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Safety-Net Hospitals Worry About ‘Affordable Care’ Cuts

Disproportionate-share facilities struggle as federal funds shrink

In 2014, for the first time in decades, Denver Health Medical Center didn’t just break even –– it saw a 4% budget increase thanks to the growing economy and, in part, thanks to the number of people who signed up for government-sponsored Medicaid through the Patient Protection and Affordable Care Act (PPACA). But like many hospitals across the country, it will face difficulties paying for the remaining uninsured. Although the proportion of uninsured patients dropped from 27% in 2013 to 13% in 2014, federal cuts mandated by the PPACA in coming years will pose financial difficulties, according to an article in U.S. News & World Report.

“Hospitals are very concerned; we have been concerned all along,” Beth Feldpush, senior vice president of policy and advocacy for America’s Essential Hospitals, told U.S. News. The organization represents about 250 so-called “safety-net hospitals” –– like Denver Health –– that serve a high proportion of patients who are homeless, in poverty, or in the country illegally.

Since 1981, the federal government has helped pay for the care that hospitals give to patients who can’t afford it, through a nationwide fund of $20 billion known as the Disproportionate Share Hospital (DSH) program. The PPACA has already cut the Medicare portion of these payments, and beginning in 2017, it is slated to do so with Medicaid as well, gradually reducing the entire DSH fund by half. The assumption is that the fund won’t be needed so much once millions of people sign up for insurance through the PPACA.

However, “these across-the-board reductions assume hospitals are the same, but they are not,” said Gerard Anderson, director of the Center for Hospital Finance and Management at Johns Hopkins Bloomberg School of Public Health.

The Department of Health and Human Services, which is responsible for overseeing the implementation of the PPACA, has boasted that hospitals are thriving under health care reform. In a March report, for example, the agency found that the cost of uncompensated care to hospitals dropped by 20% in 2014, likely because more people were covered by health insurance.

But the nationwide story isn’t the same one faced by some safety-net hospitals, the U.S. News article points out.

Two reports released this month –– one from New York City and the other from Kentucky –– quantify how their safety-net hospitals are poised to lose more money than they will gain from the effects of the PPACA.

These hospitals serve low-income patients as well as patients who are in the country illegally, who are not affected by the Act. Because of this, they will not recoup expected costs and stand to lose the most from cuts to the DSH program. By law, hospitals must treat anyone who comes into their emergency departments, despite their immigration status or ability to pay. The latest estimates from the Pew Research Center indicate that 11 million immigrants are in the country illegally.

Hospitals that are in states that have not expanded Medicaid likely will face even more financial trouble, U.S. News says. Under the PPACA, all states were expected to expand the programs to cover people under a specific income level. In 2012, however, the Supreme Court ruled that this portion of the law was optional. For people who live in one of the 22 states that have not elected to expand the program, there exists a coverage gap for those who make too much money to afford Medicaid, but not enough to afford private plans that are provided at a tax-subsidized rate through the online “marketplace.”

U.S. News points out that even after the enrollment portion of the PPACA is fully implemented in 2016, projections by the journal Health Affairs indicate that up to 27 million people are expected to remain without health care coverage, and the majority of those people will receive care in safety-net hospitals.

“The level [of funding] should continue to be looked at by Congress, and they should make further changes,” Feldpush said. “The level of cuts is going to be too deep for a community to sustain.”

Sources: U.S. News & World Report; May 19, 2015.


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