Environmental Scan to Identify the Major Research Questions and Metrics for Monitoring the Effects of the Affordable Care Act on Safety Net Hospitals. 6. Impact on Hospital Costs

06/01/2013

Potentially, the largest and most direct effect of the ACA on safety net hospital costs and expenses will be to reduce the amount of uncompensated care, although, as described above, the extent to which a hospital’s total amount of “unfunded” care is reduced (including the costs of providing services to Medicaid patients that are not fully reimbursed) will depend on the amount of reduction in public subsidies and other factors that affect patient revenues.

Other costs and expenses may increase, at least in the short term, to the extent that hospitals need to expand capacity to accommodate the expected increase in demand, especially for outpatient services. For safety net hospitals positioning themselves to participate in integrated delivery systems, health information technology may need to be upgraded in order to perform the functions needed to coordinate care of patients with other providers, collect and analyze indicators of quality of care, and implement decision-support systems for chronic disease management (Andrulis and Siddiqui 2011). To compete with other hospitals for the newly insured patients, especially privately insured patients, investments and upgrades in both facilities and staffing may be needed (Lewis et al. 2012). Making the necessary short-term investments to position themselves for delivery system reforms and to compete for newly insured patients may be difficult for many safety net hospitals, which often have neither sufficiently high margins nor cash reserves to fund such investments without some public support (Ku et al. 2011). However, such investments—especially in health information technology and care coordination processes—could lead to lower costs in the longer term.

The ACA also may increase some regulatory requirements on safety net providers (AcademyHealth 2011). For example, the law requires that nonprofit hospitals perform community health needs assessments at least every three years and develop strategies to meet these needs. In addition, new requirements for tracking and reporting on quality indicators, such as inpatient readmission rates, could increase costs for data collection. To avoid financial penalties from Medicare that are associated with high readmission rates, safety net hospitals will also have to make investments in care processes, such as discharge planning and care coordination with ambulatory care providers. Because of the nature of the patient population—which often includes many homeless and mentally ill persons and patients with low compliance with medical regimens—many safety net providers are concerned that the risk-adjustment methodologies for the quality measures do not adequately account for the risk profile of their patients (Berenson and Shih 2012).

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