Obamacare Fuels Surprising Jump In Hospital Admissions

A surprising increase in admissions to the nation’s largest hospital operators is getting a boost from newly insured patients who have purchased coverage on public exchanges under the Affordable Care Act, companies reporting earnings this week say.

Tenet Healthcare and HCA Holdings considered hospital industry bellwethers, surprised Wall Street this week with reports of robust profits and an uptick in hospital admissions thanks in part to the ACA, which has expanded health coverage to millions of Americans via public exchanges. It also comes despite a mild flu season, which has kept people out of the hospital and hurt sales at hospitals as well as pharmacy chains like Walgreens and CVS Health.

“Health reform activity continued to grow in the quarter,” said William Rutherford, HCA’s chief financial officer said during a conference call with analysts earlier this week. “In the first quarter, we saw approximately 12,500 same-facility exchange admissions as compared to the 9,860 we saw in the first quarter of last year, or about a 27% increase. We saw about 11,200 same-facility exchange admissions in the fourth quarter of 2015, or 11% increase sequentially quarter-to-quarter.”

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Just last month, a report by Fitch ratings said large investor-owned hospital operators were “unlikely to repeat the positive admissions growth” they saw last year. In 2015, hospitals had their first positive admissions growth since 2008 and it was largely due to expanded coverage under the health law that started in 2014.

HCA, which plans to invest $2.7 billion in services and capacity this year, said “same-facility equivalent admissions” increased 3.1% while admissions overall increased 1.6% compared to the first quarter of last year.

Tenet, too, surprised projections, reporting hospital patient revenue at hospitals open more than a year grew 6%, driven by 2.2% growth in admissions and “3.7% growth in revenue per adjusted admission.
 “The number of patients we treated that had exchange coverage increased significantly, with our inpatient admissions up 28 percent,” said Daniel Cancelmi, Tenet’s chief financial officer, in a conference call with analysts earlier this week.

Any increase in hospital admissions comes against a variety of headwinds, including new Medicare reimbursement incentives to improve quality as well as penalties for hospitals that re-admit patients within 30 days from errors and hospital-acquired infections, will have an impact. The Obama administration earlier this year estimated 565,000 readmissions “were prevented across all conditions” between April 2010 and May 2015 compared to the readmission rate before the ACA was passed into law, which created the readmission penalties.

But Tenet and other hospital operators say they are well positioned to capture newly insured Americans in their outpatient centers as well.

“The inpatient exchange business was up close to 30% and then the outpatient was up over 40%,” Tenet CFO Cancelmi said. “our exchange business has improved significantly year-over-year.”

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