The Health of Safety Net Hospitals following Massachusetts Health Care Reform: Changes in Volume, Revenue, Costs, and Operating Margins from 2006 to 2009

Abstract

Massachusetts health care reform, designed to expand coverage and access to care for vulnerable populations, serves as the model for national health reform in the United States that will be implemented in 2014. Yet, little is known about how the reform may have affected the demand for and the financial performance of safety net hospitals (SNH), the primary source of care for such populations before the reform. Using a quasi-experimental design that included all acute care hospitals in the state, we calculated changes in mean inpatient and outpatient volumes, revenue, and operating margins at SNH from the pre-reform (Fiscal Year 2006) to the post-reform (Fiscal Year 2009) period. We contrasted these changes with contemporaneous changes occurring among non-safety net hospitals (NSNH) using a difference-in-differences approach. We found that SNH in Massachusetts continue to play a disproportionately large role in caring for disadvantaged patients after reform, but that their financial performance has declined considerably compared with NSNH. Ongoing reform efforts in the United States should account for continued SNH demand among the most vulnerable patients and should be designed so as not to undermine the financial stability of SNH that meet this demand.

Predictors of Payer Mix and Financial Performance Among Safety Net Hospitals Prior to the Affordable Care Act

“…Two other parameters were the strongest predictors. Hospital systems in the Northeast fared worse on average than systems in the South, West, and Midwest, a finding that may be due in part to financial repercussions from Massachusetts's 2006 health reform, which redirected much of the state's uncompensated care fund away from several large safety net hospitals; 13 however, our findings were persistent even when excluding Massachusetts. Other regional market trends may be to blame, such as high overall levels of healthcare spending in several Northeastern cities, 23 although we do not have the sample size or variation over time that would be useful to further assess this issue.…”

“…For instance, Mohan and colleagues examined the impact of the 2006 healthcare reform in Massachusetts on volume, revenue, and operating margins, concluding that despite increases in coverage, safety net hospitals continued to care predominately for disadvantaged populations while experiencing poorer financial performance after the reform than other hospitals. 13 However, we are unaware of any broader national analyses of demographic predictors of financial performance. Furthermore, quantitative evidence on the financial impact of state policies and hospital features is lacking.…”

Integrating Health Care for the Most Vulnerable: Bridging the Differences in Organizational Cultures Between US Hospitals and Community Health Centers

“…As described previously, 6 sites were selected based on national recognition as leaders in health care integration among safety net providers. 4,7,10 All sites agreed to participate, with the exception of community health center leadership from Minneapolis. The interview guide consisted of open-ended questions on integration of primary and acute care services.…”

The insurance–readmission paradox: Why increasing insurance coverage may not reduce hospital‐level readmission rates

“…The relative difference, however, was not statistically significant. 10 Nonetheless, Chen et al did find that the comorbidity index increased postreform only for patients in the highest prereform uninsurance quartile, suggesting that their patient population might have become sicker. An alternate hypothesis is that safetynet hospitals were the most financially adversely affected by the Massachusetts reform and may therefore have cut services that would have reduced readmission risk.…”

“…They might use new revenue from newly insured patients to provide better care-coordination services, potentially reducing readmission risk, or as happened in Massachusetts, safety-net hospitals may find themselves unexpectedly losing revenue because of elimination of other subsidies, potentially reducing their ability to provide care transition services. 10 Examining the effect of health insurance reform on hospital readmission rates empirically, Chen et al find that readmission rates rose 0.6 percentage points in the group of hospitals with the highest prereform rates of uninsurance, but that after risk adjustment for age, gender, race, and comorbidity, there was no significant change relative to other hospitals. What accounts for these results?…”