ACA Financial Impact of Decreasing Concern for Hospitals

The Affordable Care Act (ACA)’s impact on hospital finances is of decreasing concern, although providers expect trends related to the health law to be a major challenge, according to Premier, Inc.

The fall 2014 Economic Outlook survey of hospitals and health systems found that while reimbursement cuts and pay-for-performance penalties remain the trends most likely to impact providers over the next year, just over a third (35.4%) consider them major concerns, down from 46.7% a year ago.

“There’s no question that reimbursement cuts put a severe strain on tight hospital budgets,” Michael J. Alkire, Premier’s chief operating officer, said in a statement. “But hospitals have also made great strides in improving operational efficiency and clinical quality, which has enabled them to better manage the reductions.”

A top driver of costs is compliance with ACA mandates, according to respondents, although it is of lessening importance. Mandate costs are cited less frequently by large and mid-sized hospitals, which are more likely to report labor as a primary cost driver.

According to Premier, those high labor costs could be related to the primary care doctor shortage, which is a concern for 68.3% of C-suite executives. Shortages are seen the most in large hospitals and integrated delivery networks.

Another increasing cost for hospitals and health systems is tied to the shift to new care delivery and payment models. More respondents are focusing on these voluntary programs within the ACA, which creates new cost centers, such as the management of chronic, high utilization patients, and poor care coordination.

New care delivery models, such as accountable care organizations, is of increasing concern as 16.7% of respondents predict these models will impact their organization, which is up from 14.3% a year ago.

“Shifting to new care delivery models designed to better manage population health involves a heavy up-front investment,” Alkire said. “As more hospitals make this transition, it’s probable that we will see these cost centers grow in magnitude over the next few years.”