Safety-net hospitals face greater risk for Medicare penalties

Medicare's Value-Based Purchasing (VBP) and Hospital Readmissions Reduction programs are more likely to penalize safety-net hospitals than any other hospital under the prospective payment system (PPS), according to a study published in Health Affairs.

Researchers analyzed data from a sample of 242 California hospitals paid prospectively under Medicare. They found the 60 safety-net hospitals included in the sample had lower average 30-day heart attack, heart failure and pneumonia mortality rates over a three-year period than other PPS hospitals. Despite this, the safety-net hospitals were likely to score lower than other PPS hospitals under VPB and the readmission reduction program, according to the study, and were less likely to meet the requirements to avoid a penalty beginning in October under Medicare's electronic health record meaningful use criteria.

But safety-net hospitals in states that declined to expand their Medicaid programs will face even more financial woes because they can't use the extra funds from Medicaid expansion to offset planned cuts to the disproportionate share hospital (DSH) program. 

"The combined effects of Medicare value-based payment policies on the financial viability of safety-net hospitals need to be considered along with DSH payment cuts as national policy makers further incorporate performance measures into the overall payment system," the authors wrote.

Not all news is bad for safety-net hospitals, however; since the implementation of the Affordable Care Act, many hospitals have seen their numbers of uninsured patients drop.

"We have seen a steady decline in our uninsured visits," said Roxane Townsend, chief executive officer of University of Arkansas Medical Center, which reported its number of uninsured patients fell by about half. "We did not anticipate this big a drop this quickly." However, this progress has been limited to states that expanded Medicaid eligibility.

To learn more:
- read the study abstract

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