Obamacare Set To Drive New Wave Of Hospital Bankruptcies

Tyler Durden's picture

Back in 2008, one of the biggest arguments in favor of Obamacare was that the legislation would help alleviate bad debt at hospitals created by people who required emergency care but didn't have health insurance or the financial means to cover their treatment.  Of course, like most promises made about Obamacare, the exact opposite of the Left's original theories has played out in reality as restructuring lawyers are now warning that the healthcare industry is about to experience a massive wave of hospital bankruptcies.  Per Bloomberg:

A wave of hospitals and other medical companies are likely to restructure their debt or file for bankruptcy in the coming year, following the recent spate of failing retailers and energy drillers, according to restructuring professionals. Regulatory changes, technological advances and the rise of urgent-care centers have created a "perfect storm" for health-care companies, said David Neier, a partner in the New York office of law firm Winston & Strawn LLC.

 

Some signs are already there: Health-care bankruptcy filings have more than tripled this year according to data compiled by Bloomberg, and an index of Chapter 11 filings by companies with more than $1 million of assets has reached record highs in four of the last six quarters, according to law firm Polsinelli PC. Junk bonds from companies in the industry have dropped 1.4 percent this month, a steeper decline than the broader high-yield market, according to Bloomberg Barclays index data.

 

Since 1997, health-care cases have made up only 5.25 percent of all U.S. bankruptcy filings, according to Bloomberg data. Year to date, they already comprise 7.25 percent of all filings. Emergency-room operator Adeptus Health, cancer-care provider 21st Century Oncology, and cancer treatment specialist California Proton Treatment are the largest filings. Those statistics exclude pharmaceutical company Concordia, which is restructuring in Canada, and Preferred Care Inc., one of the U.S.’s largest nursing home groups, operating 108 assisted living facilities.

Hospital

So what has caused the sudden onset of hospital failures?  Well, because Obamacare's architects were so certain their legislation would completely eliminate uninsured citizens in the U.S., they decided to offset the costs of the "Affordable Care Act" by eliminating subsidy payments to hospitals that had previously been used to cover losses from treating uninsured patients...

Hospitals, including private rural ones, may be among the hardest hit, Winston & Strawn’s Neier said. The Affordable Care Act, known as Obamacare, reduced payments to hospitals that serve a large number of poor and uninsured patients, known as "disproportionate share hospitals," on the theory that more patients would be insured under the law. Congress delayed those cuts several times, but didn’t do so for the current fiscal year, which may "single-handedly throw hospitals into immediate financial distress -- many operate on less than one day’s cash,” he said in an interview.

 

"Smaller hospitals have already been struggling for years,” said Kristin Going, a partner in the New York office of Drinker, Biddle & Reath LLP. Both lawyers declined to discuss specific companies. Since 2010, a growing number of patients have enrolled in high-deductible health plans that force them to shoulder more of costs when they get treatment, according to the U.S. Centers for Disease Control and Prevention. That has translated into more bad debt from customers for hospitals and other providers.

 

Some publicly traded hospital companies that were already under pressure from high debt loads have been further buffeted by this year’s hurricanes. Community Health Systems Inc., with $1.9 billion in debt maturing in 2019, has suffered doctor revolts over crumbling, cash-strapped facilities, as well as losses linked to the storms in Texas and Florida earlier this year. A representative for Community Health didn’t return a call seeking comment.

...of course, here in reality, things didn't quite play out so perfectly as surging Obamacare premiums have pushed more and more people into  high deductible plans or have forced them to forego insurance altogether and opt instead to simply pay the tax penalties levied by the legislation.  Shocking that folks could simply absorb a doubling of their healthcare premiums in 4 years.

Just more proof that Obamacare is working perfectly and should be left just as it is...

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38BWD22's picture

 

 

And my MD claimed three years ago how ObamaCare was so good for the poor....

hedgeless_horseman's picture

 

Bankruptcy?

Health insurance companies doing great...

These are insurance companies...they are by definition intermediaries...not medical providers.  They don't diagnose or treat anyone.  They make money only by receiving premium payments, investing these payments, and by minimizing the physician reimbursements they make to the providers that actually provide healthcare. 

bamawatson's picture

if you like your hospital, you can keep your hospital

RAT005's picture

The fine is not enforceable so basically there is no fine.  Counting premiums and deductibles, not to mention doctors that won't honor Obamacare plans anyways, most people are better off self insuring.

