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Hospitals worry an ACA repeal could harm their financial health

February 27, 2017 at 6:30 PM EDT
Efforts by the Trump administration and congressional Republicans to dismantle the Affordable Care Act are underway, unnerving to some hospital executives who see uncertainty for their bottom line. If large numbers of people lose their insurance under a replacement, hospital finances could be at risk. Special correspondent Sarah Varney reports.
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JUDY WOODRUFF: Now what hospitals fear about the possible costs of repealing and replacing the health care law.

Efforts by President Trump and congressional Republicans to unravel the Affordable Care Act are unnerving many hospital executives. They say they’re worried about big changes to their bottom line, particularly after they overhauled how care is delivered in response to the health law’s rewards and penalties.

While Republicans try to figure out their game plan, special correspondent Sarah Varney reports on how hospitals are bracing for the unknown.

This story was produced in collaboration with our partner Kaiser Health News.

SARAH VARNEY: Driving to work amid the barren winter fields in Northern Illinois, Cathie Chapman is worried about the future. She lost her job after a nearby rural hospital closed.

CATHIE CHAPMAN, Perry Memorial Hospital: I was really lucky. I found another great hospital to work in with a wonderful group of people who deliver high-quality care. But not everyone was as lucky.

SARAH VARNEY: And as Republicans work to dismantle the Affordable Care Act, she wonders if it might happen again. Now she runs the pharmacy at Perry Memorial in Princeton, Illinois. And she’s watching the Republicans’ repeal efforts warily.

CATHIE CHAPMAN: I think everybody who works in health care now feels a little uneasy. Even if you’re a large, profitable hospital, we don’t know what’s coming around the corner, and how it will affect us.

SARAH VARNEY: Rural hospitals have long struggled to stay open: They have far fewer patients and thin margins. Dozens have closed across the country in recent years, mostly in states that didn’t expand Medicaid.

But, in Illinois, which did extend Medicaid to nearly all poor adults, patients at Perry Memorial have gained coverage under the Affordable Care Act and many hospitals have found firmer footing.

But Annette Schnabel, the hospital’s CEO, says if large numbers of people lose their insurance under the Republicans’ replacement, the hospital’s finances and its patients would be at risk, especially after the hospital has invested so much money and time in complying with the health law.

ANNETTE SCHNABEL, CEO, Perry Memorial Hospital: We have spent the last six years gearing up towards everything that we were responsible for doing in the ACA. And the idea of we might have to totally go a different direction or how will we do that, it’s going to take a lot of work. There’s a lot of effort that is going into this.

SARAH VARNEY: And for some hospitals to survive or break even, it will require Congress to restore billions of dollars in funding that kept hospitals afloat before the law took effect.

Hospitals made a high-stakes trade when they signed on to the Affordable Care Act. They agreed to massive cuts in federal aid that defrayed the cost of caring for the uninsured. In exchange, they would gain tens of millions of newly insured customers. Now that deal is in jeopardy, and hospital executives are anxiously waiting to see what comes next.

Stroger Hospital of Cook County, in Chicago, is one of the busiest hospitals in the nation. Its emergency and trauma teams have inspired shows like “E.R.” and “Chicago Med” and handle most of the city’s gunshot victims.

The vast majority of patients here used to be uninsured, and the county-run hospital struggled to take care of all of their medical and mental health needs. Those patients now have Medicaid coverage because of the Affordable Care Act, and the Cook County hospital system has gained $200 million in new revenue to cover their services, breaking even for the first time ever.

DR. JAY SHANNON, CEO, Cook County Health and Hospitals System: We have no interest in slipping back in what we have been able to do.

SARAH VARNEY: Dr. Jay Shannon is CEO of the Cook County Health and Hospitals System.

DR. JAY SHANNON: We’re not able to do the kind of work that we do today with good will alone. Our staff are not a volunteer staff. We can’t get I.V. fluids and medical equipment on credit and a wink and a nod.

SARAH VARNEY: Two hospital trade groups, the American Hospital Association and the Federation of American Hospitals, have warned of — quote — “an unprecedented public health crisis” if the law is hastily scuttled.

They say if Congress repeals the law entirely and 20 million people are kicked off their insurance, hospitals will lose $166 billion in Medicaid payments alone in the next decade and face much steeper losses if certain Medicare cuts that were part of the law aren’t restored.

