A conceptual framework for understanding the effects of health reform on safety net hospitals is shown in Figure 1. The framework draws on other efforts to develop a monitoring strategy for safety net hospitals, such as the Agency for Healthcare Research and Quality’s Safety Net Monitoring Initiative, as well as an initiative by HRSA to monitor the impact of state health insurance expansions on safety net organizations (AHRQ 2003; Harrington and Byrd 2009). We adapt the conceptual frameworks used in these prior efforts to account for both specific provisions of the ACA and recent changes in the health care delivery system, along with issues that are specific to safety net hospitals. We also incorporate comments made by a technical expert panel (TEP) that was convened by ASPE as part of this project (HHS/ASPE 2013).
Policies That Affect Demand for Care, Revenues, and Costs. The most direct effect of the ACA on safety net hospitals is that about 25 million people will gain coverage by 2023 through Medicaid expansions or subsidized private coverage through the new state-based health insurance marketplaces (CBO 2013). This is likely to increase the demand for care at safety net hospitals as well as patient revenue from insured persons.
The extent of increased demand will depend on a number of state implementation decisions relevant to the ACA, especially whether the state decides to expand Medicaid eligibility to all adults with family incomes below 138 percent of the federal poverty line and whether safety net hospitals are included as “essential community providers” in qualified health plans. ACA provisions that dramatically decrease federal subsidies to safety net hospitals through DSH have the potential to offset any gains in patient revenue from insurance coverage expansions. Changes in other state and local subsidies to safety net hospitals will also affect their ability to respond to increased demand for care from the ACA coverage expansions as well as to payment and delivery system reforms.
Characteristics of Communities and Local Delivery Systems. Health reform’s impact on demand for care at safety net hospitals will depend in part on the size of the uninsured population in the community prior to reform and on the number of uninsured who will be eligible for coverage expansions.
Demand for care, patient revenues, and costs will also be affected by the organization and dynamics of the local delivery system, including the degree of competition for newly insured patients between hospitals and other health care providers; the overall capacity of the system—especially for primary care; the extent of system integration; and, the size and breadth of health plan provider networks. The ACA includes provisions to both increase system capacity and promote care coordination through payment and delivery system reforms, such as Patient-Centered Medical Home (PCMH) initiatives and Accountable Care Organizations (ACOs). If successful, such reforms will increase the demand for outpatient and primary care (as well as compensation for these services) and decrease the demand for inpatient and emergency department care.
Figure 1. Conceptual Framework
Hospital Attributes. Characteristics of safety net hospitals will also affect their response to health reform. Type of ownership, capacity (both inpatient and outpatient), whether they are the dominant safety net hospital in the community, if they are part of a larger hospital system, their financial condition before reform, and preparations they made in anticipation of reform could all affect safety net hospitals’ ability to retain existing patients, attract new patients, and form or participate in integrated delivery systems.
Safety Net Hospital Outcomes. Key hospital outcomes to monitor include the financial performance and viability of safety net hospitals, continued commitment to their safety net mission of serving patients regardless of their ability to pay (that is, the remaining uninsured population), changes in service lines offered, and changes in the quality of care. Quality of care includes not only indicators required by the Centers for Medicare & Medicaid Services (CMS) (for example, 30-day readmission rates for specific conditions), but also quality-of-care measures that reflect better access to primary care for patients and greater care coordination between hospital and community providers.
Below is a more detailed discussion of the major issues and research questions concerning the potential effects of the ACA on safety net hospitals.