The Health Care Investor : Healthcare Lawyers & Attorneys for Life Science Companies & Investors

 As discussed in our prior multi-part series, dental clinic and dental practice management companies remain an exciting investment opportunity for many private equity investors. Medicaid spending on dentistry increased 63% to $7.4 billion between 2007 and 2010.  Medicaid reimbursement in the field is, in fact, projected to reach $622 billion over the next decade. 

Thus dental companies tend to be heavily dependent on both their commercial payor relationships but Medicaid reimbursement as well. For example, in 2011, dental clinics affiliated with Church Street Health Management LLC had over 1 million patient visits; the company reported $161 million in revenue with over 90% of it originating from Medicaid and the State Children’s Health Insurance Program (SCHIP) during that same period.  

Of course, as with many subsectors, there are companies who push the limits of regulatory appropriateness, and we occasionally see instances of companies being ousted from Medicaid.   It is therefore important for investors to understand the potential abuses and closely vet any dental company investment for these risks.

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The National Health Expenditure Accounts (NHEA), published by the Centers for Medicare and Medicaid Services (CMS), are the official estimates of total national healthcare spending. The NHEA measures annual U.S. expenditures for healthcare goods and services, public health activities, program administration, the net cost of private insurance and research as well as other investments related to healthcare.

U.S. healthcare spending increased by about 3.9% in 2011 over the previous year, accounting for approximately 17.9% of GDP, the same as in 2009 and 2010, according to CMS. “The increases in such expenditures will continue to outpace economic growth projections, jumping 7.4% in 2014, when much of the insurance expansion created by the [Obama] health law begins”, writes Alex Wayne for www.bloomberg.com. The new law would add 0.1% to the average annual health spending through 2021, according to the journal, Health Affairs.

Health expenditures in the U.S. neared $2.6 trillion in 2010, ten times the $256 billion spent in 1980. Since 2001, employer-sponsored health coverage for family premiums has increased by 113%.

Federal, state and local governments are projected to spend some $2.4 trillion on healthcare in 2021, half of all U.S. medical expenditures; government spending currently accounts for about 46% of healthcare spending, projected through 2013. Total U.S. healthcare expenditures will surpass $3 trillion in 2014 and reach $4.8 trillion in 2012, according to government data.

For the past several years, healthcare technology and prescription drugs have been the primary contributors to the increase in healthcare spending, with that from prescription medications decelerating and healthcare tech and IT increasing. Approximately 7% of healthcare expenditures go toward administrative costs of government healthcare programs and net cost of private insurance (administrative costs, reserves, taxes and P&L), according to data from Kaiseredu.org.
 

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In Illinois many doctors are eschewing Medicaid patients due to low reimbursements, a trend that will likely become critical in less than two years, when the numbers of Medicaid patients are expected to increase.  In just two years, some 611,000 Illinois residents will become eligible to receive Medicaid benefits, a 22% increase from current 2012 numbers. Recently, the Illinois General Assembly voted to cut $1.6 billion from the Medicaid budget, $14.3 billion for the current fiscal year. Each state sets its own Medicaid rates, with Illinois’ rates among the lowest in the U.S.

According to Deborah Edberg, MD, first vice president of the Illinois Academy of Family Physicians, “For a private physician…if you take too many Medicaid patients, you can’t keep your doors open.

As we discussed in Medicaid Budget Crunch & Its Impact on Healthcare Investing: Part I from a year ago, funding for healthcare programs, including Medicaid, has reached critical stages. Changes to eligibility as well as reduction to state Medicaid programs will, most likely, impact those sectors most dependent on Medicaid funding, such as the skilled nursing (SNF) industry.

As we pointed out in Medicaid Budget Crunch & Its Impact on Healthcare Investing: Part II, some healthcare providers are seemingly well-positioned to thrive even as both state and the federal governments amend Medicaid budgets, notably dialysis providers, preventive care/disruptive healthcare initiatives, primary care providers, managed-care organizations and health IT.

The uncertainty concerning healthcare in general and Medicaid in particular continue to dominate both the news and the thoughts of most Americans. It has now been one year since the end of the federal government’s enhanced Medicaid reimbursement rate to the states. This loss of federal funding has states clamoring for more ways to significantly reduce their Medicaid budgets. Unfortunately, as we proposed in Medicaid Budget Crunch & Its Impact on Healthcare Investing: Part III, many options available to the states to trim their Medicaid budgets will continue to deleteriously affect many healthcare providers.

