• Another side effect of refusing the Medicaid expansion

    Bonds issued by health care systems in those states may suffer:

    Municipal bonds sold by hospitals and health-care systems have been the market’s biggest losers in the past three months. Debt from facilities in the 21 states that aren’t expanding Medicaid is poised to fare even worse.

    A key provision of President Barack Obama’s health-care plan is extending care under the health program for the poor, which is financed by states and the federal government. Where politicians don’t go along, millions would be left uncovered, costing hospitals more in uncompensated care.

    Health-care related bonds are already posting the biggest losses among revenue debt in the $3.7 trillion municipal market, losing about 6 percent over the past three months, Standard & Poor’s data show. In states that have rebuffed extending Medicaid, securities of hospital systems have less appeal, said Todd Sisson, a senior analyst at Wells Capital Management inCharlotteNorth Carolina.

    “We’re going to see spread widening on hospitals in states that are not expanding versus states that are expanding,” said Sisson, whose company oversees about $31 billion in munis. “States that aren’t expanding Medicaid are still going to have a high percentage of the uninsured. The hospitals are going to lose a lot of money.”\

    There’s actual evidence and data for this:

    Bloomberg cited Palmetto Health, whose spread on $139 million of recently issued debt narrowed by 15 percent, while the yield was not much higher than junk. By comparison, debt issued by Yavapai Regional Medical Center in Arizona, which has decided to expand its Medicaid coverage, has seen improving spreads in recent weeks.

    The financial schism between hospitals in states that are choosing to expand Medicaid or stay put is already playing out, with at least one facility in North Carolina blaming its pending closure on the state’s decision not to expand Medicaid enrollment.

    According to Bloomberg, hospital debt does not fare as well as debt issued on utilities and sewer systems because it does not hold a monopoly on its customer base.

    “It’s going to be the system of the haves and have-nots, and that starts with which states are expanding Medicaid and which are not,” Sisson said.

    This should be interesting to watch.


    • The regional not for profit health care system in my part of the low country (which dominates health care following a period of rapid expansion and integration of the majority of physician practices in the region) is bracing for lower than expected revenues due in part to the state’s refusal to expand Medicaid. This is particularly troublesome because the region has a high percentage of low income permanent residents, while the part-time wealthy (many very wealthy) residents seek their health care elsewhere.

    • Because in the free market, unfettered by intrusive government, it just isn’t profitable to provide services to people who can’t pay for them.

    • Here in fly-over country we’re seeing much of the same: The major safety-net facilities (which receive zero financial support from the City) are preparing for budget cuts, layoffs, and delayed capitol projects because most revenue streams are declining while the number of self-pay (which generally means no-pay) patients continues to swell. The old tactic of negotiating higher rates from private insurers is losing its effect, in part due to many employers switching to high-deductible/HSA type plans for which we must chase the patient’s portion of the cost, with mixed results at best. The advent of Exchange policies bodes ill as well because many plans will have severly constrained provider networks which will at least partially exclude the high-cost facilities (mainly academic) that serve the un and underinsured. Perhaps I’m being alarmist, but the future looks pretty bleak for academic medical centers that are also safety-net providers but lack national or international appeal.

      As someone versed in public policy, I understand that many of the underlying trends driving these difficult times are necessary in the long run if we’re to ever achieve a “modern” health care system. Unfortunately the promise of a more rational and equitable tomorrow does not put food on the table today.


    • AZ is surprisingly going with the Medicaid expansion. And if I understood our hospital chain’s CEO, we are expecting a 4-5% bump in revenues as a result.