Generally, safety net hospitals in states that expanded Medicaid under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) are treating significantly more insured and fewer uninsured patients than in 2013, helping the hospitals financially. Safety net hospitals provide health services to many low-income uninsured people, Medicaid enrollees, and other vulnerable populations. Conversely, hospitals in states that did not expand Medicaid typically experienced little change in their patient mix and increased financial challenges. In Mathematica Policy Research report submitted to the HHS Assistant Secretary for Planning and Evaluation (ASPE), hospitals in both types of states experienced little effect from new marketplace coverage, faced declining subsidies, and are bracing for additional cuts, although experience varied within the study set.
ASPE and the research team selected for study 10 safety net hospitals or systems that range in size, role in the local safety net, ownership, and geographic location. Six of the hospitals are in Medicaid expansion states. Some are single hospitals; some are hospital systems with several hospitals included in the analysis, while other selected hospitals were part of larger systems (not included in the analysis).
Overall, the study suggested that the Medicaid expansion under the ACA was a significant, helpful change for these hospitals; also, this expansion in more states could help bolster both the safety net hospitals operating in those states and access to care for their low income residents.
Findings. The study identified a number of challenges that safety net hospitals face in adapting to payment and delivery system reforms, noting that several of the study hospitals have made progress in developing integrated delivery systems capable of assuming financial risk. However, the author’s noted that future viability of safety net hospitals were dependent upon potential changes to financial supports, as well as strategies to reduce hospital costs and better manage care.
Despite concerns that other providers could take newly insured patients away, the study hospitals in Medicaid expansion states retained most existing patients, as well as gained new ones. The growth in patient volume was especially notable for outpatient care, and there were corresponding marked increases in the proportion of their patients with insurance coverage. The authors noted that the growth in outpatient visits reflects in part safety net hospitals’ active efforts to help uninsured patients enroll in coverage, expand primary care capacity, and improve their facilities and systems to attract or retain patients as they gained coverage.
Overall, the study hospitals had a 3 percent increase in emergency department visits. The changes were relatively minor, but a few Medicaid expansion state hospitals saw 10 to 11 percent increases in emergency department visits. The authors noted that these increases were consistent with studies that previously found that insured patients use emergency departments more than uninsured patients out of convenience, as Medicaid patients typically face no cost sharing to use one.
Some hospitals expressed concern that marketplace products tend to reimburse providers at rates considerably lower than traditional commercial coverage—at or closer to Medicaid payment rates. Longstanding federal, state, and local subsidies to safety net hospitals began declining over the last few years, but the study found that to date, the cuts have not been as large as the hospitals expected because of policymaker decisions allowing the hospitals time to adjust.
For most Medicaid expansion state hospitals, much of the improvement in financial margins were realized between 2013 and 2014; by 2015, margins typically had increased only slightly or even declined from 2013. In contrast, non-expansion state hospitals’ average operating margins declined over the study period and remained negative; total margins also fell but remained positive.
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