Guidehouse Analysis: How Medicare Expansion Would Squeeze Hospitals

Jeff Leibach, POLITICO

Guidehouse analysis: How Medicare expansion would squeeze hospitals. The industry could face financial peril under Medicare expansion scenarios modeled by analysts at Guidehouse, POLITICO's Paul Demko reports.

Guidehouse's starting point: The consulting firm projected the impact using a sample mid-sized, regional hospital system: 1,000 beds, $1.2 billion in annual revenue and an operating margin of 2.3%.

Under the most disruptive scenario of "Medicare for All," where Medicare is the sole payer at current rates, hospital operating margins would fall to negative 22.1%, Guidehouse predicts.

Under the least disruptive scenario, where individuals who are at least 50 years old and shop on the individual insurance market are allowed to buy into Medicare, hospitals would only see a slight downtick in operating margin to 2%.

But hospitals already are facing financial challenges given the aging population and the increasing share of Medicare patients. The report projects that if nothing changes, the hospital used in the model would go from a 2.3% profit margin to a negative margin of 6.2% over the next five years.

Medicare expansion “would potentially accelerate those headwinds significantly,” said Guidehouse's Jeff Leibach.

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