
Medicaid Redeterminations Create New Financial Challenges for Hospitals
Hospitals and health systems have been operating in the most challenging financial environment in history, and now they face another looming headwind—the impact of Medicaid redeterminations.
Hospitals and health systems have been operating in the most challenging financial environment in history, and now they face another looming headwind—the impact of Medicaid redeterminations.
As of late July, more than 3.6 million Americans have been disenrolled from Medicaid, a process that began after the federal government ended the COVID-19-related declaration of a public health emergency (PHE), according to the
Medicaid redeterminations are occurring at a particularly vulnerable time for US hospitals, many of which are still reeling financially and operationally from the effects of the pandemic and subsequent labor shortages. For example, the median year-to-date operating margin index for hospitals was 0.0% in April, according to
A significant contributing factor to tight margins has been escalating labor costs, a
As hospitals confront inflated expenses and operating margins that may never recover, they must develop new strategic plans to cope with these new financial realities.
Medicaid Redeterminations Lead to Widespread Loss of Coverage
Near the beginning of the pandemic, the federal government passed a law requiring state Medicaid programs to keep patients continuously enrolled through the end of the PHE in exchange for additional federal funding.
The KFF
Early evidence bears this out. Of the 3.6 million disenrollments that have occurred so far across 37 reporting states and Washington, DC,
Like all Medicaid redetermination policies, procedural disenrollments vary widely by state. For example, 95% of all disenrollments in South Carolina have occurred for procedural reasons—with the other 5% having been determined ineligible for Medicaid—while just 15% of disenrollments in Alaska were related to procedural factors, according to the KFF.
Additionally, states are approaching the unwinding differently, leading to a variation in disenrollment numbers across reporting states. Forty-two states plan to take
What Providers Should Expect
The unavoidable truth of Medicaid redetermination is that health systems are likely to suffer, at least in the near term. Here’s what providers should expect as the process continues to unfold:
- More ED visits and charity care: As patients lose Medicaid coverage, some of those with chronic conditions are likely to cancel regular check-ups with their primary care physicians, causing their conditions to worsen; the result for hospitals will be more spent on charity care and increased patient visits to the ED than would have otherwise occurred had these patients maintained continuous coverage
- Increased emphasis on eligibility verification: In the realm of RCM, it will be essential for providers to streamline Medicaid-eligibility determination workflows prior to care delivery; if patients are found to be eligible but coverage has lapsed, providers can work with patients to ensure they complete re-enrollment paperwork
- The need to adjust models of care: Providers must continue the trend in recent years of shifting to more outpatient care over more costly, resource-intensive inpatient care; similarly, health systems can continue to trim unnecessary costs by transitioning what was once outpatient care to in-home models Regardless, care, quality, cost, and efficiency must be top-of-mind when determining the most appropriate sites of care
When it comes to Medicaid redetermination, there is only so much that providers can control. The effects on providers will vary extensively based on factors such as location, patient mix, and organizational mission. However, providers can be certain that more redeterminations are on the horizon, driving the need to prepare for another new financial reality.
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