With increasing demand and diminishing dollars, investments in many life sciences and healthcare sectors continue to perform well. It is, however, more important than ever for investors and providers to continue to scrutinize both present and future revenue sources to meet the opportunities and the challenges as they arise.

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Doctors and organized medical associations are voicing their objections to proposed Stage 2 Medicare and Medicaid guidelines, saying the new standards are far too demanding for many smaller and less-sophisticated medical practices. Practitioners are asking that requirements be within a physician’s control and not rely on a third party’s use of technology; e.g., a patient or laboratory. The AMA, as well as 98 state and specialty societies, also argue that EHR penalties should not be backdated. These organizations also strongly oppose CMS (Centers for Medicare & Medicaid Services) plans to cut rates by 1% in 2015 and 2% in 2016 for not meeting ‘meaningful use standards’ by October 2014. It should be said that CMS has provided exemptions from penalties in certain practices.

Over 185,000 doctors have registered for the program but hundreds of thousands had not applied for the incentives as of March. Approximately 62,000 doctors have received incentives from either Medicare or Medicaid. CMS indicates that fewer than 200,000 physicians, out of the over 600,000 eligible, reported PQRS (Physician Quality Reporting System) measures in 2010. Over 125,000 doctors met enough of the criteria to share a total of some $400 million in incentives but hundreds of thousands did not even attempt to meet the pay-for-reporting criteria due to the burdensome process. Over 50,000 attempted to qualify for the bonuses but failed to report sufficient measures. PQRS participation increased when 35 academic practices, with 24,823 eligible professionals, chose to send physician quality data as group practices, receiving financial bonuses.

CMS is offering up to $44,000 over five years from Medicare or $63,750 over six years from Medicaid to eligible health care providers who adopt EHRs and implement them in a meaningful way, reports Charles Fiegl on www.amednews.com. Stage 1 rules, implemented in 2011, required physicians to meet 15 core measures and five optional measures; stage 2, which will begin in 2014, will require doctors to meet additional requirements.

Bonuses were allotted to 168,843 health care professionals and just over 19,000 medical practices in 2010, with the average payout $2,157/doctor and $20,364/practice. These incentive amounts are diminishing until 2014, the final year to receive higher pay before the first noncompliance penalty is levied to pay rates in 2015. A 1% penalty was applied this year to thousands of doctors who did not report enough eligible electronic prescribing situations with their patients last year.

The Government Accounting Office (GAO) is currently examining the process that CMS uses to validate if healthcare providers have met “meaningful use requirements”. Practitioners may be required to submit additional documentation to prove that they are, indeed, entitled to receive ‘meaningful bonuses’ since it seems apparent that the Medicare incentive program may be vulnerable to making improper payments. Currently, Medicaid requires additional reporting that Medicare does not require or does not verify until payment has been made; the GAO would like to see Medicare match those increased requirements. To test these conditions, some 10% of hospitals and 20% of professionals that are receiving incentive checks will be subject to random audits.

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Nearly 62,000 doctors have earned electronic health record bonuses from Medicare and Medicaid since May 2011, with nearly 40,000 getting bonuses from Medicare. Primary care practitioners have received the most from Medicare, with about 17,000 doctors sharing more than $300 million.

Source: “EHR Incentive Program,” Centers for Medicare & Medicaid Services

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In prior posts we have discussed financial data released by the Obama administration regarding the financial upside of the Patient Protection and Affordable Care Act (PPACA), the healthcare reform law. Recently, we discussed a current study by the Centers for Medicare & Medicaid Services (CMS). Not surprisingly, opponents of the law are eager to publish findings supporting their point of view. But in response to an inquiry from House Ways and Means Committee Chairman Dave Camp (R-Mich), 71 Fortune 100 companies (out of 100 polled) stated that they could save approximately $28.6 billion in 2014 alone by not providing health insurance for their nearly six million employees.

The facts: PPACA requires employers with more than 50 employees who meet the legal definition of full-time workers, to offer health insurance that meets the qualifications for being affordable, beginning in 2014. The law imposes employer fines, payable as an excise tax; employers that do not offer coverage must pay $2,000/employee after exempting 30 employees. If said coverage is deemed to be unaffordable under the law and employees qualify for subsidies in the health insurance exchange markets (which are to be in place in 2014), employers will be fined $3,000/year for each employee who receives the subsidies. The penalties will be indexed to the average per capita premium for health insurance after 2014.

