Seeking new federal designation, AHA touts report on Metropolitan Anchor Hospitals' marginalized patients, financial challenges

Late last week, the American Hospital Association (AHA) shared a new report highlighting a subset of urban safety net hospitals the industry group said deserves a new federal designation and funding support.

Dubbed Metropolitan Anchor Hospitals (MAHs), these urban hospitals are defined by AHA as those with greater-than-average rates of Medicaid inpatient utilization, higher disproportionate patient percentage and high per-bed uncompensated care costs.

Pointing to characteristic data collected by NORC at the University of Chicago, a social research organization contracted by the industry group, AHA said these hospitals already faced “ongoing, unique financial pressures” that have worsened with the pandemic.

“This subset of hospitals … tends to have lower margins while providing a higher level of uncompensated care to uninsured patients than comparison hospitals,” AHA Senior Vice President of Public Policy Ashley Thompson wrote in a Friday blog post sharing NORC’s report.

“The AHA is working with Congress and the administration to elevate the critical role of MAHs in the health care delivery system and advocate for policies to support these vital hospitals so they can continue to address health inequities and protect access to care in America’s urban communities," she wrote.

NORC’s report reviewed safety net literature and, using pre-pandemic Medicare Inpatient Prospective Payment System data, collected the descriptive characteristics of 465 hospitals that met the AHA’s proposed designation for a MAH. The group compared these characteristics to those of 1,358 “comparison hospitals” that are located in the same 162 metropolitan statistical areas as the MAHs.

MAHs are typically larger hospitals, representing 33% of the 162 markets’ beds and 34% of its inpatient revenue despite accounting for just over a quarter of the markets’ total hospitals, according to the new report.

The MAHs were more likely than comparison hospitals to offer a full range of essential services, frequently are involved in clinician training, are “major” employers in their communities and—by nature of their qualifying criteria—serve lower-income patient communities with disproportionately complex health needs, NORC wrote.

From a financial standpoint, median net patient revenue at MAHs outpaced other market hospitals in 2019 ($317 million versus $207 million) and had higher total Medicare margins (1.4% versus -2.8%), NORC found. However, MAHs lagged behind the comparison hospitals' median operating margins (1.6% versus 4.4%) and median total margins (3% versus 5.5%).

The “likely” explanation, NORC wrote, is MAHs' higher charity care spending and greater share of Medicaid patients. The report’s 465 MAH hospitals saw uncompensated care costs nearly equal to the remaining 1,358 hospitals in their markets—49% versus 51%.

“In 2019, MAHs spent a median 2.8% of operating expenses on charity care compared to 1.6% by other hospitals; this equated to a median of $10.6 million per MAH and $4.2 million in other hospitals (noting MAHs are generally larger hospitals),” NORC wrote in its report.

MAHs also provided 48% of all Medicaid inpatient days across their markets, NORC wrote, averaging a Medicaid inpatient utilization rate of nearly 37% compared to the comparison hospitals’ 17%—meaning they less frequently recoup their costs with higher-paying private payer reimbursements.

NORC noted that between 25% to 35% of the population either relies on Medicaid or lacks insurance entirely and that more than half of those are part of historically marginalized demographics. With Medicaid enrollment increasing during the pandemic, more individuals who are often facing inequities are relying on safety net hospitals—such as MAHs—for care, the group wrote.

AHA’s Thompson wrote in a blog post sharing NORC’s data that these “hospitals serving marginalized urban communities need additional federal support so they can meet their mission of advancing health for the patients and communities they serve.”

The industry group reiterated its case in a recent letter (PDF) to congressional leaders. Penned Monday, the group listed the MAH designation alongside other targeted relief proposals such as extensions to rural hospital programs and prevention of an impending hospital pay sequester.