Safety net hospital revenue in peril under health reform

Safety net hospitals could see revenue squeezed on more than one front under health reform.

As my colleague Maureen McKinney reported this week, safety net hospitals may fail to earn performance-based payments, according to research published in the Archives of Internal Medicine.

The authors compared performance of safety net hospitals on patient experience measures tied to value-based payments and found they “performed more poorly than other hospitals on nearly every measures of patient experience and that gaps in performance were sizable and persistent over time.”

Under value-based payments, Medicare holds onto 1% hospital payments, which is allocated based on hospital performance.

Meanwhile, health reform, as signed into law, included a shift in the financing of healthcare for people who cannot afford it. The law reduced subsidies to offset hospital losses on uninsured patients by $36 billion over 10 years. But projected 34 million would gain subsidized insurance through Medicaid, the Children's Health Insurance Program or exchanges under the law. Hospitals would see fewer direct subsidies for the uninsured as more patients gain insurance.

But many patients may stay uninsured in some states after the Supreme Court decision on the Patient Protection and Affordable Care Act. The court struck down a major incentive for states to expand Medicaid in 2014 and some governors said they would not do it. The Medicaid expansion would cover 11.5 million uninsured adults who live below poverty and are ineligible for subsidies available under health reform, the Urban Institute estimates.

The $36 billion cut to hospital subsidies for the uninsured remains unchanged by the Supreme Court decision. Safety net providers have warned such cuts would be devastating.

Federal health officials will decide how to distribute what's left of some hospital subsidies, known as Medicaid disproportionate share payments, and could take into consideration state Medicaid expansion policies, said Melinda Dutton, a partner with the healthcare division of Manatt, Phelps and Phillips.

Guidance is expected in 2013, she said.

You can follow Melanie Evans on Twitter: @MHmevans.



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