Analysis of the Joint Distribution of Disproportionate Share Hospital Payments. What Is a Safety Net Hospital?


Below we highlight some of the key dimensions to describing a safety net hospital and how researchers and policymakers have defined safety net hospitals. A summary of these is provided in Table 2.1.

Table 2.1 
  Safety Net Hospitals: Key Dimensions and Definitions


Research and Policy Definitions
Legal Mandate or Mission
  • Clinton Health Care Proposal: Legal mandate and in area of high need
  • Gaskin and Hadley: Mandate or mission driven or high share of low-income discharges
Vulnerable Populations
  • Medicare DSH formula: Medicaid and Medicare/SSI recipients
  • Basic Medicaid DSH formula: Three available options, which can be used separately or jointly
    • d) Medicare DSH formula
    • e) Medicaid recipients only or
    • f)Low-income populations including Medicaid and indigent persons
  • Medicaid DSH option: states free to establish own criteria for vulnerable populations
  • IOM: uninsured, Medicaid, and other populations such as people with HIV or mental illness.
Disproportionate Amount of Care Volume of care:
  • Medicare DSH Formula: threshold volume of Medicaid and Medicare SSI patients depending upon selected hospital characteristics such as size and location
  • Federal Medicaid DSH minimum standards:
  • Hospital's Medicaid inpatient rate at least 1 S.D. above state mean Medicaid inpatient rates
    • a)Hospital's "low-income use rate" (Medicaid and charity care patients)1>25%
    • b)Many states pay DSH to other hospitals as well
    • c)Costs of uncompensated care:
  • Top 10% of hospitals providing most bad debt and charity care (Baxter and Mechanic 1997)
  • Top 10% of hospitals with highest ratio of bad debt and charity care to operating expense (Fishman 1997)
  • Ratio of hospital's uncompensated care to hospital's total costs >10% (Cunningham and Tu 1997)

Type of care: 
Provision of certain types of services (e.g. ER, trauma, burn) as indication of safety net hospital

Level of Aggregation
  • National
  • State
  • Hospital Type
  • Market-Level

1.  Low income use rate is the sum of two ratios. The first is the share of the hospital's total revenue for patient services that are paid by Medicaid or state/local subsidies. The second is the percent of total hospital charges for inpatient services accounted for by the net (of state and local subsidies for inpatient care) amount of charity care provided to inpatients.

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