Safety-net hospitals that receive generous public subsidies will experience significant financial reversals if they do not change their business practices prior to much of the Patient Protection and Affordable Care Act taking effect in 2014, according to a Commonwealth Fund study published in the August Health Affairs.
The Commonwealth Fund studied the finances of 150 safety-net hospitals nationwide between the years 2003 and 2007. It concluded that those operated directly by elected officials had the highest operating margins: 7 percent. Those hospitals with authority delegated to political appointees had margins of less than 1 percent. Both private sector for-profit and not-for-profit safety net hospitals both operated in the red.
The Commonwealth Fund concluded that those hospitals operated by elected officials enjoyed such large margins because they were able to negotiate higher subsidies from local governments, in some instances as high as 35 percent of all revenues. However, such subsidies have been tamped down due to the recession, and are expected to be cut further as the result of the ACA.
"Safety net hospitals governed by elected politicians must focus on cost control, quality improvement, and services that attract insured patients," the study abstract states. "Such efforts will be important to ensure that the 23 million people who will be without insurance coverage even when the health reform law takes full effect … continue to receive the range of healthcare and specialized services."
Whether the quality of care delivered by those hospitals impacted by future cuts remain to be seen. Many safety nets score as well or even better on outcomes than their non-governmental counterparts.