CheapBastard's picture

"If you want to keep your hospital, you can keep your hospital. I promise!"

Vilfredo Pareto's picture

The fine may be enforceable someday.  Besides, does anyone know if they are going to add interest and penalties to those unpaid amounts?  If so after about ten years that is a buttload of money.  The next leftist government may change the law on filing leins and garnishments. After all anybody willfully racking up penalties is an antisocial free rider lol not paying his share for the common good.

Déjà view's picture

HC@20% GDP...

'Flip and clip' burgers and toenails for highly paid unemployed bed pan attendants et al...

Hata Mari's picture

I don't believe they do, but don't quote me on that. I had a client who owed both income tax and ACA penalty. The IRS actually separated out the amounts and sent him 2 bills, one for the income tax and one for the penalty. I think he told me no extra fees were attached to the penalty.

peippe's picture

same for your/my delusions.

we can keep those too!

Shocker's picture

Heathcare has just been another disaster in the past 8 years. Time to stop the mess, and get real reform

Layoff List: http://www.dailyjobcuts.com

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swmnguy's picture

8 years?  Healthcare finance was a disaster in 1987, when I first became aware of the full cost.  I was working at a small company then, which wanted to add a health insurance benefit.  In 1987 it cost about double what my then-employer could afford.  I saw all the numbers, and was clever enough with a calculator to figure out that they genuinely could not afford it.  Then.  In 1987.  It hasn't gotten any cheaper since.  

I've been buying my own family coverage in the Individual Market since 2004.  I saw double-digit percentage increases every year from 2005-2009.  After ACA was enacted, my policy was "grandfathered in" as it didn't meet all the requirements of ACA but met enough.  Since then I've barely seen an increase, other than the annual increases as I get older, as spelled out in the original policy rate sheet.

There's no way to let Finance drive Health Care, without the vicious price spiral, decline in quality of care, and rationing on the basis of ability to pay.  Doesn't work and can't work.  It's the nature of Finance.  Look at Higher Education, home finance, retirement finance, auto finance, public and infrastructure finance; all subsumed entirely by Finance, all circling the drain.  When our economy worked, 5% of GDP was finance-driven.  Now it's nearing 50%.  And the economy doesn't work, as we discuss on ZH every day these past 8 years.  There's no proposal that can "fix" healthcare finance.  It's simply one of those things that doesn't work in a finance-driven market context.

ThisIsMadness's picture

Health insurance is not health care. Until the focus is on health care (and the costs of health care) nothing gets fixed.

MoreFreedom's picture

"Health insurance is not health care. Until the focus is on health care (and the costs of health care) nothing gets fixed."

The way to fix the mess, is to separte the government from both health care and health insurance.  Free markets make us prosperous, while government markets make us poor.  It's that simple.  But it also means, governments neither forcing health providers to care for those who can't or won't pay, and not paying for the health care of the poor. 

But I'll tell you one things for sure: when the government stops paying for people's health care, they'll start making sure they can.  With freedom, comes responsibility.

 

Vilfredo Pareto's picture

So how did you get to keep a grandfathered policy.  Mine was cancelled after three years.  You must be paying the penalty for a non compliant policy now.

ATM's picture

I had a grandfathered policy too, but the insurer yanked it from the market. If that hasn't happened to you, it will.

When it does, your premiums will be exponetially higher and not multiples higher. I went from something like $5k/yr for a family of five to $30k for a family 4.

RedBaron616's picture

It has been a mess long before that. As usual, you can trace the problems to when the federal government become involved more and more in health care. Just as in college tuition, everywhere the government interferes with the free market, they royally screw it up.

There should never be such a thing as obtaining a certificate of need before building a hospital. All that does is ensure that there is not any real competition.

Also, everyone should pay the same price for the same services. Stop all the special pricing for this or that insurance company, etc. One service = One price.

icedoc's picture

Let's make the statement more inclusive: Everywhere and anywhere any government is involved is a failure. There are no successful government agencies at any level, anyplace.

