It is no secret that hospitals and health systems have faced unprecedented financial challenges over the past three years. Latest reports indicate that margins are hovering around zero percent, which while dismal is a tremendous improvement from the negative margins that have been the reality for some time. Now, health systems are being confronted with yet another challenge that threatens their financial viability – Medicaid redeterminations.

As of mid-July, over 1.5 million Americans have already been dis-enrolled from Medicaid plans across the country. The impact will be material as it will lower overall reimbursement, increase bad debt and charity care, disrupt routine care and increase emergency department utilization, and create revenue cycle management (RCM) difficulties for members and hospitals alike. No one wins in this scenario.

Medicaid redeterminations are taking place now because of the expired continuous enrollment provisions that were put in place during the COVID-19 pandemic to ensure coverage. The provisions required state Medicaid programs to maintain member enrollment until the public health emergency was declared officially over. With the expiration, states can now redetermine the eligibility of Medicaid patients-and some states are doing so very aggressively.

The Kaiser Family Foundation estimates that about 15 million people will lose Medicaid coverage during the unwinding of the continuous enrollment provision. Two-thirds of those disenrolled had no changes in income or circumstances that would render them ineligible for Medicaid coverage and likely still qualify. Commonly it is a paperwork problem-failure to renew or requalify in a timely manner, outdated contact information or just lack of understanding has led to lack of coverage for millions.

A secondary but also major impact to health systems is potential change in 340B status. If hospitals are not providing enough care to low income/Medicaid individuals, they risk losing access to millions of dollars in drug discounts that directly impact the balance sheet and can wreck already fragile margins.

All in all, Medicaid redeterminations pose significant financial risk for hospitals and health systems. While the exact impact will vary depending on geography, patient mix, and organizational mission, providers must prepare for an impending wave of redeterminations. Success is predicated on having the data to monitor Medicaid coverage denials, increases in charity care, 340B qualification status and other metrics in real-time. By anticipating the effects and adopting proactive strategies, hospitals can navigate these challenges and ensure the delivery of quality care despite the new financial realities.

Interested in learning more? The team at VisiQuate is focusing on how we can help hospitals optimize their revenue cycle management. Visit our Revenue Cycle Playbook for step-by-step plays to help you stay on top of the ever-changing landscape of healthcare revenue cycle, or contact us to schedule a demo.

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