US Healthcare bankruptcies surge 270% in 2018 vs 2017

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6 months ago we wrote of the growing crisis of hospitals declaring bankruptcy in America. While The Affordable Care Act (Obamacare) is often lauded by some as noble legislation, according to bankruptcy lawyers, Polsinelli, the changes made to reimbursements that used to help cover hospitals who treated uninsured patients that were pulled under ACA have sent many hospitals to the bankruptcy A&E ward. Polsinelli wrote this month,

The Health Care Services Distress Research Index was 455.00 for the first quarter of 2018. This is an increase over 173 points from last quarter’s record high, approximately 62 percent. The index has experienced record or near-record highs in seven of the last eight quarters. Compared with the same period one year ago, the index has increased over 333 points, approximately 270 percent, and compared with the benchmark period of fourth quarter of 2010, it is up approximately 355 percent.”

HCBR

Polsinelli also wrote in 1Q 2017 that,

“Unlike the public markets, the Polsinelli/TrBK Distress Indices include both public and private companies, creating a broader economic view and one which may show developing trends on Main Street before they appear on Wall Street….Health care distress is high and it seems to be getting worse…

…The business of health care is unlike other industries, such as manufacturing, real estate, or retail. Health care faces all the traditional business challenges, such as competition, the impact of technology on services, and increasing wages. But more, the health care industry is needing to adapt to increasing regulations, changes in reimbursement rates from government or private payors, and a shift from traditional fee-for-service to value-based models that impact profitability…There is unprecedented pressure of major systemic changes to the existing health care system, particularly the implementation of the Affordable Care Act over the last several years and the current status of the program, which is alternately being repealed, repealed and replaced, phased out, or simply defunded…The (Obama) administration’s recent decision to terminate cost sharing reduction payments will also directly impact the health care market. Insurance companies may continue to provide insurance at a higher premium or decide to exit the markets. Eliminating these payments and the resulting premium increases may increase the cost to the government through premium subsidies.”

In short many Americans saw a doubling of premiums (an average increase of 113%) under Obamacare inside of 4 years causing many to forgo the insurance. The reimbursements under the old system (which helped compensate hospitals administering emergency treatment for the uninsured) that were stopped on the proviso people would take up ACA plans backfired. Not enough people signed up and more hospitals running on a days cashflow have been forced to close because the reimbursements designed to protect them against uninsured patients disappeared. When Jonathan Gruber, the architect of Obamacare, testified to Congress he candidly said,

The Affordable Healthcare bill was written in a tortured way to make sure the (Congressional Budget Office) did not score the mandate as taxes…If CBO scored the mandate as taxes, the bill dies, OK? Lack of transparency is a huge political advantage … call it the stupidity of the American voter or whatever … that was really, really critical to get the thing to pass … I wish … we could make it transparent, but I’d rather have the law than not.”

Makes one wonder what the status of the medical equipment suppliers who lease equipment to these hospitals does with the machines they repossess.

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