US hospital job growth cooling even before ACA reform

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The rate of job growth at US hospitals fell in the first two months of 2017, even before Congress began haggling over potential reforms to the Affordable Care Act.

Job growth at US hospitals clocked-in at 2.1 per cent year-on-year in both February and January, according to data from the labour department. That represented the lowest level since June 2015, and a slowdown from the 2.4 per cent growth seen at the end of last year and the 2.9 per cent pace recorded at the start of 2016.

The slowdown came as admissions to hospitals have weakened, according Emily Evans, healthcare policy analyst at HedgeEye Risk Management. The decline has resulted partly from “fading effects of increased demand” sparked by the ACA, the healthcare reform law, she said. The ACA, often called Obamacare, knocked the US uninsured rate to historic lows by requiring individuals to have health insurance.

An increase in deductibles that has come as employers who sponsor health insurance plans have attempted to keep a lid on premiums has also played a role, Ms Evans said.

A major question mark for hospitals going forward is the future of the American Health Care Act, which is being pitched by Republicans as a plan to “repeal and replace” Obamacare. The legislation would end the individual mandate. It would also by 2020 substantially curb the expansion to Medicaid — the joint federal-state insurance scheme for the poor — that has led to an additional 11.2m adults gaining coverage.

“We believe hospital employment will continue slowing reflecting deteriorating admissions trends,” Ms Evans said. She noted that the upcoming Obamacare reform is also “negative for medical spending and providers specifically.”

Analysts at S&P Global, the credit ratings group, added in a report this week that “operating revenues and margins for for-profit and not-for-profit hospitals are likely to be pressured by the passage of the legislation as proposed”.

“The overall payor mix for providers would weaken as the number of people without insurance would most likely rise as would the hospital sector’s level of bad debt and charity care expenses,” S&P said.

Investors are closely watching for clues from Congress, with hospitals seen as one of the groups that would be most affected by the GOP’s plan.

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