hospitals may see costs rise as self-pay patients obtain HMO coverage

As the number of uninsured decreases with the implementation of the Affordable Care Act, hospitals should monitor how newly insured admissions are paid for and the financial impact of the new coverages.

A review of inpatient admission data collected by states for the three-year period of 2011-13 shows the number of self-pay or uninsured admissions declined by 27 percent, from more than 900,000 in 2011 to 656,000 in 2013. These same data show the decrease in the number of self-pay admissions coincides with increases of at least 14 percent in the number of admissions in three payer categories-Medicare HMO, Medicaid HMO and commercial HMO plans-as previously uninsured patients are moved into these plans.3 The charges associated with these admissions have increased at least 18 percent for all HMO categories.

Within the subset of HMO admissions, three high-volume conditions-normal childbirth, childbirth by cesarean section, and pneumonia, organism unspecified-were responsible for more than 12 percent of total HMO admissions in 2013. These conditions accounted for only 10 percent of self-pay admissions, suggesting high-volume admissions are being moved into the HMO categories-a significant development for hospitals when one considers that average lengths of stay (ALOS) and resulting charges for these conditions are significantly higher among HMO admissions than among self-pay admissions.

Based on more than 314.000 admissions in 2013, the difference in charges between HMO and self-pay admissions can be estimated to exceed $1.16 billion. Because hospital costs are calculated in part based on proportionality to charges, the costs of these high-volume admissions for newly insured patients can be expected to trend upward in a manner similar to admissions, ALOS, and charges.

To ensure the anticipated rise in costs does not negatively affect profitability and overall financial health, hospitals will need to track admissions by reason for admission and payer type, and then carefully monitor the costs associated with HMO beneficiaries in detail at the departmental level. Failure to closely monitor these costs could erase any anticipated potential benefit of increased revenues resulting from a decrease in self-pay patients. *

Many states collect inpatient admission data from hospitals via a state agency, a hospital trade association, oran outside vendor and, in turn, create and make available non-identifiable data sets for commercial and academic use. The states range from large to small and span the entire length and depth of the country, providing a comprehensive social, ethnic, and geographic base from which comparisons can be made. This analysis draws on the most current three years of data (2011-13) collected from states where 2013 data has been made available. These data were combined into a single archive of inpatient hospital data for analytic and benchmarking purposes to form a universe of over 146 million potential lives and 16 million yearly admissions.

This research and analysis was prepared by Optum Payer Solutions Consulting. For more information, contact Jan Welsh at janine.welsh@optum360.com.

a. While not officially designated as HMOs, the narrow-network plans that are prevalent in the new health insurance marketplaces, and increasingly so in employer-sponsored coverage, are similar to HMOs.