Can Safety Nets Climb up the Stimulus Heap?

As the new finance editor here at HealthLeaders Media, I'm on the scent of money wherever I can find it—even from the late-night local news, which normally only serves as a muted backdrop to my end-of-day routine. But I perked up the other night when a story ran about Nashville General, the city's only safety net hospital and the admitting hospital for Meharry Medical College. According to the local TV station, the hospital was hit with $70 million in expenses for uncompensated care in 2008, ending the year $3 million in the red. It interested me because that's a pretty large uncompensated care tab for a hospital with less than 200 beds. Having spoken to the hospital's CEO, Reginald Coopwood, MD, late last summer, I know that behind the scenes the hospital is working to increase efficiencies and improve care by doing thing such as implementing a multi-million dollar IT system that includes electronic health records.

Still, the upshot of late is a scuffle developing between the city—which is in the midst of its own fiscal belt-tightening and wants to cut payments by as much as 10% to the hospital—and a coalition, made up of area clergy, looking for cash anywhere to keep the hospital afloat. One solution being floated is to attract more insured patients to the hospital. That will be difficult, given the fact that HCA's flagship 615-bed Centennial Medical Center, 832-bed Vanderbilt University Medical Center, and 683-bed Baptist Hospital are virtually within sight of Metro General. The city has tried to drive more revenue to the ailing hospital. Last year Nashville's Metro Council passed a resolution waiving copays, coinsurance, and deductibles for city employees who received care at Nashville General.

At HealthLeaders Media, we've covered the problems of public and safety net hospitals extensively, including most recently in the March cover story of HealthLeaders magazine. What is happening in Nashville is far from unique, but it got me thinking about the amount of patient volume safety nets are seeing due to the tanking economy and wondering whether they've managed to make any inroads toward obtaining federal stimulus funds.

Larry Gage, president of the National Association of Public Hospitals and Health Systems, says safety net hospitals, not surprisingly, are getting socked. "Most safety net hospitals are now seeing significant numbers of additional uninsured patients, both in their outpatient clinics and in their emergency rooms. Some public hospitals are seeing as much as a 50% to 60% increase in need for services by the uninsured and underinsured," he says. Not only are there more patients, he adds, but many of these new patients never thought they would need a health safety net.

Gage does say that some public and safety net hospitals are working the insured population angle, as many are urging Nashville General to do, but it is by no means a short-term solution. "Many of our members, especially those which are staffed by medical school faculty, have created centers of excellence that can attract insured patients as well as uninsured or government-sponsored ones, but such programs often take years to develop and yield benefits," says Gage.

Like it or not, in this new economic climate, everyone is taking a hit. The most vulnerable are the smaller safety nets like Nashville General. Gage says some public hospitals and health systems have had no choice but to lay off staff and cut services in many parts of the country due to the "inability or unwillingness of state and local governments to finance this increased need."

While Gage is somewhat hopeful, at this point it doesn't seem as though the stimulus funds will offer much relief to hospitals like Nashville General over the long haul. The economic stimulus package signed into law two months ago, which funnels $150 billion or so to healthcare interests, provides an additional $268 million injection in DSH payments to safety nets across the country, a 2.5% increase by state. Tennessee, however, instead of receiving a DSH increase, has been given a $331 million Medicaid grant. In general, when it comes to the stimulus money, Gage says "much of that money flows through the states, which often have considerable discretion in whether or not to spend the funds for their intended purpose or just use the money to stave off cuts or balance the budget."

Gage says other funds are available, too. "Over and above the DSH increases, some safety net hospitals are drawing on a range of different new programs. Funds designated to improve health information technology are specifically targeted on the safety net," he says.

Safety net hospitals have multiple vulnerabilities in a downturn—the uninsured rise usually comes concurrent to tax revenue decreases for the municipalities they depend on. Some larger safety nets—such as Atlanta's Grady Memorial—may try to use the threat of their closure as pressure to prompt state and local governments, and in some cases even surrounding not-for-profit health systems to supply direct or in-kind aid. The key question for the industry to face is not just how to sustain smaller safety nets through the current downturn, but how to create positive revenue streams to lessen their vulnerability to the next one.