 The report, BROKEN PROMISE: Why ObamaCare Will Force Americans to Lose the Health Care Coverage They Have and Like, authored by the committee’s majority staff, states that PPACA “threatens the stability and sustainability of the employer-based health insurance system—even among the nation’s most prosperous companies”.

In an article by Sara Hansard, writing for Bloomberg/Bureau of National Affairs, the GOP avers that the majority of these giant companies would save $422.4 billion from 2014 through 2023 by eliminating employee health insurance coverage and paying any penalties. Since the cost of paying the penalties is much cheaper than the cost of providing health care coverage, employers will need to make a tough economic choice. This conundrum could affect some 10.2 million employees and their dependents. Individually, these companies could save an average of $402.3 million or $4,821/employee on an after-tax basis in 2014, by opting to pay the fines instead of health insurance. From 2014-2023, the average employer responding to the survey could save $5.9 billion or $9,999/employee, according to the report.

Eighty-four percent of the employers who responded to the poll felt that future health care costs will increase at rates higher than the increases of the last five years, the report continues. Employers’ costs, which increased 5.9% annually over the last five years, are predicted to rise 7.6% annually over the next few years. These increased costs, companies aver, could lead to increased unemployment as many businesses will simply not be able to afford the cost of insuring their workers.

In 2010, some 170 million Americans received health coverage benefits from their employers, the largest source of health insurance in the nation. Representative Camp argues that “Anyone who gets insurance through their job should be worried what will happen next, because there is a distinct financial incentive for employers to terminate health care coverage under the Democrat’s health care law”.

In response, spokesman for the Ways and Means Committee Democrats, Josh Drobnyk, rebutted the Republicans stance, saying that the Republican report’s assertion that employers may eliminate workers’ health insurance is “a cynical assertion that ignores the fact that the largest and most successful American businesses for years have voluntarily chosen to offer health coverage to workers Employers provide coverage because it a valuable recruitment tool and retention benefit and because it helps keep their workers healthy and productive.”

Paul Dennett, senior vice president for health care reform at the American Benefits Council, which represents mainly large employers that provide both health and retirement benefits to over 100 million Americans, told BNA that employers’ decisions to continue employee coverage post-2014 will involve “many other dimensions than just the question of the after-tax expense of health care vs. the cost of the penalty”.

 And the debate continues.

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It appears that the glory days of investing in skilled nursing facilities (SNF) are over. In a report from Avalere Health, profits for these facilities are predicted to flatline by 2014, only three short years from now. As a result of the 11.1% reduction in Medicare reimbursement rates, estimates show that the skilled-care nursing industry will experience a reduction in overall margins, declining from 4.4% to 0.4%.

More onerous, the report, financed by the Alliance for Quality Nursing Home Care (AQNHC), reveals that payment reduction as well as group therapy changes in FY 2012 will reduce margins from 3.8% to 0.

A new regulation from The Centers for Medicare & Medicaid Services (CMS) will trim payments for this health-care sector by $79 billion over the next decade. These cuts come at a time when SNFs are already reeling from deep reimbursement cuts for Medicaid beneficiaries, with states besieged with huge budgetary deficits.

According to Avalere CEO, Dan Mendelson, “In the long term, there is concurrence among policymakers that SNFs hold the key to better patient management and cost reduction, but in the short term, these pressures on Medicare and Medicaid rates will be exceedingly difficult to manage.”

Alan G. Rosenbloom, president of AQNHC, concurred, “By adding substantial changes in payment methodology for therapy services, CMS also crossed the line from over-correction [of past inadvertent provider overpayments] into real Medicare cuts.”

To the health-care investor, it is of vital importance to be vigilant as to the outcome of this fall’s Congress’ Joint Select Committee on Deficit Reduction, the so-called ‘Super Committee’, which has been given the arduous task of uncovering $1.2 billion in cuts to the federal budget over the next ten years. Additional Medicare cuts would, undoubtedly, be calamitous to nursing home patients, deleterious for caregiver employment and deleterious to SNFs, which provide high quality patient care in a reasonably-priced setting.