GUS100CORRINA's picture

Obamacare Set To Drive New Wave Of Hospital Bankruptcies

Observation: OBAMACARE is a CURSE on America that is bleeding Americans dry and will ultimately lead to CIVIL UNREST if nothing is done to correct the injustice.

vealparm's picture

Obamacare was never really about reforming the heatlthcare/insurance industry. It was designed from the get go to destroy the industry so the  leftist/socialists who wrote it could force single-payer down the throats of ALL Americans execpt the 1%.

 O'care architect himself, John Gruber said it only passed because so many Americans are stupid.

ATM's picture

Just what the magical negro/arab wants. He is Colin Kaepernick without the ability to throw.

ToWo's picture

.. bleeding 'tax paying' Americans .. there are many that get the 'free ride'.

two hoots's picture

Take them out of the loop.   Just expensive middlemen/administrators,

ZD1's picture

Also take big government bureaucrats out of the loop too. Just expensive middlemen/administrators.

Dontblamethegoat's picture

CHS bet the shop on a surge of ACA insured patients so they went on a buying spree, pledging the assets of acquired hospitals to raise more debt. Read a few of their recent annual reports to see what a debt ponzi scheme they've been using lately.

Expect them to sell off as much as they can quickly.

Bigly's picture

HH-

But Insurers are not providers (docs, hospitals, ancillary)

ShorTed's picture

I hope you immediately went out and got a real doctor as opposed to a SJW.

toady's picture

One of my many DRs (obamacare makes me change DRs every year) went insane when he was flooded with new patients that hadn't been to a DR in decades.

Just threw up his hands and walked out one day.

slightlyskeptical's picture

Your Dr. is an idiot then. He could always take less appointments. Given that people with more health problems create more income for Drs. the Dr. should be rejoicing.

It's like saying your auto mechanic quit because people were bringing him too many cars to fix.

Dontblamethegoat's picture

Ah, no not really. At Medicaid payment levels, most Drs. And hospitals can't break even on them.

how_this_stuff_works's picture

"At Medicaid payment levels, most Drs. And hospitals can't break even on them."

Not to mention they're not compliant, don't take their prescribed meds, the list goes on.

Medicares are similar.

Vilfredo Pareto's picture

Correct.  You are screwed when your largest payer is medicaid and medicare without those disproportionate share payments.

Bigly's picture

I suspect he did not want the majority of his patients to be the stupid dregs of society

Vilfredo Pareto's picture

That too.  They won't take care of themselves.  They are badvoutcomes just waiting to happen, a liability.

toady's picture

Okay,  you are correct on a generic level, but what I was getting at was the patients were horrible.... just disgusting humans.... and the money per head just keeps dropping as the insurance companies seek to keep all the money.

Why keep working on scooter bound 500 pounders with smokers lung, toe fungus, and bad dental hygiene when you're only getting paid pennies on the dollar?

Check out the stats on DRs leaving medical practices since the implementation of obamacare.

Hata Mari's picture

Never mind the hours spent per day on administrative tasks instead of actually seeing patients (the money-maker). I was reading that while certain admin tasks can be performed by admin personnel, most MUST (by regulation) be completed by the MD.

Chuck Walla's picture

Government paying means bankrupt doctors. They know it and many avoid it. 

Vilfredo Pareto's picture

His doctor is likely employed and has a 15 minute slot for the routine follow up and a 15 minute slot for the patient who hasn't seen a doctor in ten years.  He didn't have a say in the schedule.  Work or quit was probably his choice.

 

You must think most doctors still use their independent judgment and discretion lol.

Buck Johnson's picture

Remember this "plan" that Obama pushed it's software was done by a friend of Michelle and it was essentially off shelf software that was already online and it wasn't possible to do what was needed aka it was shit.  Isn't it amazing how so many things are coming to ahead from the economy to war to failed everything to make theperfect storm for the US.

We are looking at the black swan or swans and they are dangeorus.

 

swmnguy's picture

This article is talking about bankruptcies among healthcare-related companies.  Personal bankruptcies have been in steep decline since ACA was implemented.  The direct cause of personal bankruptcies isn't quantified by the courts, but healthcare costs have long been the leading cause of personal bankruptcies, accounting for perhaps 500,000 filings a year.  Again, hard to quantify because the courts don't specify.

