Funding and other fixes
Some large health systems are trying to stave off other safety-net hospital closures, but experts warn more will fail without regulatory and legislative changes.
“People who absolutely need care will get care most of the time. But at the margin, there will be people who need care who aren’t going to get it,” said Dr. Vikas Saini, president of the Lown Institute, a nonpartisan think tank. “Almost certainly there will be more pain and suffering, and maybe even deaths.”
New Hyde Park, New York-based Northwell Health has been trying to help nearby community hospitals through administrative support, capital planning and one-time funding for infrastructure.
One such hospital is Maimonides Medical Center in Brooklyn, which recorded a $145 million operating loss in 2021, the latest annual data available. Within the boundaries set by antitrust law, Northwell is helping Maimonides by advising infrastructure improvements to attract more commercially insured patients, sending staff to its facilities to identify bottom-line improvement opportunities and reducing supply chain expenses via group purchasing, Northwell President and CEO Michael Dowling said. Northwell is additionally lending IT support for revenue cycle management and lab operations, he said. It’s offering similar aid to Wyckoff Heights Medical Center in Brooklyn, which also faces financial difficulties.
“The fundamental problem in hospitals is that government reimbursement is too low,” Dowling said. “The bulk of hospitals that are dependent on Medicaid are in dire circumstances.”
Some community groups are pushing for Northwell to purchase Maimonides, which generates about $1.5 billion in revenue a year. That would dent Northwell’s finances and potentially hurt its credit rating, Dowling said.
“It will be dilutive to our financial position and Northwell will become a problem to the state,” he said.
Outside of affiliations such as Northwell’s or acquisitions, safety-net hospitals could benefit from tweaked reimbursements and adjusted policies.
Congress should narrow the reach of the disproportionate-share hospital payment program and the 340B drug discount program so hospitals treating the most low-income patients receive the most funding, industry observers said.
Medicare and Medicaid disproportionate-share hospital payments, which vary by state, are intended to offset uncompensated care for low-income patients. Eligible hospitals can participate in the 340B program, which allows hospitals and clinics to buy drugs at discounts of up to 50%, if at least 11.75% of their patient mix is Medicare or Medicaid patients.
Both programs are stretched too thin across thousands of clinics and hospitals, some of which treat a relatively low number of Medicare and Medicaid beneficiaries, said Ian McCarthy, an economics associate professor at Emory University.
The share of hospitals that met the minimum 340B eligibility threshold increased 41% from 2014 to 2016, according to 2021 research published in the peer-reviewed journal BMC Research Notes.
“There is some room to improve the policy by better targeting hospitals that really serve low-income patients who have no other option of where to get care,” McCarthy said.
When hospitals do have to shutter, Emory’s Thadhani said more state-mandated notice of the closures would allow other area providers to bolster their staffing levels and facilities to accommodate a spike in demand.
“We have to figure out a more efficient system,” he said. “What happened here [in Atlanta] will continue to happen in other states.”