 

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             There is considerable uncertainty surrounding the future of the Medicaid program.  At the end of June the federal government’s enhanced Medicaid reimbursement rate to the states ended. The loss of these federal funds has left states clamoring for additional ways to reduce their Medicaid budgets. At the same time, most Americans are keenly aware that the federal government is trying to get a grip on its budget deficit. According to a recent Wall Street Journal report,  this confluence of budget pressures has forced the Obama administration and congressional Republicans to consider cuts to the Medicaid program that may have not been on the table in previous budget negotiations. In a continuation of our series on the implications of the Medicaid budget crunch, this post will consider some of the providers that may suffer the most from the uncertainty surrounding state Medicaid budgets and the implications of the budget uncertainty for patients and the wider healthcare industry. 

Not surprisingly, healthcare providers who accept Medicaid patients are some of the biggest losers when states have to cut their Medicaid budgets. As noted in Part II of our series, since the start of the recession every state has either frozen or reduced provider rates for at least some Medicaid providers.  Part I of our series highlighted some of the proposed rate cuts in Nevada and other states are proposing similar cuts. For example Indiana recently extended a 5 percent rate cut for a number of services including inpatient and outpatient hospital services, home health services, non-hospital radiology providers, and skilled nursing facilities through June of 2013.  California wants to implement even steeper cuts, reducing reimbursement rates for a number of providers including certain hospitals, physicians, and long-term care facilities by 10 percent. 

As a recent article highlighting the impact of MediCal (the California Medicaid program) on the ambulance industry demonstrates, these cuts ripple across the entire healthcare system. In California, the average cost of an ambulance trip ranges between $586 and $673. California’s Medicaid program pays a quarter of this price, a rate that recent budget cuts will reduce by another 10%. This means that ambulance services have to shift costs, almost doubling the average rates that private payers pay for ambulance services to $1200.

However, there are signs that, in the future, states will not be able to rely so heavily on provider rate cuts to balance their budgets. In California, providers and patients sued the state to stop a series of MediCal cuts the legislature enacted in 2008 and 2009.  A federal district court judge and the Ninth Circuit Court of Appeals found for the plaintiffs and enjoined the rate cuts. The courts held that the cut violated federal law requiring MediCal reimbursements to attract enough physicians to meet the needs of patients. The Supreme Court recently agreed to hear the case. Oral arguments are set for this coming fall and a final decision is expected in the spring of 2012. 

The Obama administration is also taking steps to make it harder for states to cut the rates that they pay to Medicaid providers. In May, the administration proposed a new regulation that would create additional administrative hurdles through which states would have to jump to cut Medicaid provider rates. Among other things, the regulations would require states to show that patients have sufficient access to care before states can cut provider rates. This rule, and, potentially, the California court action, could at least blunt the effect of the Medicaid budget crunch on some providers.  States would probably still be able to reduce provider rates to control their Medicaid budgets, but they would also have to consider other option that might make the impact on provider rates less severe.

Unfortunately, some of the “other options” available to the states to balance their Medicaid budgets would still disproportionately affect healthcare providers. In a recent letter to state Medicaid directors, U.S. Secretary of Health and Human Services, Kathleen Sebelius, emphasized the flexibility states have in cutting so called “optional” Medicaid benefits detailed in the chart below. Federal law requires state Medicaid programs to cover such benefits as hospital and physician services, but grants states considerable discretion to cover other benefits such as prescription drugs, dental services, and speech therapy.  Secretary Sebelius suggested that states could achieve substantial savings by reducing these optional benefits, which constitute approximately 40% of total state Medicaid spending, totaling about $100 billion in 2008.

Mandatory v. Optional Medicaid Services

A recent report by the National Association of State Budget Officers indicates that legislatures across the country have taken Secretary Sebelius’s suggestions to heart.  The report notes that fourteen states reduced Medicaid benefits in fiscal 2011 and many are proposing benefit reduction for fiscal 2012.   Nevada eliminated all adult vision, hearing and other benefits.  South Carwww.kff.org/medicaid/8137.cfmolina went even further, eliminating, among other things, podiatry, vision, and hospice services for adults; insulin pumps for Type II diabetics; certain wheelchair accessories and standard circumcision for newborns. 

Investors considering investing in healthcare businesses that provide a significant amount of “optional benefits” to Medicaid patients must carefully look at specific state Medicaid programs. Should the federal government or courts restrict states’ abilities to reduce provider rates, it is possible that more states will look to reduce or eliminate any optional services that they provide to Medicaid enrollees. Thus, those providers providing services like vision and foot care to Medicaid beneficiaries may find it increasingly difficult to do so. Of course, states vary in the amount of optional benefits that they have extended to Medicaid beneficiaries and in the severity of their Medicaid budget deficits.  Accordingly, investors would be wise to consider each state’s particular fiscal environment as well.

