It was almost inevitable that healthcare reform would pass under the current administration. As we all know, there has been a lot of hysteria around the great debate for more than a year. It has been a long battle and a hard fought process and yet still, few people actually understand the impact it will have on the economy.

Currently, healthcare costs are a huge burden on small business owners and individuals that pay for their own insurance and healthcare. In addition, hidden costs of healthcare place huge burdens on hospitals struggling to stay afloat, as they have to treat patients in the emergency room, whether or not they have insurance. These hidden costs are ultra visible to healthcare providers but are invisible to the average consumer. Despite all the additional services the healthcare bill will bring to the average American healthcare user, it will probably have the greatest impact on the hospital industry in a positive way.

As it stands today, hospitals have very narrow margins due to several issues 1) Medicare reimbursement rates 2) Insurance reimbursement rates 3) Personal bankruptcies and 4) Emergency room service. These issues often force hospitals to close down or sell to the state, as they cannot generate sufficient cash flow to service their debt. Firstly, a large percentage of hospitals generate most of their revenues from Medicare and the reimbursement rate is the rate at which Medicare will reimburse the hospital for a specific procedure. The remainder of the cost is billed to the patient. As healthcare costs rise, Medicare reimbursement rates have actually decreased and more of the cost has been passed on to the patient. Some doctors have chosen to not accept Medicare patients as a result and it wouldn’t have a significant negative effect on hospitals if medical insurance filled the void and reimbursed hospitals, but that is not the case. Medical insurance reimbursement rates are steadily on the decline as the rate is loosely pegged to Medicare reimbursement rates, which means that less money is spent on a patient’s treatment, which enables the insurance company to increase profits as insurance premiums increase. The third issue is that of personal bankruptcies related to healthcare, which affect more Americans than any other form of bankruptcy. As individuals file for bankruptcy and fail to pay the hospital for their treatment the hospital has to write-down the lack of payment as an expense, which has a direct effect on their cash flow and bottom line. Finally, emergency room service severely affects the profitability of a hospital as patients (even those with insurance) claim to be uninsured and as the hospital has a responsibility not to turn anyone away, the hospital is forced to provide a service and incur a non-billable expense by doing so.

The language in the healthcare bill will prevent more hospitals from going bankrupt and refocus insurance money on the patient instead of insurance company profits. The mandate to purchase insurance will limit the amount of write-downs that the hospital incurs while treating patients in the emergency room. As a result of the healthcare bill hospitals will become better investments and healthcare costs could potentially decline as hospitals won’t be forced to mark-up prices in order to make up for lost revenue.