Everybody agreed hospitals would be the biggest business losers if the Supreme Court overthrew the health act. But the Thursday ruling that preserved most of the law — along with the promise of billions in extra hospital revenue — raises new problems for the industry.

 

Hospital bosses applauded and hospital stocks soared as investors bet that coverage for as many as 30 million extra Americans would reduce unpaid bills and boost profits.

“It’s kind of like your kid being in a ballgame and having a critical play,” said Wright L. Lassiter, III, CEO of Alameda County Medical Center in California. “You cringe right when they’re going to do it and hope they’re successful.” Thursday morning, he said, “I was that way and kind of cringed, hoping it was upheld. It was, and I cheered.”

Even so, attention switched almost immediately to the November election, unsustainable deficits, looming fiscal deadlines and the court’s decision to let states opt out of the Medicaid expansion — a critical part of the law.

After the justices announced their decision, presumptive Republican presidential nominee Mitt Romney repeated his pledge to get rid of the law.

“If Romney is elected and the Senate becomes Republican and the House remains Republican, they could well repeal it, even though we know that they don’t have a clue as to what they’d replace it with,” said Paul Ginsburg, president of the Center for Studying Health System Change. “I take that risk very seriously.”

Even if President Barack Obama is re-elected, the ruling letting states refuse the act’s Medicaid expansion puts at risk billions of dollars in potential federal funding of medical care.

“We have a lot of questions about that,” said Richard Umbdenstock, CEO of the American Hospital Association.  “It wasn’t an area that people focused on.”

That’s a financial risk for all hospitals in those states that opt out but especially for “safety net” hospitals that serve the uninsured poor. Not only would the hospitals miss out on the expansion of Medicaid coverage; over time the health act reduces the Medicare and Medicaid surpluses they collect for handling a disproportionate share of low-income patients.

“If a state chose not to participate in the expansion, the poorest of the poor would be impacted,” said John M. Haupert, CEO of Grady Health System, an Atlanta public hospital where a third of the patients are uninsured.

Georgia Gov. Nathan Deal said Thursday that he would wait until after the election to decide about the Medicaid expansion, but he hinted that the state would be likely to accept the funding. “The taxpayers of the state of Georgia will be paying as federal taxpayers to support the expansions of other states,” Deal said.  “And if ours are excluded, that’s certainly a question we would have to ask if that is prudent.”

Under the Affordable Care Act, Grady Health’s annual $60 million in extra federal funds to take care of the uninsured will be substantially reduced.  That shortfall was supposed to be filled by expanded coverage in Medicaid and the private market, Haupert said. But if Georgia opts out of the Medicaid expansion and Congress doesn’t change the rules, the hospital will be forced to turn for funding to the counties it serves, he said, “and they are not in a position to make up that difference right now.”

Most states are expected to embrace the Medicaid expansion, which was estimated to bring coverage to an additional 17 million people nationwide.  But Republican lawmakers in Idaho, Missouri, Nebraska and Mississippi have already raised doubts about going along with it, claiming it would be too expensive even though Washington would pay almost the entire bill.

“The vast majority of states will move forward and implement the expansion, but it may take longer than anticipated,” said Dan Hawkins, senior vice president at the National Association of Community Health Centers, a trade group of federally funded clinics serving the poor. 

Analysts predicted that hospitals and health centers — which provide jobs for their communities as well as care and healing — would heavily lobby Republican lawmakers in their states to accept bigger Medicaid programs. 

“Whether you look at it from the position of states, whether you look at it from the position of consumers or whether you look at it from the position of providers, there’s tremendous pressure to expand coverage,” said Deborah Bachrach, a health lawyer and former New York Medicaid director. 

The bigger threat to hospitals comes from Washington. Even if the health act isn’t repealed after the election in November, there could be delays in implementing it, and the means to pay for it could be undermined by a post-election deal to address expiring tax cuts and looming budget reductions, analysts said.

“It’s a short-term victory for hospitals to have the whole law upheld,” said Arthur Henderson, who covers hospital stocks for Jefferies, an investment bank. “What I’m focused on, now that that’s behind us, is the election… We know there’s going to be deficit reduction, and it’s going to be very hard for hospitals not to chip in something.”

On Thursday, investors buying stock in HCA Holdings, which operates more than 150 hospitals, seemed more focused on the short-term. HCA stock zoomed up by $2 a share immediately after the court’s announcement and closed the day up $2.86, or 11 percent.

Phil Galewitz of KHN and Jim Burress of WABE in Atlanta contributed to this report.