How Do We Keep Safety Net Hospitals Safe from Bankruptcy?

Nancy Carlson , RN, MBA

Practice Management Consultant

Published September 12, 2012

Safety net hospitals serve vulnerable populations such as low income and uninsured patients. Studies show that the upcoming changes to Medicare reimbursement could greatly add to the financial troubles of safety net hospitals, and it appears that hospitals already on the financial edge could fail. The new way of determining Medicare payments that begin this October will be partially based on quality metrics such as patient experience surveys and readmissions, as opposed to the pay per service model of the past.

It makes sense to judge hospitals on the quality of care they provide. In terms of quality of care, some have made the case that there is little difference between safety net and non safety net hospitals. According to a study conducted by Joseph Ross for Health Affairs, care quality for Medicare enrollees at safety net and non-safety net hospitals was almost equal, and mortality and readmission rates were “broadly similar” for both. Safety net hospitals even face some increased challenges in readmissions such as their patients are often less likely to be able to afford medications, have access to doctors for check-ups, and are more likely to have trouble getting the needed transportation for follow-up care. Kaiser Health News recently reported that hospitals that have the largest share of low income patients are 2.7 times as likely to have high readmission rates.

Despite such studies documenting that the quality of patient care at safety net hospitals is very much on a par with other hospitals, safety net hospitals will find it more difficult to achieve the high patient satisfactions scores that CMS will require for full reimbursement. They tend to score more poorly on measures of overall hospital rating, provision of discharge information, and communication with the physician. The study notes that safety net hospitals typically receive "poorer marks from patients," and that "the gap between how their patients rate them and the scores that other hospitals get has widened" over the past four years. If the trend continues, "it means safety net hospitals will be at a disadvantage when the Centers for Medicare & Medicaid Services uses the scores to dole out bonuses and penalties that will ultimately amount to 2 percent of regular Medicare payments." This inability to get high marks on surveys that are needed for reimbursement could even be seen as a regressive tax on these hospitals. Unlike ‘trickle down’ economics, the failure of safety net hospitals could trickle up and provide untold burden to all hospitals that must legally provide care to all patients.

It is ironic that the Affordable Care Act, which will insure so many more Americans, will at the same time endanger the very hospitals that serve them. History has shown that patients continue to choose safety net hospitals even after becoming newly insured. A study from the Archives of Internal Medicine found that after the Massachusetts health reform law increased the number of people with health insurance, patients continued to choose safety-net hospitals because of their convenience, affordable price, and other non-medical services. The study concludes:

“Despite the significant reduction in uninsurance levels in Massachusetts that occurred with health care reform, the demand for care at safety-net facilities continues to rise…Most safety-net patients do not view these facilities as providers of last resort; rather, they prefer the types of care that are offered there. It will continue to be important to support safety-net providers, even after health care reform programs are established.”

Given that patients continue to use safety net hospitals even when newly acquired health insurance gives them a choice of hospitals, the validity of the lower patient satisfaction scores at the safety net hospitals is thrown into question. It makes no sense to give such probably invalid scores the power to cripple safety net hospitals.

So what are safety net hospitals to do? How can they meet the challenges of their patient population while also meeting the high quality standards set by CMS that may cause financial doom?

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