None of this detracts from the fact that US healthcare finance has been in a death-spiral since before 1973, when the Nixon Administration introduced HMO plans to deal with what was already a problem threatening the economy.  Since then, every single attempt to fix the problem has failed, because the problem is the system itself.  ObamaCare is of course no different. 

The Heritage Foundation was hired by the insurance industry around 1990 to write up a policy proposal that would "fix" US healthcare finance and preserve and enrich the insurance industry.  That plan knocked around Washington for a decade or so, until Mitt Romney proposed a variant of it in Massachusetts when he was that state's Governor.  There it was called "RomneyCare."  Obama got hold of the plan, and following both the Clinton's "triangulation" strategy of implementing Republican proposals and claiming them as their own, and Obama's own native allegiance to the Finance Sector, it was a natural choice for Obama to enact and claim as his own.

Obama's main goal was revealed when he and Democratic Party leadership sent ACA to Max Baucus' Finance Committee instead of Tom Harkins' Health and Human Services Committee.  The goal was to bail out the healthcare finance sector from having priced its products out of the reach of Americans and their employers, approaching a critical mass and collapse.  Had health care itself been the point, it would have gone to Harkin's committee, and would probably have resulted in opening up Medicare to all Americans.

That's what's going to happen anyway, but probably not until the aftermath of the next financial collapse.  That may happen soon, and it wouldn't surprise me a bit of President Trump is still in office, and proposes opening up Medicare to everyone.  

GunnerySgtHartman's picture

opening up Medicare to all Americans

Oh, yeah, that will solve EVERYTHING.

The situation we have doesn't have its roots in Nixon's HMOs (although those didn't help anything); it has its roots in FDR's wage freeze during World War II.

http://www.chicagotribune.com/news/opinion/commentary/ct-obamacare-health-care-employers-20170224-story.html

The government gave us the current situation; there's no way the government will fix what it did, and opening Medicare to everyone will only make it worse.

JRobby's picture

The upward spiraling costs caused by the way the system has been constructed over the decades which includes anti trust exemptions for health insurers.

Retired Guy's picture

Under medicare they don't tell us how much medical services cost. Sometimes I peek and see $500 for an office visit. I don't have any control over what they bill medicare. Really nobody does. Please don't think medicare will fix anything.

People knowing the cost of  service they are buying and paying a large part of that cost directly is part of the solution.

Usually the biggest medical costs come just before you die. My uncle had a $175,000 operation and died within a year. Part of the solution must be a recognition that we all die and must accept it without giant, worthless, painful, end of the road, treatment.

how_this_stuff_works's picture

"Under medicare they don't tell us how much medical services cost."

Looking at a medicare EOB tells a lot. A friend of mine had two heart valves repaired and a CABG x 2. Spent 8 days (at least) in the hospital, including 3 in post-op cardiac recovery. Add in anesthesia, the OR, the docs, the other staffing, it ain't cheap.

His insurer paid 28 cents on the dollar.

No doubt in my mind the hospital lost money on his care.

Vilfredo Pareto's picture

Not really.  If insurance wants a fifty percent discount you anticipate that by setting your cash rate as double the rate you have to have to operate.  It is slightly more complicated because you have multiple insurors with varying numbers of patients and bargaining power but their official rate represents really just the rate from which they expect the average discount to be taken from and theiraveragee discounted rate is their actual revenue target.   

how_this_stuff_works's picture

" If insurance wants a fifty percent discount you anticipate that by setting your cash rate as double the rate you have to have to operate."

Okay, so if the insurer paid 28 cents on the dollar how does that translate into 50% discount. Seems like a 72% haircut to me.

JRobby's picture

Find a doctor with the ability to reason

Bigly's picture

A majority of doctors are (or at least were) jewish. The majority of jews are dems. Dems loved obamacare and socialized medicine. Therefore doctors helped their own demise.

Kidbuck's picture

Obama care and fag marriages were both ways for Obama to shift the costs of AIDS infected faggots, illegal aliens, slutty single mothers, and no account losers and boozers and drug addicts to normal healthy people.

Vilfredo Pareto's picture

Lol.  That is true.  They call it helping marginalized groups.