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Healthcare providers are often the first to feel the effects of Medicaid funding shortfalls.  Economic turmoil, federal law and political pressures leave states few options but to slash the rates they pay to providers or take other actions regarding program eligibility discussed in Part I of our Medicaid Budget Crisis series.  A recent Kaiser Family Foundation study found that 39 states cut or froze provider rates in 2010 and 37 states have either planned or implemented rate restrictions in 2011.   Yet, because Medicaid covers approximately 68 million beneficiaries nationwide, many providers continue to rely to varying degrees on Medicaid reimbursement.  As John Iglehart's piece in the New England Journal of Medicine describes, in 2010 the program spent approximately $406 billion on acute and long term care, representing one sixth of the United State’s overall healthcare spending.  Assuming that the requirements of the healthcare reform law, The Affordable Care Act (aka PPACA) continue to take effect as scheduled, these numbers are expected to continue to grow, some estimate by over 16 million people. The challenge, particularly for healthcare investors, is determining which providers can benefit from Medicaid programs despite state budget cuts.  In a continuation of our series on the Medicaid budget crunch and its affect on healthcare investing, this post will consider some of the healthcare providers that are well positioned to flourish (or at least emerge relatively unscatched) as states and the federal government assess strategies for Medicaid budgets. 

The first type of business that are more likely than others to emerge as winners, or perhaps more accurately at least not be cast as losers, from the Medicaid budget crunch are those that do not rely heavily on state legislatures for their reimbursements.    A few provider types that fall in this category are as follows.

• Dialysis Providers: The best example of this is dialysis providers who receive the majority of their payments from the federal government’s Medicare program. 

• Preventive Care/Disruptive Healthcare Initiatives:   We have discussed in the past certain healthcare thought-leaders' perspectives on the value of disruptive healthcare initiatives, a philosophical shift in the macro system of orienting care and incentivizing clinical outcomes.  As providers focusing on preventive healthcare and those geared toward different stages in the healthcare continuum flourish, those that are typically self pay or commericial-reimbursed rather than  government-reimbursed could be "winners" in the Medicaid budget crunch.

• Primary Care Providers: As a result of PPACA, primary care providers are another group that should enjoy some insulation from state budget issues.  Assuming that PPACA is not repealed or rendered unconstitutional, the legislation calls for a temporary, federally funded two-year increase for payments to primary care physicians starting in 2013.  The increase would pay primary care physicians 100% of the rate that Medicare pays primary care physicians, rather than the historically lower Medicaid rates that each state sets.   At least in the short term, this enhancement should insulate primary care physicians from the volatility in state budgets and, at least for providers in some states, give primary care physicians a significantly enhanced reimbursement rate for each patient that they treat.   
  • Unfortunately, the extent to which this enhanced reimbursement will benefit primary care physicians depends on the state in which a physician practices. While state Medicaid programs have historically reimbursed primary care physicians at lower rates than Medicare, the degree of difference varies dramatically between states.  In 2008, states like New York and California reimbursed primary care physicians at less than half the rate of Medicare.  Therefore primary care physicians in these states stand to gain significantly from the PPACA’s rate enhancement.  On the other hand, states like Alaska, Wyoming and Idaho had Medicaid reimbursement rates that exceeded the Medicare reimbursement rate. Thus, at best primary care physicians in these states will likely see their rates remain the same or possibly even decline as state Medicaid directors reduce their reimbursement rates to bring them into line with Medicare.
  • Finally, primary care physicians must consider whether or not a two year rate enhancement is enough to entice them to open their clinics to Medicaid patients.  In 2008 only 42% of primary care physicians nationally were accepting new Medicaid patients. This compared with 61% of primary care physician accepting Medicare patients and 83% accepting privately insured patients.  For further detail on historical rates and primary care government program activity, see these publications by Stephen Zuckerman and Dennis Smith.

Other potential winners in the Medicaid budget crunch are those businesses who can provide better care with fewer resources and the vendors who will provide the tools to help healthcare providers reach these cost and quality improvement goals.

