Environmental Scan to Identify the Major Research Questions and Metrics for Monitoring the Effects of the Affordable Care Act on Safety Net Hospitals. a. Hospital Financial Performance


Because of their reliance on Medicaid revenue, the relatively large amount of care provided to uninsured patients, and decreasing revenue streams from federal, state, and local governments, most safety net hospitals operate with very low or negative margins. NAPH margins averaged 2.3 percent in 2010 compared to the 7.2 percent average margin nationwide, and many safety net hospitals operate with chronically negative margins (Zaman et al. 2012).

Whether safety net hospitals can maintain their financial viability will depend primarily on (1) their ability to offset the loss of Medicare and Medicaid DSH funds—as well as other potential decreases in state and local subsidies—with increased patient revenues from newly insured patients, including both existing patients who gain coverage and new patients they are able to attract from other health care providers, and (2) finding ways to streamline costs while at the same time making the necessary investments to position themselves for delivery system reforms and greater competition with other hospitals.

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