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American Rescue Plan will be credit positive for nonprofit hospitals, says Fitch

The ARP will help support hospital patient revenues by reducing the number of those who are uninsured.

Jeff Lagasse, Associate Editor

(Photo by Cavan Images/Getty Images)(Photo by Cavan Images/Getty Images)

The American Rescue Plan contains a number of measures that would subtly improve the revenue profile and reduce cost pressures for nonprofit hospitals, according to Fitch Ratings. 

In contrast to the Coronavirus Aid, Relief and Economic Security Act, which allocated funds directly to hospitals based on size and COVID-19 caseload numbers, the ARP only provides direct aid to rural providers. But it will help support hospital patient revenues by reducing the number of those who are uninsured, which is a credit positive for hospitals, Fitch said.

The most significant measures temporarily subsidize healthcare coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA), subsidizing the premium at 100% through the end of September; provide additional funding and incentives to expand Medicaid coverage in states that haven't yet done so; and expand Affordable Care Act premium subsidies.

WHAT'S THE IMPACT

Medicaid expansion would have a positive effect on providers in states that go that route, as it would reduce exposure to uninsured patient revenue risk, with a corresponding increase in Medicaid volume, according to Fitch. 

The law increases the Federal Medical Assistance Percentage (FMAP) by five percentage points for two years for states that have not already expanded Medicaid. States that expanded during the public health emergency may also receive the coronavirus 6.2 percentage point FMAP increase. When Medicaid expanded in 2014–2015, upgrades of Fitch's rated credits outpaced downgrades by three to one.

The ARP reduces insurance premium costs for plans offered through the ACA by increasing tax credits, along with capping premium contributions at 8.5% of income for mid-level health plans, said Fitch. Those who earn 100% to 150% of the federal poverty level will not pay any premiums. Congress could potentially make some of these measures permanent, supporting the Biden administration's goal of improving healthcare access.

In line with greater Medicaid coverage, the law increases Medicaid coverage for coronavirus testing and treatment, and clarifies that the federal matching rate for vaccinations is 100% for those covered by Medicaid. The ARP also allocates $50 billion for the Disaster Relief Fund, which could be used to help hospitals with personal protective equipment and other supplies.

Fitch sees the recent confirmation of Xavier Becerra as Secretary of the U.S. Department of Health and Human Services, who is considered a strong supporter of ACA expansion, as a bellwether of the expected direction of healthcare policy. The Centers for Medicare and Medicaid Services announced earlier this year that it plans to rescind approvals granted by the Trump administration that allowed states to implement work requirements in order to qualify for Medicaid.

THE LARGER TREND

The Senate passed the $1.9 trillion American Rescue Plan earlier this month, though it doesn't include relief funding for hospitals or loan forgiveness. Those provisions weren't in the House bill but were requested by the American Hospital Association.

The AHA wanted more relief funding to help offset losses sustained during the pandemic, such as the $100 billion earmarked for hospitals in the CARES Act.

The legislation does include provisions to help hospitals and health systems provide care to their patients and communities, including measures to increase access to health coverage for those who lose insurance or are uninsured. It also makes investments to bolster the nation's COVID-19 response, with resources for vaccines, treatment, testing, contact tracing, personal protective equipment and workforce development.
 

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com