An Obama Second Term Likely Will Benefit For-Profit Hospitals: Analysts

For-profit hospitals stand to gain a lot from a second Obama administration, according to a recent report from a financial analyst, because of the expanded Medicaid and private insurance coverage provided under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148). Chris Rigg, an analyst with the Susquehanna Financial Group in Bala Cynwyd, PA, noted that, “the hospital industry will benefit significantly from [the health reform law’s] coverage expansions. The expansion of Medicaid and insurance subsidies more than fully offsets the commercial pricing pressure we expect in the individual and small group insurance segment.”

Under PPACA, the ranks of the uninsured have gone down already, according to a recent report from the U.S. Census Bureau. In 2011, the number of individuals without insurance fell to 48.6 million (15.7 percent of the population) from 50 million in 2010, the first drop in the uninsured since 2007.  The Census Bureau report–Income, Poverty, and Health Insurance Coverage in the United States: 2011–saw a corresponding increase in the number of individuals covered by health insurance, from 256.6 million in 2010 to 260.2 million in 2011.

The Census Bureau report noted that the percentage of individuals covered by private insurance or employment-based health insurance remained the same between 2010 and 2011. The percentage of individuals covered by government health insurance increased from 31.2 percent in 2010 to 32,2 percent in 2011. Medicaid coverage increased from 15.8 percent to 16.5 percent. Medicare coverage increased from 14.6 percent to 15.2 percent

Certain health insurance reforms went into effect in 2010, such as allowing adult children to remain on their parents’ health insurance until they turned 26. The uninsured rate among individuals age 19 to 25 dropped from 29.8 percent in 2010 to 27.7 percent in 2011. Expanded Medicaid coverage, as well as access to private insurance coverage through state health insurance exchanges, starts in 2014.

The current increase in the number of insured, coupled with the much larger increase expected starting in 2014, were the major contributing factors to the analysis that for-profit hospitals have better days ahead of them. According to Rigg, profit margins on earnings before income taxes, depreciation, and amortization (EBITDA) will increase more than 2 percent in 2014 for for-profit hospital operators Community Health Systems, Inc., Tenet Healthcare Corp., and Health Management Associates, Inc.