Skip to main content

7 Ways the PPACA Hurts Safety Net Hospitals

 |  By cclark@healthleadersmedia.com  
   July 19, 2012

The idea that the Patient Protection and Affordable Care Act, which was written in part to strengthen the healthcare safety net, may end up punishing the very providers who take care of the poor by imposing unfair payment algorithms, is ironic.

It reminds me of Catherine Kutzler's lament.

She's the CEO of poor St. Joseph's Hospital in Philadelphia. When the HCAHPS (Hospital Consumer Assessment of Healthcare Providers and Systems) survey was updated in May, it showed her 146-bed facility had the third worst patient experience scores in the country, including whether patients "would recommend" St. Joseph's to family and friends.

"This is a very old hospital," she sighed. "We receive a lot of complaints about our rooms. They're old and they look dirty no matter what we do."

Also hurting her scores is the fact that the building is in a poor part of town. Many patients can't pay. She couldn't get qualified emergency department nurses and salaries aren't comparable. Many of the doctors are older and may be perceived as being out of touch. 

And many of their patients have drug-seeking or mental health issues that make St. Joseph's other patients uncomfortable. "I've been here since 1990 and the community has always viewed this hospital as one that just takes care of the poor," she said.

Nearly two and a half years after the law's passage, researchers, clinicians and public hospital officials are seeing that unintended consequences of the law may punish these hospitals for conditions that are out of their control, impeding their ability to care for the sickest and poorest patients, and contributing to a downward institutional spiral.

Beth Feldpush, of the National Association of Public Hospitals and Health Systems, has supported the use of tools such as HCAHPS to improve quality. But now she's not so sure.

"Now, I think, the tool is just new enough that we are just starting to learn potential limitations to it, and refinements that could be made," she says.

In my interviews with health policymakers and executives, I've heard these themes about how the law, as it now must be implemented, may place safety net hospitals at an unfair disadvantage, potentially perpetuating some of the very problems the healthcare law was supposed to fix.  Their complaints fit into seven categories.

1.  Higher rates of readmissions
There's substantial evidence that safety net hospitals have a tougher time preventing readmissions than non-safety net hospitals, and will be penalized up to 1% starting Oct. 1, up to 2% starting Oct. 1, 2013 and up to 3% starting Oct. 1, 2014 and beyond. 

Mitchell Katz, MD, head of the Los Angeles County Department of Health Services, which runs four safety net hospitals with nearly 1,500 beds, says poor family support at home for meals, problems with transportation, and medication non-adherence impede the ability of safety net patients to make it on their own after discharge.

"Two people get discharged after treatment for pneumonia. One has family that can cook and bring liquids, has a warm home, people who visit and help with medications. The other lives alone in a single room occupancy hotel. Who's more likely to be readmitted?" he asks.

2. Illness severity not reflected
Katz points out that safety net hospitals may unintentionally downgrade the severity level of their patients, which may make it look like they treat healthier patients than they do. That's because publicly funded hospitals don't often pay attention to diagnostic coding.

"Here in Los Angeles, we don't do a good job at coding, and that influences the severity adjustment."

Why not just educate the staff to do a better job, he was asked.  "Safety net hospitals don't have the money to hire professional coders, he replies.

"Private non-profit hospitals have coders constantly going through the records putting little arrows with suggestions for the doctors, who themselves are going to get paid more by doing this. In my system, we don't prioritize coding. It's not that we're sloppy. It's just that we have a finite budget." Given extra resources, safety net hospitals hire more doctors.

3. Poorer patient experience scores
A Harvard study this week in the Archives of Internal Medicine documents one aspect of this problem for the first time. It shows that 769 safety net hospitals scored an average of 5.6% lower on HCAHPS than their non-safety net counterparts.

Under authority from the PPACA, lower HCAHPS scores can put these struggling hospitals smack dab in the center the payment reduction bullseye starting Oct. 1.

Under the value based purchasing algorithm, hospitals that don't do as well as their competitors—and patient experience surveys make up 30% of the score—will receive as much as 1% less in their Medicare reimbursement.

Study author Ashish Jha, MD, postulated several reasons for the lower scores, such as fewer nurses per 1,000 patient days, more Medicaid patients whose care receives lower rates of reimbursement than Medicare or commercially insured patients.

4. Patients with limited payment resources
It almost goes without saying that safety net hospital patients don't pay well. That means available resources must all go to basic services, while ignoring amenities. "Other hospitals spend their money on improving their facilities, hiring more customer service people, better parking and infrastructure," Katz says.

5. Lower Medicaid DSH funds
Under section 2551 of the law, safety net hospitals will lose billions of dollars in federal funds to pay for the uninsured through the Medicaid Disproportionate Share Hospital (DSH) program. The schedule for reducing DSH program funding begins with a $500 million cut in 2014 and accelerates each year through 2020, when the cut is $4 billion.

Before the Supreme Court decision, the cuts were reasonable. Another section of the new law dramatically reduced the number of uninsured by requiring each state to expand its Medicaid eligibility to anyone earning up to 138% of the federal poverty level. If they refused, they would lose all of the federal match, which is usually 50% or more of each state's Medicaid costs. The Supreme Court ruled that unconstitutional, which poses the following problem for safety net hospitals.

6. States can now decline Medicaid expansion
The court's ruling gives states the freedom to not expand their Medicaid coverage programs without losing their entire federal match. And so far, 30 states are seriously considering that option.

That leaves hospitals to care for an estimated 4 million to 13.8 million people who would have been covered. Some say it could be as many as 40 million, if some states tighten eligibility requirements, which some may try to do.

In an interview with HealthLeaders Media last week, Bruce Siegel, MD, President and CEO of the National Association of Public Hospitals and Health Systems, described the impact as "a disaster for the safety net and a disaster for patients.  You can have a safety net for public hospitals or you can have Medicaid coverage, one or the other, but what's happening is that we are walking away from both."

7. Greater risk of infection
Under the new law, hospitals with higher rates of healthcare-associated infections will receive another downward payment adjustment. This, too, could disadvantage those low-income patients' hospitals that are older and have double rather than single-bed rooms.

"I don't want to suggest that safety net hospitals cause more infections," Katz says. "I just know that any place that doesn't have single rooms has higher rates of infections. And disproportionately, safety net hospitals are more likely to have double or quadruple rooms."

Bottom line
The bottom line, Katz says, is that the ACA's rules are telling his hospitals "we're going to compare you relative to your peer group, even though your peer group is not really equal to you" with hurtful payment reductions that are premature.

Far better, he suggests, is a "carrot and stick" approach that would push hospitals to set up improvement targets that challenged hospitals could strive to reach. "I have no problem with the idea that if you can't demonstrate improvement, payment is withheld. But I don't like pretending that all hospitals have these burdens and should be rated against each other. They don't."

Tagged Under:


Get the latest on healthcare leadership in your inbox.