WSJ: Court Ruling on Obamacare Vindicates Hospital Consolidation, Investments

The Supreme Court decision to uphold President Barack Obama’s Affordable Care Act vindicates the hospital industry in its more than two year-strategy of consolidation and investment to control costs and gain better bargaining position with payers, the Wall Street Journal reported.

Hospitals had accelerated their bid to consolidate and invest in outpatient clinics and information technology ahead of the enactment of the law, known as Obamacare, which is likely to see about 30 million more insured patients as well as government cuts on payments.

North Shore-Long Island Jewish Health System in the last two years had spent $400 million on technology, doubled the number of doctors it employs and posted case managers and home-care aids to help control readmissions, CEO Michael Dowling told the Journal.

"We were going at 20 miles an hour before the law," said Dowling of the firm’s two-decade campaign of steady acquisitions of rivals. "The law brought you up to 70 miles an hour."

The Supreme Court ruled 5-to-4 to uphold the healthcare mandate, requiring nearly all individuals to purchase insurance or face a fine, as an example of the government using its taxation powers and not its authority to regulate commerce, The New York Times reported.

The decision restricted one part of the law: the expansion of Medicaid, the government healthcare program for low-income and sick people, the Times reported.

Hospital stocks surged after the ruling was announced. Tenet Healthcare Corp. and Community Health Systems Inc. about 9 percent each before paring gains, the Journal said.

"We'll have 32 million potential customers who will come in, get treatment and pay," said Alan Miller, chief executive of Universal Health Services, a hospital operator, told the Journal. Previously they got treatment but couldn’t pay, he said.

Public government-backed hospitals will need to boost investments and care quality to compete with private providers, said Robert Earley, CEO of John Peter Smith Health Network, the public hospital system in Fort Worth, Texas. "It puts me in a competitive standing that's not been there before," Earley said.

Still, Barry Arbuckle, CEO of MemorialCare Health System, which runs six southern California nonprofit hospitals, said the tax, or fine, on individuals for failing to acquire insurance is too small. He said it was ``maybe a tenth’’ of what it would cost to purchase insurance, which would prompt many people to remain uninsured, the Journal said.

Some doctors are worried that they may not be able to handle the expected flood of new patients as many of the newly insured would be covered by state-run Medicaid plans, which have low payment rates that many doctors currently don’t accept.

"Many states' reimbursements for Medicaid may not cover your costs," said Tim Bartholow, chief medical officer of the Wisconsin Medical Society, the Journal said.

Republicans reaffirmed their pledge to repeal the law.

“Obamacare was bad policy yesterday; it’s bad policy today,” said Mitt Romney, the presumptive Republican presidential nominee, in remarks at the Capitol after the ruling was announced. “Obamacare was bad law yesterday; it’s bad law today,” the New York Times reported.