Affordable Care Act Drives Reimbursement and Revenue Cycle Changes at Hospitals

CHICAGO (March 4, 2015) - During the past two years, market factors related to the Affordable Care Act, Medicaid expansion and the increased popularity of high-deductible health plans have caused providers to evaluate volume and revenue trends, according to Crowe Horwath LLP, one of the largest public accounting and consulting firms in the U.S.

Crowe Horwath Revenue Cycle Analytics (Crowe RCA) software uses patient account transactional data to generate a variety of finance and revenue-cycle benchmarking results for several key performance indicators. The Crowe RCA Benchmarking Analysis, which reflects data from more than 320 hospitals through Dec. 31, 2014, reveals that Medicaid expansion and reform - core tenets of the Affordable Care Act - underscores a year of consistent progression toward a new delivery model.

“These data-driven metrics show interesting shifts in payer demographics and noticeable differences between volume and uncompensated care between Medicaid expansion and nonexpansion states,” said Derek Bang, chief innovation officer and leader of healthcare performance consulting at Crowe. “We are starting to see what happens to the hospitals that sacrificed reimbursements in order to finance other health insurance exchanges, under the assumption they would receive more revenue from patients covered by those exchanges.”

Key performance indicators and trends uncovered by the benchmarking results include:

1. Medicaid Expansion Effects on Payer Mix 
   Among the participants in the Crowe RCA Benchmarking Analysis, healthcare coverage dynamics vary significantly based on whether their state has chosen to expand Medicaid. For those that have, the implications became apparent immediately, with Medicaid and Medicaid managed care revenue increasing nearly 6 percent (from 11.44 percent to 17.33 percent) from the end of 2013 to the end of 2014. This increase was offset in large part by the decrease in self-pay and commercial/managed care revenue - by 4.14 percent and 1.56 percent, respectively.
   
   
2. Medicaid Expansion Effects on Uncompensated Care 
   When assessing uncompensated care in between 2013 and 2014, a large variance exists between providers in expansion states and those in nonexpansion states. While bad debt and charity write-offs remained flat in nonexpansion states, in expansion states bad debt increased subtly (from 2.5 percent to 2.6 percent), and charity write-offs decreased dramatically (from 3.2 percent to 1.7 percent).
   
   
3. Nonexpansion Effects in the Marketplace 
   Outside of Medicaid expansion, the healthcare industry also has been affected by the continued adoption of high-deductible health plans (HDHPs) and a rise in insured patients' responsibility. Further cost shifting within benefit plan designs, as well as the adoption of health insurance exchanges, has increased the healthcare consumer's financial responsibility. As such, more patient care appears to be shifting to lower-cost settings, including moving from hospital admissions to outpatient care.

“The increase in HDHPs has caused providers to take a closer look at self-pay after insurance collections and has increased the need to address patient collections and point-of-service collections,” said Bang. “Also, the data clearly shows the impact HDHPs are having on hospitals, where patients are encouraged to shop around for better pricing and use fewer hospital services.”

About the Crowe RCA Benchmarking Analysis
The Crowe RCA Benchmarking Analysis includes 326 distinct hospitals classified as acute-care facilities, critical-access facilities, or rehabilitation, psychiatric or cardiovascular clinics. The database includes information from hospitals in 35 states, with 25 additional facilities in Florida, Indiana, Kansas, Kentucky, Nebraska, South Dakota, and Texas. 

For more information about the Crowe RCA Benchmarking Analysis, please visit www.crowehorwath.com/benchmarking-release.

About Crowe Horwath
Crowe Horwath LLP (www.crowehorwath.com) is one of the largest public accounting and consulting firms in the United States. Under its core purpose of "Building Value with Values®," Crowe uses its deep industry expertise to provide audit services to public and private entities while also helping clients reach their goals with tax, advisory, risk and performance services. Crowe and its subsidiaries have offices coast to coast with more than 3,000 personnel. The firm is recognized by many organizations as one of the country's best places to work. Crowe serves clients worldwide as an independent member of Crowe Horwath International, one of the largest global accounting networks in the world, consisting of more than 150 independent accounting and advisory services firms in more than 100 countries around the world.