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Archive for April, 2012

Hospitals and Health Systems Anticipate that the Affordable Care Act (ACA) will Reduce Organizational Revenue

HighRoads, the industry leader in SaaS-enabled (software as a service) health care compliance and benefits management, and Sullivan, Cotter and Associates, Inc. (SullivanCotter), a nationally-recognized compensation and human resource management consulting firm, find that 55 percent of hospitals and health systems anticipate a drop in revenue as a result of the Affordable Care Act (ACA), with 12 percent anticipating an increase in revenue. Perhaps more telltale of the volatile nature the industry faces is that 28 percent have reported that they don’t yet know the impact that ACA will have on revenues.

These findings are part of an inaugural survey of Employee Benefit Practices in Hospitals and Health Systems performed by HighRoads and SullivanCotter between November 2011 and January 2012. The survey received responses from 178 participants, including 126 health systems, which had an average employee range of between 3,000 and 9,500.

“Hospital and health system’s financial health has a direct impact on the benefits offered to healthcare employees,” said Maureen Cotter, Senior Principal, HighRoads.  “Even though 70 percent of those surveyed stated that they are committed to providing coverage in the long term, and no organizations have plans to discontinue coverage now or in the future, the coverage provided may take a new shape. In fact, among those surveyed, 42 percent plan to become an accountable care organization (ACO) and 18 percent plan to structure their employee health plan as an ACO-like program.”

One feature unique to health systems and hospitals is their ability to create their own smaller provider network for employees to select from so that the hospital could essentially “pay itself” for delivering care to its employees. However, the survey found that there is no set standard of claims accounting for these types of services. The most common answer was to use the standard carrier negotiated discount (30 percent); however, many organizations are using a deeper discount in one form or another. Organizations with a conservative approach to the accounting treatment of ‘domestic claims’ may trigger the excise tax under ACA earlier than those with different approaches.

When comparing health systems and hospitals to all other general industry sectors, the survey found the following:

  • Hospitals and health systems have an average enrollment of 66 percent in preferred provider organization (PPO)/point of service (POS) plans compared to the general industry with 62 percent.
  • Enrollment in health maintenance organizations (HMO/Exclusive Provider Organization (EPO)) was 25 percent for hospitals and health systems compared to 19 percent for the general industry.
  • Enrollment in consumer-directed health plans (CDHP)/high-deductible health plans for health systems and hospitals averages 9 percent compared to the general industry average of 15 percent.
  • The average annual PPO/POS premium for single coverage for hospitals and health systems was $6,708 compared to a general industry premium of $5,919.
  • 81 percent of hospitals and health systems encourage employees to use their own facilities or providers, yet costs are not necessarily less than general industry

“The unique nature of the health care business, including not-for-profit tax status, workforce differences and the increasing challenges faced by hospitals and health systems, point to an increasing need for more industry-specific information so that hospitals and health systems can make informed decisions for their employees and their business,” said Michael Gaal, Senior Consultant, SullivanCotter.

“Hospitals and health systems have unique benefits management challenges that may be magnified by ACA requirements. By looking exclusively at employee benefits trend information for this distinct market, we hope to enable hospitals and health systems to optimize their benefits plans to better provide for their employees while lowering overall costs to their organization,” Cotter added.

For a copy of the report’s full executive summary please contact Petra Marino at pmarino@highroads.com.

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