Representatives of California’s safety-net hospitals say the devil is in the details concerning the federal government’s plans to reduce funding for hospitals caring for a disproportionate share of low-income patients.
The Affordable Care Act will reduce by at least half the amount of Medicaid money set aside to help safety-net hospitals provide uncompensated care for patients with no insurance and no cash. Hospitals serving a high percentage of uninsured, low-income patients—or disproportionate share hospitals—are reimbursed at a higher rate by Medicaid. 21 California public hospitals receive approximately $1.1 billion a year in DSH funding.
The reductions make sense, hospital officials agree, because more people will become paying customers under ACA. But exactly how those reductions are made will be critical, according to representatives of California's safety-net hospitals.
“While we do expect that many patients currently seen in public hospital systems will gain coverage through the expansion of Medi-Cal and the exchange, recent estimates suggest that roughly three million people in California will remain uninsured even after full implementation of reform,” said Erica Murray, senior vice president of the California Association of Public Hospitals and Health Systems (CAPH).
CAPH represents 19 public hospitals and systems—including University of California teaching hospitals—in 15 counties where more than 81% of the state's residents live. The CAPH network is the principal fabric of the state’s safety net.
DSH cutbacks begin relatively modestly with about $500 million in national reductions in 2014. Reductions increase each year growing to expected cuts of $5.6 billion in 2019 and $4 billion in 2020.
Medicare Changes Could Also Hit Safety-Net Hospitals
In addition to Medicaid funding cuts, changes in the way Medicare reimburses hospitals—through what is known as "value-based purchasing"—could affect safety-net hospitals. Beginning in October, Medicare will adjust hospital reimbursements to reflect hospitals' performance in a number of clinical and patient satisfaction areas. A recent study published in the Archives of Internal Medicine suggested safety net hospitals often do not score well in patient satisfaction and could suffer financially as a result.
In an op-ed piece accompanying the Archives of Internal Medicine report, Katherine Neuhausen, a Los Angeles physician, and Mitchell Katz, director of the Los Angeles County Department of Health Services, warned that the double whammy of DSH cuts and Medicare payment changes could push some safety-net hospitals into insolvency.
Their editorial on Medicare value-based purchasing said, in part: "Safety-net hospitals that are already drained by the DSH reductions are likely to lose additional funds under this program, leaving them without any capital to launch initiatives to improve quality and patient experience. Over time, VBP could worsen the disparities between prosperous non-SNHs (safety net hospitals) and struggling SNHs. It would be a tragedy if the combined stressors of the DSH cuts and VBP trigger the closures of SNHs."
Source: California Healthline, August 6, 2012.