CA Safety-Net Hospitals Stand to be Hard Hit by Federal Cuts

Doug Desjardins, June 13, 2014

California safety-net hospitals are already operating on a tight budget, and a program to reduce federal subsidies could result in those hospitals facing a $1.5 billion shortfall by 2019.

California safety-net hospitals could be hit hard by a program that will reduce federal subsidies to hospitals based on the assumption that uncompensated care costs will decline with the arrival of federal healthcare reform.

The study from the UCLA Center for Health Policy Research published in the journal Health Affairs looked at the impact of pending reductions to disproportionate-share hospital payments. The federal government currently distributes $11.5 billion in DSH funds to states each year that are used to subsidize hospitals that care for a high percentage of the uninsured and patients covered through Medicaid.

The study estimates that California receives $1.1 billion in DSH payments per year—which covers about 50% of total uncompensated care costs—and that 98.5% of those funds go to 20 large county and public hospitals.

They include LAC + USC Medical Center in Los Angeles, Santa Clara Valley Medical Center, Alameda Health System, San Joaquin General Hospital, and Harbor-UCLA Medical Center. Discharge records show that 18% of patients at those hospitals have no insurance and that 41% are insured through Medi-Cal, which provides hospitals much lower reimbursement rates than private health plans.

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