• Managed Care Organizations:  A number of states are trying to overcome their Medicaid budget issues by pushing more of their Medicaid beneficiaries into privately run managed care plans.  In 2010 13 states and in 2011 20 states expanded their Medicaid managed care programs.  These plans at least purport to save states money and encourage more efficient care because they allow states to pay an insurance company a set fee for each Medicaid patient that a health insurer covers.  A recent USA Today article highlights the business opportunities that the recent state expansion of managed care, combined with the PPACA’s expansion of Medicaid, offers large healthcare payers like Aetna and UnitedHealthcare.  While many industry participants disfavor MCOs because of the manner in which they control costs, at least one state, Florida, is giving hospitals and doctors groups the chance to set up their own managed care networks and compete directly with traditional MCOs.  In theory at least, under this plan, providers will be able to take advantage of some of the business opportunities that MCOs see in the expansion of Medicaid managed care. 

·        Health IT:  Health information technology is another area that has received significant government investment over the past two years.  The American Recovery and Reinvestment Act of 2009 (ARRA) included approximately $27 billion worth of incentives for Medicaid and Medicare providers who “meaningfully” use electronic health records.  The incentives are substantial. Clinicians with at least 30% of their patients (20% for pediatricians) on Medicaid can qualify for up to $63,750 in grants. 

Ultimately, who wins and who loses as a result of a particular state's Medicaid budget crunch largely depends on the state in which a provider practices.  Not every state is experiencing the same level of budget problems and not every state is exacting deep rate cuts to Medicaid providers.  For example, states like Oregon and South Carolina, with large Medicaid budget shortfalls, are resorting to large provider rate cuts, while states like Virginia may be able to avert any rate cut for the upcoming fiscal year other than for outpatient hospital care.  Healthcare providers and investors would be wise to consider the particular circumstances of their states and the providers’ reliance on Medicaid reimbursement when assessing the likely impact of the Medicaid budget crunch on their businesses.

*** The authors would like to thank Tim Hoppe, McGuireWoods LLP summer associate, for his significant contribution to this post. ***

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Government budget crises have been widely reported and have virtually dominated local and national news coverage in recent months. Funds shortages for Medicaid and other healthcare programs in many states have reached critical stages, all while Medicaid enrollment has risen. Many states have contemplated a variety of mechanisms for limiting spending on state healthcare programs while simultaneously examining revenue-enhancement opportunities for the program through participation and other provider-level fees. Part I of this blog series will discuss the state-level challenges generally. Subsequent parts of this blog series will examine states and industries most hard hit, as well as which sectors may continue to flourish despite state program cuts.

Bloggers Lea Winerman and Vanessa Dennis of PBS’s The Rundown have published a truly fascinating pictorial description of the funding crises, with a state-by-state examination of the situation. According to data presented by Winerman and Dennis, states are looking at a combined $125 billion shortfall in fiscal year 2012 -- which begins in July 2011 for most states – and that states estimate that the Medicaid program will cost them $195 billion in 2012.    That's up 48% from what they spent in 2010 budgets.

In one ongoing state effort, Maine’s Gov. Paul LePage is leading the charge to narrow eligibility requirements for Medicaid, an approach other state leaders are considering in lieu of, or in tangent with, cutting reimbursement. Many industry analysts believe that certain changes proposed in Maine, such as making families of three earning more than $24,645 annually ineligible for the program, are likely to be approved by the federal government, whereas changes such as cutting eligibility for adults without children are not permitted by PPACA (aka the Affordable Care Act).

Unless specific state-level industry protections are implemented, such changes to eligibility and cuts to state Medicaid programs logically impact certain industries most dependant on Medicaid dollars the most, such as the skilled nursing (SNF) industry. For example, Eljay LLC recently released an analysis of Nevada Medicaid payment cuts to SNFs proposed by Gov. Brian Sandoval that provides a bleak outlook for the industry. Eljay LLC used cost report information from 32 of Nevada’s skilled nursing facilities to assess the impact of the loss of $20 per Medicaid patient per day residing in a skilled nursing home. The analysis estimates that the $20 rate reduction would equate to an average loss of almost $500,000 for each facility used in the analysis. More specifically, three facilities would have annual revenue reductions exceeding $1 million and the average shortfall between Medicaid allowable costs and the rates paid would be almost $40 per patient day. The report concludes that the cuts would result in significant facility closures and loss of jobs.

Despite the sobering picture painted by these state-level program analyses, investments in many healthcare and life sciences sectors continue to perform well. It is simply more critical than ever for investors and providers to closely examine their current and potential revenue sources to understand challenges and opportunities coming down the road.

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