News: U.S. hospitals could lose $25B due to new legislation, analysis suggests

Hospitals across the United States are poised to experience a seismic shock to their net revenue in the coming years due to Medicaid disenrollment, according to a new report published by Kodiak Solutions.

Kodiak Solutions developed a quarterly key performance indicator report based on data from approximately 2,100 hospitals and 300,000 physicians. Using this data, Kodiak created “four different disenrollment scenarios and calculate[d] how each of the scenarios would impact the net revenue of an average hospital Kodiak Platform user.”

According to Kodiak, the four different disenrollment scenarios are as follows:

• Scenario 1: A “5% drop in Medicaid gross charges that coverts to self-pay” would result in a “decline in net revenue of more than $1 million.”
• Scenario 2: A “10% drop in Medicaid gross charges that converts to self-pay” would result in a “decline in net revenue of more than $2 million.”
• Scenario 3: A “15% drop in Medicaid gross charges that converts to self-pay” would result in a “decline in net revenue of more than $3 million.”
• Scenario 4: A “20% drop in Medicaid gross charges that converts to self-pay” would result in a “decline in net revenue of nearly $4 million.”

The authors note that in a “worst-case scenario,” the net income for U.S. hospitals could drop by “more than 71% to about $1.6 million, and the operating profit margin could drop by 70% to 0.6% from 2%.”

Most concerningly, the authors noted that this “worst-case scenario” is well within the realm of not possibility, but plausibility.

“The scenario isn’t far-fetched: Fitch Ratings reported this month that the median operating profit margin for not-for-profit hospitals last year was just 1.1%. Most of the hospitals in the Kodiak Platform database are not-for-profits,” they concluded.

Editor’s note: To read the Kodiak report, click here.