Safety-Net Hospitals Must Overcome Fiscal Challenges, Studies Say

Safety-net hospitals that focus on providing care to low-income individuals and those in medically underserved areas are more prone to substantial financial risk from a weak economy and must take steps to alleviate the challenges, according to a Commonwealth Fund study, The Hill's "Healthwatch" reports (Baker, "Healthwatch," The Hill, 8/7).

Meanwhile, a second study by the Urban Institute found that safety-net hospitals should work to improve the efficiency and quality of care delivery, in part by investing in health information technology and integrated care.

Both studies were published recently in the journal Health Affairs.

Commonwealth Fund Study

In the first study, Harvard University researchers examined financial data from 150 safety-net hospitals between 2003 and 2007.

The study noted that the most financially stable safety-net hospitals were those overseen by lawmakers, in part because those facilities were supported by state, local and federal aid. However, that aid is at risk during a weak economy.

Further, upcoming reductions to Medicare and Medicaid under the Affordable Care Act, including a 75% reduction in Medicare disproportionate share payments in 2014, also are expected to strain safety-net hospitals' budgets, the study noted.

"The economic downturn, slow recovery and politics of deficit reduction erode the ability of local governments to support the safety net," the researchers wrote. They concluded, "Safety-net hospitals that have not focused on cost control, quality improvement or services that attract insured patients will face increasing financial and competitive pressure."

Urban Institute Study

The second study analyzed how five hospitals were preparing for changes in the health care system. Between September 2010 and January 2011, the researchers examined:

• Bellevue Hospital in New York City;
• Denver Health Medical Center;
• Parkland Health and Hospital System in Dallas;
• San Francisco General Hospital; and
• Virginia Commonwealth University Health System in Richmond.

According to the study, hospital officials reported that investing in health IT and integrated systems of care improved their ability to endure lower funding levels. The researchers also noted that integrated care increase the hospitals' purchasing power.

The study found that Bellevue, Denver Health and Parkland adopted a strategy known as "lean performance improvement," which aims to eliminate resources that do not create value for patients.

"The study hospitals' preparations for reform include improving the efficiency and quality of care delivery; investing in the systems, staffing and physical environment needed to retain current patients and attract newly insured patients; and laying the groundwork for accountable care organizations and new payment systems," the authors wrote (Adams, CQ HealthBeat, 8/7).