Safety-Net Hospitals Face $1.5 Billion Shortfall by 2019, UCLA Study Says

A UCLA study released yesterday made a dire prediction for the state’s public hospital system: The safety-net facilities will likely face a shortfall of between $1.38 billion to $1.54 billion by 2019, when federal funding cuts go into effect.

The cuts will hit the poorest Californians hardest, according to the study.

“Hospitals that can least afford a cut are the most at-risk,” said Dylan Roby, director of the Health Economics and Evaluation Research Program at UCLA’s Center for Health Policy Research. The UCLA study was published in the journal Health Affairs.  

California public hospitals rely on federal funds called disproportionate share hospital payments. DSH payments cover roughly half the costs for 21 facilities across the state. DSH funds, which help offset low Medi-Cal reimbursement, according to the study’s authors, are due to be cut roughly in half starting in 2019.  

According to the study:

  • Five county hospitals likely will be especially vulnerable, in part because they have the lion’s share of DSH payments. They’re also in areas with big undocumented populations. They are: LAC+USC Medical Center, Santa Clara Valley Medical Center, Alameda Health System, Harbor-UCLA Medical Center and Olive View-UCLA Medical Center.
  • Despite expanded insurance coverage through the Affordable Care Act, as many as four million Californians still are likely to be uninsured in 2019.
  • Using the CalSIM model (the California Simulation of Insurance Markets), researchers said DSH reductions and uncompensated care costs could outstrip the revenue generated from Affordable Care Act insurance expansion. That would mean those 21 hospital systems could face as much as a $1.54 billion shortfall.
  • Approximately 21% of Californians receiving outpatient services last year were uninsured and about 29% of them were on Medi-Cal, California’s version of Medicaid.
  • However, at LAC + USC Medical Center, those numbers were much higher: About half of the outpatients were uninsured and more than a third were Medi-Cal patients.


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