The legal intricacies of today's 5-4 decision by the Supreme Court to uphold key provisions of the Affordable Care Act will be parsed for weeks, months and probably years, and will extend far beyond health care. But for hospital executives wondering what it all means for their operations, there are two key pieces emerging at the moment— while the Court upheld the individual mandate as a tax, it may make it difficult for the federal government to withhold existing Medicaid funds from states that refuse to participate in the law's Medicaid expansion. So while millions of additional paying customers are expected to enter the health care system via the mandate, longstanding concerns about uncompensated care will remain an issue for hospital balance sheets.
Here's the key bit on the Medicaid portion, in an individual opinion from Chief Justice Roberts:
"Nothing in our opinion precludes Congress from offering funds under the ACA to expand the availability of health care, and requiring that states accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding."
What that may mean, according to Greg Moore, who chairs the National Healthcare Group for law firm Clark Hill and counts hospitals, doctors and other health care providers as clients, is that states may not be penalized with the loss of existing Medicaid funds for refusing to participate in new Medicaid programs covered by the ACA. In lay terms: Hospitals will have to closely monitor the response from their states on expanding Medicaid.
"Hospitals will need to focus in coming weeks on the Medicaid provision," Moore says. "Will there be an expansion or not be an expansion [in their states]? If there's not an expansion, theoretically there's going to be an issue with uncompensated care that remains."
For patients who can't afford to buy insurance but live in states that decide not to participate in the new Medicaid expansion, a chunk of patients could continue to be uninsured.
"A portion of the population will simply ignore the taxing issue," Moore says. "There will be uncompensated care that remains."
And that will continue to add financial pressures to hospitals and health systems that are already looking to trim upward of 20 percent from their cost structure, says Doug Fenstermaker, managing director, owner and vice president of health care, Warbird Consulting Partner. "The issue of providing and writing off charity care will continue to be a burden," he says.
In the big picture, though, the ruling still means "30 million more paying customers," Moore notes.
In addition, because the mandate was upheld as a tax and not under the commerce clause, which grants Congress the ability to regulate interstate commerce, he expects "very lasered attacks" on individual provisions of the law — including, potentially, the mandated coverage of preexisting conditions and other key components — for some time to come.
"I don't think it's the end of the legal battle," Moore says.
The American Hospital Association is also running a blog with analysis from Dominic Perella, one of the lead authors of the AHA's amicus briefs on the ACA and an attorney at D.C.-based firm Hogans Lovells US LLP. In one of his blog entries, Perella notes that "the majority apparently would have voted to strike down the individual mandate under the Commerce Clause, if it hadn't been able to sustain it by pointing to Congress' tax power."
Reaction from health care providers and advocates was swift. In a statement, American Hospital Association President Rich Umbdenstock praised the ruling:
"Today's historic decision lifts a heavy burden from millions of Americans who need access to health coverage. The promise of coverage can now become a reality. The decision means that hospitals now have much-needed clarity to continue on their path toward transformation. But transforming the delivery of health care will take much more than the strike of a gavel or stroke of a pen. It calls for the entire health care community to continue to work together, along with patients and purchasers, to implement better coordinated, high-quality care. Now that the Supreme Court has made its decision, hospitals will continue their efforts to improve the law for patients, families and communities."
Marty Fattig, CEO of Nemaha County Hospital, a 20-bed critical access hospital in Nebraska, points out that there is still a fair amount of uncertainty for hospital execs given that HHS is still promulgating ACA regulations. Fattig says that while there are some good things in the ACA, "things we need embrace," hospital leaders must now gear up to work with Congress to fix portions of the law that give cause some angst, including some of the provisions around payment cuts.
Alan Channing, CEO of Mount Sinai Hospital in Chicago, says he was "pleasantly surprised" by the ruling, noting that 15 percent of his hospital's patients are currently uninsured.
"This will address two-thirds of them," Channing says. The rest, he says, are individuals who will remain uninsured or are undocumented residents.
As for the question of whether states will move ahead with the Medicaid expansions — and Wisconsin Gov. Scott Walker, for one, has already indicated his state will not implement that aspect of the ACA — Channing remains optimistic about the situation in his home state of Illinois.
"My own sense is, the elected leadership in Illinois is committed to caring for its constituents," he says. "Here's a tremendous opportunity to do that. If they don't take advantage, they'll be subsidizing other states."
As it happens, Channing heard the news over his car radio en route from a meeting; his board finance committee, meanwhile, was meeting as the ruling was announced.
"The judgment brought deliberations of that committee to a halt," Channing says. "It's an opportunity to get paid for the work we've done been doing for years for uninsured people."
American Medical Association President Jeremy Lazarus, M.D., also weighed in:
"This decision protects important improvements, such as ending coverage denials due to pre-existing conditions and lifetime caps on insurance, and allowing the 2.5 million young adults up to age 26 who gained coverage under the law to stay on their parents' health insurance policies. … It protects those in the Medicare ‘donut hole,' including the 5.1 million Medicare patients who saved significantly on prescription drugs in 2010 and 2011."
Check back with us as the day goes on, with more reaction from hospitals on what the decision means going forward.