How successfully safety net hospitals can adapt to the reforms will depend on the financial performance of the hospitals before reform, as well as the preparations they have made in anticipation of reform. In particular, the TEP identified the scope of future pension obligations of safety net hospitals that offer defined benefit plans—especially the large county- or city-run public hospital systems—as an important factor that could affect their ability to adapt and respond to health care reform because of the impact on both cash reserves and credit ratings (HHS/ASPE 2013).
Hospitals in a stronger financial position prior to reform will have more resources to make the necessary expansions in capacity to meet the increase in demand for care and compete for newly insured patients. For example, Alameda County Medical Center in northern California has made a financial turnaround and, assisted by funding from a local bond measure, is rebuilding its facilities and expanding primary and specialty care both on its campus and throughout the community (Tu et al. 2012). Safety net hospitals have also been preparing for reform by streamlining operations to control costs, upgrading infrastructure (especially electronic medical records and other health information technology), and developing partnerships with other hospitals and providers in the community in anticipation of delivery system reforms (Coughlin et al. 2012; Felland and Stark 2012). Some hospitals are using performance improvement strategies, such as the LEAN method, to identify waste, improve efficiency, and improve employee and patient satisfaction, patient safety, and quality of care (Eslan 2011).
Improvements in health information technology are especially important for improved efficiency, the ability to track and report on key quality indicators as required by many payment and delivery system reform models, decision support for chronic disease management, and improved billing processes in order to maximize reimbursement. Expanding capacity for primary care, increasing patient flows and referrals from primary care providers, and improving the “patient experience” have also been identified by some hospitals as key to competing and thriving during health reform.
Under the state’s Bridge to Reform Medicaid waiver, California safety net hospitals have been particularly immersed in health care reform preparations. In addition to the DSRIP payments to help hospitals expand their capacity and improve care processes and health outcomes, the hospitals are involved in implementing low-income health programs (Harbage and Ledford 2012). These county-based programs provide Medicaid-like benefits to low-income, uninsured people as a way to help identify who will become eligible under an expanded Medicaid program in 2014, provide care early to reduce pent-up demand and strains on provider capacity, and build patient loyalty to safety net providers. As part of this effort, safety net hospitals are focused on expanding their own primary care capacity and coordinating with community health centers, as a key focus of the program is to establish PCMH and increase the availability of primary care (Felland and Cross 2013).