Hospitals Optimistic they’ll Dodge Bullet with Health Subsidy Ruling

U.S. hospital executives said on Wednesday they were optimistic they will avoid the toughest consequences of a U.S. Supreme Court decision on whether millions of Americans can continue to purchase subsidized health benefits under the Patient Protection and Affordable Care Act.

The high court heard oral arguments in the case challenging the federal tax credits that help residents in at least 34 states afford medical benefits under President Barack Obama’s health care law.

Investors interpreted commentary by Justice Anthony Kennedy, a potential swing vote among the nine judges, as favorable to the Obama administration’s defense, boosting hospital shares.

Since the subsidies were introduced last year, they have helped hospitals reduce the debt accumulated by covering the costs of uninsured patients.

If the subsidies are deemed illegal for states that rely on the federal insurance exchange, as many as 8 million people may no longer be able to afford coverage, according to health care consultants. An additional 13 states and the District of Columbia have set up their own exchanges and would not be affected.

“I am hopeful that the court will recognize and uphold the intent of Congress, which was to expand coverage as broadly as possible,” Bill Carpenter, chief executive of LifePoint Hospitals Inc., said in an interview.

If the court rules that the federal government cannot provide the subsidies, Mr. Carpenter and other executives interviewed by Reuters said they expected the justices would allow for a transition period before patients lose access to health care.

Mr. Carpenter said LifePoint is talking to members of Congress from the 21 states where it has hospitals, warning of the devastating effect on patients, particularly in the rural areas it serves. A ruling on subsidies would affect 44 of its 65 hospitals in 13 states.

Alan Miller, CEO of hospital chain Universal Health Services Inc., expects the Obama administration would reach an agreement with Republican opponents of the law to keep subsidies in place through the end of 2015. He believes that is enough time to create a workaround to the Supreme Court ruling.

“The Republicans are already talking about providing coverage until the end of the year, until something else can be worked out,” Mr. Miller said, pointing toward the alternative plan being presented by Sen. Orrin Hatch, R-Utah, and others. “Nobody wants to be in the position of denying health care to at least 8 million people.”

Mr. Miller said his company was also speaking with members of Congress about the importance of the coverage. Universal Health Services runs hospitals in 37 states, about two dozen of them in states relying on

Carolinas HealthCare System has about 40 hospitals in North Carolina and South Carolina, where the federal government provides subsidies. President Joe Piemont said lawmakers would have to act to ensure the newly insured are not left to their own devices if the subsidies are thrown out.

“We won’t let the care fall apart, but this is not an uncertainty that we could endure for a very long time,” he said.

“We’re going to lobby through hospital associations and medical associations to admonish everybody that there needs to be a soft landing here.”

Ascension Health, which has hospitals and clinics in 16 states using, has published opinion pieces in the press advocating the need for the subsidies. But it sees little it can do to influence the Supreme Court.

“We are not planning for alternatives because we remain optimistic and hopeful,” said Ascension Health CEO Robert Henkel.

Universal Health shares rose 2.7% and LifePoint rose 3.6% on Wednesday. Community Health Systems Inc., HCA Holdings Inc. and Tenet Healthcare Corp. all jumped more than 5%.


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