Environmental Scan to Identify the Major Research Questions and Metrics for Monitoring the Effects of the Affordable Care Act on Safety Net Hospitals. 8. Differences in Responses to Health Reform by Type of Safety Net Hospital


As mentioned above, safety net hospitals include not only public hospitals, but also many academic medical centers and private hospitals. These distinctions may be less meaningful and important than in the past, as many safety net hospitals—regardless of ownership—have pursued similar strategies in recent years of reducing costs, expanding into more affluent areas and services to compete for more privately insured patients, and often minimizing their safety net “image” (Cunningham et al. 2008).

Nevertheless, differences in ownership and type of safety net hospitals may still have some relevance for how they adapt to health reform. Public hospitals—many of which are controlled by state and/or local governments and are more dependent on federal, state, and local subsidies—are likely to be more constrained by their governance requirements and mission in how they respond to payment and delivery system reforms. Politically influential labor unions for hospital staff can also prevent streamlining of operations and staff in order to reduce costs (Christianson et al. 2011a). Although such constraints would seem to make them less competitive with other hospitals, Kane et al. (2012) found that public hospitals governed directly by elected officials were more profitable than safety net hospitals with other governance structures (for example, governed by a politically appointed board). Nevertheless, many local governments have seemingly helped their public hospitals by turning direct management over to an independent governing body to separate strategic and operational decision making from local politics (Felland and Stark 2012). Public hospitals may also be well positioned for changes related to health care reform, as they are usually one of the largest Medicaid providers in the community and often the only place for critical services such as trauma, burn, mental health, and neonatal intensive care units. In addition, many public hospitals have strong connections with FQHCs that can serve as the basis for increased collaboration and formation of integrated delivery systems.

The role of private hospitals in the safety net varies. In some communities—especially those with large public hospitals—private hospitals play a secondary, though still important, role in providing services to uninsured and other low-income populations. In communities without public hospitals, they often serve as the primary safety net hospital. Private hospitals receive Medicare and Medicaid DSH payments if they serve a certain volume of low-income patients, but are not directly supported by local tax revenue or controlled by local or state governments. This gives them more flexibility in altering their governance and mission—and to limit “low-revenue” patients and services—although they must still demonstrate that they are providing “community benefit” in order to maintain their tax-exempt status. Private safety net hospitals that are part of a larger hospital system in the community are often cross-subsidized by other hospitals in the system that serve a much higher number of privately insured patients. Hospitals that are part of larger systems can also have lower costs for supplies and higher payment from privately insured persons because of the greater negotiating leverage of the hospital system (Bachrach et al. 2012).

Academic medical centers are similar to private hospitals in terms of their safety net orientation. They are often the major safety net hospital in a community, including the main provider of tertiary, quaternary, and other highly specialized services to Medicaid and uninsured persons, as well as trauma treatment, burn care, and organ transplants for all people in the community. As prestigious institutions, they are better able to negotiate higher payment rates from health plans than public hospitals.

Academic centers have multiple missions of teaching, research, and providing care to vulnerable patients in the community; balancing them has become increasingly difficult in recent years. Academic activities such as research and teaching are often at odds with the improved efficiency, productivity, and lower costs needed to prepare for reform (Coughlin et al. 2012). Although many academic medical centers have traditionally been located in inner-city areas close to low-income populations, some are more aggressively expanding in ways intended to attract more lucrative services and patients. For example, although community and political pressures prevented the University of California at San Diego—the city’s largest safety net hospital—from closing their main campus in a low-income neighborhood, the university is relocating some services to more affluent areas and substantially expanding tertiary and quaternary services in more affluent suburban areas as well as areas outside the state (Tu et al. 2013).

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