DHS cuts mean $1.5B shortfall at public CA hospitals

Impending payment cuts to California disproportionate share hospitals (DSHs) due to the Affordable Care Act may leave safety-net hospitals with a $1.5 billion shortfall, according to a study published in Health Affairs.

The federal government expected the cuts, which will take effect in 2019, to be offset by newly insured patients. However, in the Golden State, many newly insured patients at public hospitals may instead switch to private hospitals, taking their insurance payments with them, according to Katherine Neuhausen of Virginia Commonwealth University and her team.

"Hospitals that can least afford a cut are the most at risk," co-author Dylan Roby, director of the Health Economics and Evaluation Research Program at the UCLA Center for Health Policy Research, said in a statement. "Policymakers should ensure that the impending shift in federal funding does not destabilize institutions that are the backbone of public health in California."

Public hospitals, such as Los Angeles County/USC Medical Center, are particularly at risk, since they receive the highest proportion of federal payments in California. Hospitals with patient bases that include large numbers of undocumented immigrants, who are not eligible for the state's Medicaid program, will similarly feel the effect of the cuts, according to the study.

"[W]e estimate that California public hospitals' total DSH costs will increase from $2.044 billion in 2010 to $2.363–$2.503 billion in 2019, with unmet DSH costs of $1.381–$1.537 billion," the authors state.

The cuts will hurt even worse in states that have not expanded Medicaid, Neuhausen said. "As challenging as these cuts will be for safety-net hospitals in California, they will be much worse in other states," she said in the statement. "Safety-net hospitals in states that do not expand Medicaid and those in states that do not target DSH payments to the hospitals with the greatest need could be in jeopardy."

To learn more:
- here's the study abstract
- read the statement

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