"Safety-Net" Hospitals Need Support to Survive

Health care reform may make life easier for low-income Americans in the future, but for now, it’s “safety-net” hospitals that need rescuing in order to serve the needs of millions of uninsured patients and meet the disaster response needs of communities, say experts in the June 18, 2009 New England Journal of Medicine (NEJM).

Safety-net hospitals are typically found in areas in which the uninsured are concentrated – inner-city neighborhoods and economically depressed rural communities. Private hospitals with a large base of paying patients can shift their relatively modest costs of uncompensated care onto other patients’ bills, safety-net hospitals have little capacity for shifting costs.

Nearly 30 years ago, the federal government developed a plan to partner with states to provide supplemental Medicaid payments to facilities that provided a disproportionate share of care to the uninsured and Medicaid beneficiaries. These facilities came to be called “disproportionate share hospitals (DSHs)” and the supplements were called DSH payments.

But in the years that followed, many state governments figured out how to exploit loopholes in the program to secure large federal DSH payments and direct the money to other purposes. After several cycles of reform, most of these abuses have been eliminated, but wide disparities in DSH payments persist.

“Over the years, the program has had its flaws, but the DSH funds that finally reach safety-net hospitals are vital to their survival,” says Arthur L. Kellermann, MD, MPH, professor of emergency medicine and associate dean, Emory University School of Medicine. In addition to providing ‘safety net’ care, these institutions play several vital roles in their communities.”

Kellermann and co-author Michael Spivey, JD, a principal with Spivey/Harris Health Policy Group, say in the NEJM Perspective article that four changes to the federal law would allow the DSH program to achieve its original purpose.

“First, we believe that DSH funding should be restricted to truly disproportionate providers,” the authors say. “The legislative clause that deems certain hospitals to be DSH facilities should be revised so that DSH payments can be made only to these facilities.” Currently, state governments can direct DSH payments to hospitals that provide little or no charity care if they choose to do so.

Second, say Kellermann and Spivey, the flexibility given to states to designate special classes of DSH providers should be eliminated. They believe that states should not be allowed to favor certain hospitals over those that provide a greater proportion of uncompensated care. DSH payments should be based on a single, uniform method.

Third, because trauma and emergency care are vital to public safety, a hospital should be required to operate an emergency department and participate in its state’s trauma system to receive DSH funds.

Fourth, large DSH hospitals that anchor their region’s disaster plan should receive supplemental funds, provided that they meet strict performance and readiness criteria. A portion of current federal DSH money - perhaps 10 percent - should be held back and awarded for this purpose through competitive grants.

“By allocating federal funds to hospitals that need them most, the reforms we propose would go a long way toward correcting the program’s deficiencies,” say Kellermann and Spivey.

The authors acknowledge that they could have gone farther with their recommendations.

“Our proposals do not correct historical inequities in the allocation of DSH funds among the states,” they concede. “Attempts to do so would probably trigger a legislative battle that would doom any chance for reform.

“Until fundamental health care reform is achieved, millions of low-income Americans will remain dependent on safety-net facilities for care,” say the authors. “Everyone - insured and uninsured alike - benefits from the specialized services, medical education, and trauma and disaster care that many safety-net hospitals provide. Today, DSH is needed more than ever. The program is broken, but we believe it can and should be fixed.”

From Woodruff Health Sciences Center News

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