The FAMCare Blog

Rural Nonprofit Hospitals:  How the ACA is Putting Them in Danger

Posted by George Ritacco on Mar 22, 2016 4:25:17 PM


Unintended consequences of the Affordable Care Act are beginning to haunt rural, nonprofit hospitals. As the saying goes, “the road to hell is paved with good intentions.”

The Affordable Care Act of 2010 anticipated insuring more Americans through expanded Medicaid eligibility and subsidized health insurance sold through state run exchanges. Nonprofit hospitals serving rural communities across America reasonably expected a reduction in uncompensated care since more of the marginally insurable would arrive for care with some insurance in hand.

 Nonprofit hospitals sort uncompensated care into two categories:

  1. BAD DEBTS – any bill submitted for payment by a third-party payer or patient which is not paid in full.
  2. CHARITY CARE – care provided to consumers at no cost with no expectation of payment.

Charity care costs have begun to decline at rural nonprofit hospitals since the adoption of the ACA because fewer patients arrive at rural hospitals without the benefit of any insurance at all.

However, bad debt expenses have unexpectedly begun to skyrocket. This increase is caused by two facets of the Affordable Care Act that have an unintended financial impact.

  1. With the passage of the ACA, Medicaid reimbursement payments are considerably lower and slower than in the past.
  2. The ACA imposes restrictions on debt collection by nonprofit hospitals adding to the steep increase in uncompensated care.

Although unintended, these two sections of the law are having a profound negative impact on the cash flow management at many rural nonprofit hospitals.

The boards of small rural hospitals have begun to re-evaluate the benefits of maintaining their nonprofit status. They are struggling with two important questions:

  1. If we surrender our Non-profit status, will the imposition of real estate taxes and federal income taxes be offset by the hospital’s ability to collect bad debts?
  2. Will the reduction in charity care brought about by the ACA put our Charity rational for nonprofit status in question?

Small nonprofit hospitals provide a critical service to rural communities all across America. If the ACA has put their very survival in jeopardy, lawmakers must take a closer look at the law as it applies to these essential rural community hospitals.

Complex laws always carry unintended consequences. They must be reviewed frequently by lawmakers to insure that they do not cause greater problems then they solve. The Affordable Care Act is no exception.

Topics: Social Services Industry News, Government

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