How the ACA is Affecting Hospital Renovations

The Affordable Care Act (ACA), also known as Obamacare, has had a major impact on virtually every aspect of the healthcare industry in the U.S. Hospitals in particular are only beginning to understand how this expansion of private insurance and/or Medicare to a much wider range of Americans will influence their businesses and bottom line.

When it comes to significant hospital renovations, there are many different factors that come into play but revenue and being able to afford those renovations is certainly key.

Demand for Care Means More Revenue

The ACA has led to a greater demand for care throughout the healthcare system. The addition of 17 million Americans to private insurance plans or expanded Medicare coverage means that there are simply more people who are able to go to the doctor or the hospital for basic care. An increase in patients, followed by an increase in insurance payments for treating these patients, means an overall increase in revenue for many hospitals. Of course, this improved revenue stream could be used for hospital expansion to serve these new patients and renovations for improved patient safety and comfort. So far there has been no indication that this is a trend in hospital renovation, but it is one factor to consider.

Other Considerations

Unfortunately, increase patient revenue is just one impact that the ACA has had thus far. If more revenue from privately insured patients meant a steadier - and bigger - stream of cash, a lot of renovations would probably be on the horizon. But that is simply not the case. Instead, other ACA provisions are either having their impact already or looming on the horizon. For example, one ACA provision allows for the decrease in the program known as the Medicaid Disproportionate Share Hospital payments. These payments are disbursed to those hospitals that shoulder more than their "fair" share of Medicare and non-paying patients. With the expansion of private insurance, it is thought that these payments should become less necessary across the country. Although these cuts have been pushed back to 2018, that kind of looming issue could certainly factor in when hospitals are deciding whether to plan or schedule large renovation projects.

Further, the overall reimbursement numbers for healthcare services have fallen, according to one financial expert. The decrease in reimbursement at the lowest level has an impact on the cash stores a hospital would have to expand and renovate, making these projects get pushed back until absolutely necessary.

Moving Forward

For contractors who work in hospitals, it is important to note that the long-term implications of the ACA will not be apparent for many more years. In the short term, renovation projects will most likely continue at a steady pace. As hospitals begin to determine what their year to year revenue will look like with Obamacare, upgrades and renovations are likely to become more common.

But money is not the only factor, either. As there continues to be an increase in outpatient care, the need for more hospital beds will decline. In some cases this may mean fewer expansion projects, but other instances may see conversions of inpatient areas to administrative offices or other types of repurposing, which will still mean work for hospital contractors.

Overall, it is too early to tell what long-term effects the ACA will have on hospital renovations, but keeping important factors like patient demand, Medicare reimbursement, and trends in healthcare should help contractors be able to keep ahead of the curve and be ready to fill their project pipeline.