In Chicago, limo driver Jerold Exson is one of those patients who could lose coverage and have his hospital bills once again go unpaid. As of now, the hospital helps enroll low-income adults like Exson into Medicaid. In 2014, he was shot nearly a dozen times in a case of mistaken identity.

His medical care is covered now, and the hospital can provide follow-up surgeries, physical therapy and mental health treatment that were often off-limits to the uninsured.

NATALIA RUIZ: How are you feeling today? I see you. You’re kind of down.

JEROLD EXSON, Chicago: I’m not as edgy when I’m, like, driving or out in public, around a lot of people.

SARAH VARNEY: Exson sees clinical psychologist Natalia Ruiz to manage the after-effects of gun violence.

JEROLD EXSON: I had that episode where I was driving that time, and the little rock hit the window, and it kind of sent me into a tailspin.

SARAH VARNEY: The health law also shifted the business model for U.S. hospitals. It offered them financial incentives to move away from expensive E.R. visits to primary care and managing chronic conditions.

Earl Williams Sr. has finally brought his diabetes under control. He’s diligent about exercising, taking his medication, and seeing his doctor.

EARL WILLIAMS SR., Chicago: My sugars was in the 200s. They’re now from 80 to 120, where they’re supposed to be. Then they took some of the medication away because I have maintained due to the teachings of my doctors and the staff here at Woodlawn Hospital.

SARAH VARNEY: Before the Affordable Care Act, hospitals had little incentive to reduce E.R. visits, especially from Medicare patients who generate a lot of revenue.

At the University of Chicago Medicine, an academic medical center, Dr. Kenneth Polonsky says that if those incentives are rescinded and patients forgo preventive care, they will clog up already strained emergency rooms.

DR. KENNETH POLONSKY, University of Chicago Medicine: We will go back to a very frustrating time, where people had limited options for health care because of inability to get health insurance.

SARAH VARNEY: The uncertainty is also roiling county governments, which often fund medical care for the poor. The burden on local taxpayers to fund the Cook County Health System has dropped by $300 million since the health law went into effect.

President of the Cook County Board of Commissioners Toni Preckwinkle says repealing the law could force local governments to raise taxes.

TONI PRECKWINKLE, President, Cook County Board of Commissioners: For us, it’s a $300 million hole in our budget. So, there aren’t a lot of options, other than raising more revenue. It’s a nightmare for us.

SARAH VARNEY: She says the county and the country have been making progress, and repeal is a step backward.

In Waukegan, Illinois, near the Wisconsin border…

BARBARA MARTIN, CEO, Vista Health System: What we’re entering here is our new open heart surgery suite.

SARAH VARNEY: Vista Health System CEO Barbara Martin says with more insured patients and additional reimbursement from the health law, she’s invested in new equipment and hired hundreds of new employees across Vista’s two for-profit hospitals.

She says, if the 900,000 Illinois residents who gained insurance under the law lose coverage and hospital revenue drops suddenly, hospital executives estimate 95,000 jobs could be lost.

BARBARA MARTIN: That could just be catastrophic to the state and catastrophic, not to only Vista, to all hospitals across the country.

SARAH VARNEY: But Edmund Haislmaier, a senior fellow at the Heritage Foundation, a conservative think tank, says U.S. taxpayers already spend too much on health care.

Haislmaier, who was a member of President Trump’s transition team on health policy, says communities and states and local governments shouldn’t rely on hospitals to create new jobs and fill their budget holes.

EDMUND HAISLMAIER, Heritage Foundation: Hospitals in particular have become economic development projects. If you’re paying tax dollars for a public program like Medicare or Medicaid and you’re paying private insurance premiums, this is all what makes health care unaffordable.

SARAH VARNEY: More than a dozen top Republican lawmakers declined to be interviewed for this story. But a spokesperson for Senator Lamar Alexander, chairman of the Senate Committee on Health, Education, Labor and Pensions, said in a statement that he is listening to hospitals, doctors, patients, governors and others as they draft the replacement plan.

Back in Chicago, that all adds up to more questions for patients like Earl Williams.

EARL WILLIAMS SR.: Am I going to have insurance in a month or two?

SARAH VARNEY: Questions doctors are struggling to answer.

MAN: I’m going to give it to you straight. And that is, it’s likely that it’s going to change. It’s not going to be the same.

SARAH VARNEY: With President Trump and congressional Republicans now saying a final replacement plan may not be ready until later this year, the uncertainty is likely to linger.

For the PBS NewsHour and Kaiser Health News, I’m Sarah Varney in Chicago.

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