News Release

Local Public Hospitals: Changing with the Times

Facing Certain Cuts in Federal Support to Care for Uninsured, Public Hospitals’ Prospects May Ride on State Decisions to Expand Medicaid

In recent years, local public hospitals have stayed afloat financially without abandoning their mission to care for low-income people by expanding access to primary care, attracting privately insured patients and paying closer attention to collection of patient revenues, among other strategies, according to a qualitative study released today by the Center for Studying Health System Change (HSC).

Since 1996, HSC researchers have tracked how local public hospitals that serve as core safety net providers in five communities—Boston, Cleveland, Indianapolis, Miami and Phoenix—have weathered increased demand for care from growing numbers of uninsured and Medicaid patients amid fluctuating public funding.

Generally, the five public hospitals have adopted six key strategies to respond to growing capacity and financial pressures: establishing independent governance structures; securing predictable local funding sources; shoring up Medicaid revenues; increasing attention to revenue collection; attracting privately insured patients; and expanding access to community-based primary care, the study found.

The health reform law is expected to impact public hospital finances in two opposing ways: 1) an improved payer mix as lower-income, uninsured people gain Medicaid or subsidized private insurance coverage; and 2) reduced federal Medicaid and Medicare subsidies to help defray the cost of care for low-income, uninsured patients, known as disproportionate share hospital, or DSH, payments.

While public hospitals appear poised for changes under national health reform, they will need to adapt to changing payment sources and reduced federal subsidies and compete for newly insured people, according to the study.

“A major concern for public hospitals, dating from the Supreme Court decision on the health reform law, is the financial impact if their states choose not to expand Medicaid eligibility,” said Laurie E. Felland, M.S., HSC director of qualitative research, and coauthor of the study with Lucy B. Stark, a former HSC research assistant. “The cut in federal subsidies is certain, while the Medicaid expansions are uncertain, and public hospital leaders are worried they will have many more uninsured patients than expected if states choose not to expand Medicaid.”

The study’s findings are detailed in a new HSC Research Brief—Local Public Hospitals: Changing with the Times.

The study, funded by the Robert Wood Johnson Foundation and the National Institute for Health Care Reform, is an offshoot of HSC’s 2010 site visits to 12 nationally representative metropolitan communities.

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The National Institute for Health Care Reform (NIHCR) is a nonpartisan, nonprofit 501 (c)(3)organization created by the International Union, UAW; Chrysler Group LLC; Ford Motor Company; and General Motors. Between 2009 and 2013, NIHCR contracted with the Center for Studying Health System Change (HSC) to conduct high-quality, objective research and policy analyses of the organization, financing and delivery of health care in the United States. HSC ceased operations on Dec. 31, 2013, after merging with Mathematica Policy Research, which assumed the HSC contract to complete NIHCR projects.