Under California Gov. Arnold Schwarzenegger’s proposal to provide universal healthcare coverage to all Californians, providers are expected to fund a large portion of the program with a “coverage dividend”--4% of gross revenues from hospitals and 2% of gross revenues from physicians. But it’s an open question whether hospitals and physicians will financially benefit once the nearly 19% of residents in the state who are currently uninsured have healthcare coverage. Schwarzenegger’s proposal also calls for an additional $10 billion to $15 billion in reimbursements for providers through increased Medi-Cal rates and coverage for the uninsured.
“We believe the financial and credit impact to the 27 hospitals and health systems rated by Moody’s in the state could vary widely, both positively and negatively, depending on whether and to what degree the benefits of additional reimbursement offset the cost of the coverage dividend,” writes Moody’s. On average, the 4% coverage dividend would “be equal to a significant 34% of total cash flow available to pay debt service, fund capital expenditures, and contribute to pension plans,” estimates the service. Only seven out of 27 Moody’s-rated hospitals have amounts of charity care that would exceed the dividend, so most hospitals would experience a net financial loss. That universal coverage would erase all bad debt from patients, however, is unrealistic, says Moody’s. For more information on this special comment, contact Moody’s at 212-553-1653.
