Safety Net Hospitals Raise Concerns on DSH Cuts

The nation's safety net hospitals are concerned that the proposed cuts to disproportionate share payments that take place next year under the Patient Protection and Affordable Care Act may not be on the same timetable as the expansion of health insurance coverage.

Beth Feldpush, vice president for advocacy and policy at the National Association of Public Hospitals, says that specific cuts to DSH payments were written into the ACA regardless of whether or not healthcare coverage is extended to an additional 50 million people who are currently uninsured.

"We remain very concerned about the size of the DSH cuts," Feldpush told HealthLeaders Media. "With a little bit of hindsight at the ACA and looking at where we are with implementation, we are concerned we are not going to see coverage expand as quickly as we would optimally hope it would. I haven't seen anyone really do an estimate of how quickly we would get to that full coverage expansion."

DSH payment cuts totaling more than $22 billion for Medicare and $18.1 billion for Medicaid over 10 years are supposed to take effect beginning in federal fiscal year 2014, Feldpush says.

The fate of the PPACA remains in the hands of the U.S. Supreme Court, which is expected to rule this month on the constitutionality of the sweeping healthcare reforms. With so much uncertainty surrounding the law, Feldpush says there has been some reluctance to implementing key provisions that could help safety net hospitals.

"We know for certain that at least on the health exchange side the implementation in states is going a little slower," Feldpush says. "Obviously they have been bogged down by the constitutional challenges to the law. There are a lot of states that have not moved quickly either because they are opposed to the exchanges or they are not sure it is going to remain in the law. That is all happening slower than people had anticipated."

NAPH this month released a study showing that the nation's safety net hospitals represent 2% of all acute care hospitals, but delivered 20% of all uncompensated care in 2010. NAPH said its annual member characteristics report, America's Safety Net Hospitals and Health Systems, 2010, found that its member hospitals delivered increasing levels of outpatient and inpatient services and uninsured patients accounted for 30% of ambulatory care visits and 19% of inpatient services.

The 52-page report said that the average margin for NAPH hospitals was 2.3% in 2010, compared with 7.2% for all hospitals. Safety net hospitals would have suffered a 6.1% loss without Medicaid DSH payments and a 10.6% loss without DSH and other supplemental Medicaid payments, the report said.

Under a preferred scenario, Feldpush says DSH payments would gradually decline each year as coverage expands. "Unfortunately when the ACA was being written, the Congressional Budget Office could not give a savings score to that implicit understanding of a natural decline in the need for DSH," Feldpush says.

"That is how we ended up with those direct cuts that are tied into the law. We would have said we don't need to put any DSH reductions into law at all because we will be gradually spending less on this program as coverage expands." 

The PPACA provides a framework but gives broad implementation powers to the Health and Human Services Secretary Kathleen Sebelius and the Centers for Medicare and Medicaid Services. Feldpush says NAPH is also asking them for a review of how DHS payments are distributed.

"In addition to cutting the shared total dollars there is going to be a redistribution of the DSH dollars," Feldpush says. "Our advocacy efforts are focused now on the implementation approach to make sure remaining DSH dollars are distributed to hospitals with the highest needs—that is those hospitals that really do take care of the disproportionate burden of the low-income patients."

The report also found that safety net hospitals:

Averaged almost three times the volume of inpatient admissions seen in other acute care hospitals and exceeded average admissions within their markets by 44%.

Provided nearly $128 billion in inpatient and outpatient services, nearly half of which was for low-income patients.

Trained more than 19,000 full-time equivalent medical and dental residents and more than 300 FTE allied health professionals.

Reported uncompensated care averaging 16% of costs, compared with 6% of costs for hospitals nationally.

Represented 37% of the level 1 trauma care and 57% of the burn care beds in the 10 largest U.S. cities. In 31 communities nationwide, safety net hospitals are either the only level 1 trauma center or the only trauma center of any level.