Uncertain future of Obamacare leaves Michigan hospitals unsteady

One day, Obamacare is dead. The next, it's alive. Trumpcare is on the agenda today. Tomorrow, it has been shelved.

The future of health care reform in Washington for the moment remains undeniably unclear.

So how do Michigan hospitals and health systems with thousands of newly insured patients plan ahead?

Do everything they can to keep the money flowing under any plan to repeal and replace the Affordable Care Act, commonly known as Obamacare, according to executives at some of the largest acute care systems in Michigan.

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Leading hospital groups opposed the Trump-backed bill that died before a vote last month, saying the replacement would "result in a substantial reduction in the number of Americans able to buy affordable health insurance or maintain coverage under the Medicaid program."

They also are wary about future efforts.

"Every day, I wake up ready for there to be a catastrophe," said Laura Appel, senior vice president and chief innovation officer at the Michigan Health & Hospital Association. "Every day that it doesn’t happen is a good day."

Congressional Republicans and the Trump Administration pledged to dismantle the Affordable Care Act and replace it with a more affordable system built on greater individual choice and fewer mandates.  But early versions of plans would have likely reduced Medicaid funding through a more limited block grant program to states. That's a move that could reverse a decline in unpaid hospital bills seen under the current law.

House of Representatives Speaker Paul Ryan, R-Wis., after canceling a vote last month on repeal legislation that divided his caucus, said Thursday that the House will add language to the draft bill to create a new federal risk-sharing program that would lower premiums and add protections for people facing challenges obtaining affordable care.

Unsteady times have been forcing some hospitals around the country to report delaying expansion plans, cutting costs or taking on added risk to borrow money for capital investment projects.

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But those kind of hedges against changes to the Affordable Care Act are not widespread in Michigan, hospital officials say.

Instead, the state's hospitals are seeking to solidify gains that have boosted the numbers of patients treated, raised profit margins and lowered costs since the Affordable Care Act's biggest provisions took effect four years ago.

"We are uncomfortable with the uncertainty for sure," said Mary Zatina, senior vice president of government relations and community affairs at Beaumont Health.

After November's election, Zatina sat with strategic planners at Beaumont to sketch out what might happen.

"We filled up every bulletin board with all of the what ifs," she said. "We really had no clue which one would prevail and that is frustrating." Zatina added that "we strive to be flexible and nimble, but health care institutions are not normally quick."

Top executives at Spectrum Health, a not-for-profit health system based in western Michigan with 12 hospitals, and Flint-based nonprofit McLaren Health Care, also with a dozen hospitals, said they are watching the latest developments in Washington closely.

"Like everyone else, we tried to predict what we think is going to happen here. And one day, I just said, 'Stop,' "  Phil Incarnati, McLaren's president and chief executive officer, said in an interview. "Value is going to prevail if you provide high quality at a low cost."

Incarnati and other top executives said they have not slowed down on plans or canceled projects because of the Affordable Care Act's cloudy future.

To be sure, other parts of the health care sector have been strained by the law.

Some insurers have withdrawn from offering coverage to those seeking plans under the exchanges in every state. And some newly insured consumers have struggled with rising premiums and out-of-pocket expenses. The Affordable Care Act also cut federal dollars sent to some hospitals to help them care for  poor people and reduced the size of raises the government paid them for treating Medicare patients.

Still, Michigan hospitals have done relatively well.

Even before the Affordable Care Act, experts say Michigan had more people insured than most states and lower average health care spending. Many hospitals in Michigan since then have seen revenue grow from new customers who paid their bills, primarily from those newly eligible for Medicaid. Mergers in the state have also continued as health systems chased cost-savings and greater buying power.

Health care provided nearly 588,000 direct jobs in Michigan in 2015, nearly 228,000 in hospitals alone, according to the most current information compiled by the Michigan hospital association. That was up from nearly 586,900 direct jobs in 2014, nearly 227,000 in hospitals alone.

Michigan’s 83 acute-care hospitals posted higher total profit margins in 2014 than in 2013, averaging 8.2%, according to a Crain's Detroit Business report on the annual Michigan Health Market Review.

Allan Baumgarten, publisher of the Review, said in an interview that profits are up again, according to preliminary figures for metro Detroit hospitals, but the overall margins declined, in part because of a drop in revenue from nonoperating sources, including investments. Final numbers on all of Michigan's hospitals are expected to be released by month's end, Baumgarten said.

Nearly 1 million Michigan residents gained health insurance through the state's Affordable Care Act exchange or expanded Medicaid. That's in part because Michigan, along with 31 other states and the District of Columbia, agreed to accept federal funding to cover more lower-income residents who were previously uninsured. Michigan officials say there is no net cost to the state over the next 21 years, and Michigan will save $320 million in uncompensated care costs by 2022.

Hospital admissions in Michigan have been stable if not growing. Officials said the Affordable Care Act likely plays a substantial role in the increase, but is not the only factor as the state's economy has recovered and population loss has slowed. Only one hospital has closed since 2013, according to the hospital association.

For decades, hospitals across Michigan lost hundreds of millions of dollars to care for uninsured and poor people.

But a University of Michigan study published last year found soon after the state government expanded Medicaid under the Affordable Care Act in spring 2014, many hospitals saw a major drop in this uncompensated care.

Hospital officials said in interviews there is a caveat to those findings: There are a significant number of patients who have insurance with high deductible plans who are still unable to pay their bills, leaving hospitals with so-called bad debt.

Millions in federal grants are also prodding local institutions in the state to test new ways to pay for health care to improve quality and lower the cost, according to Marianne Udow-Phillips, executive director of the Center for Healthcare Research & Transformation, a nonpartisan health policy center based at the University of Michigan

Beaumont Health President and CEO John T. Fox urged President Donald Trump and members of Congress to tread carefully as they consider changes to the Affordable Care Act.

"Repeal of the ACA without an adequate replacement plan could well wreak havoc on both the health and economic stability of our patients, clinicians, hospitals and communities," Fox wrote in an opinion piece published last month.

Incarnati said the law missed an opportunity to put more responsibility on patients for their own care — a failure that continues to drive up hospital costs. He said that overall, he believes McLaren has likely lost more than it gained in revenue since the passage of the Affordable Care Act, a phenomenon other hospitals say they have not seen.

No matter any changes to come, Incarnati predicted many hospitals shouldn't expect another boost in revenue.

"I have told our people," he said. "Don’t expect that there is going to be additional new money."

Contact Matthew Dolan: 313-223-4743 or msdolan@freepress.com. Follow him on Twitter @matthewsdolan.