Hospitals that serve vulnerable patients have much lower average margins that other providers, according to America's Essential Hospitals.
The safety-net providers have persistently high levels of uncompensated and charity care that pushed average margins down to one-fifth that of other hospitals in 2017, according to the annual study, Essential Data: Our Hospitals, Our Patients. They operated with an average margin of 1.6 percent in 2017 -- less than half their 2016 average and far below the 7.8 percent average of other U.S. hospitals, according to the data from Essential Hospitals' 300 members.
While these hospitals represent about 5 percent of all U.S. hospitals, they provided 17.4 percent of all uncompensated care, or $6.7 billion, and 23 percent of all charity care, or $5.5 billion in 2017, the study said.
Amercia's Essential Hospitals fears further financial pressure from $4 billion in federal funding cuts to disproportionate share hospitals slated to go into effect on October 1. This represents a third of current funding levels.
The DSH payments are statutorily required and are intended to offset hospitals' uncompensated care costs. In 2017, Medicaid made a total of $18.1 billion in DSH payments, including $7.7 billion in state funds and $10.4 billion in federal funds, according to the Medicaid and CHIP Payment and Access Commission, or MACPAC.
MACPAC recommends starting with cuts of $2 billion in the first year.
The association and other organizations have been urging Congress to stop or phase-in the cuts. Speaker Nancy Pelosi said Congress must take action to ease the DSH cuts.
Since 1981, Medicaid DSH payments have helped offset essential hospitals' uncompensated care costs.
The study data shows essential hospitals provide disproportionately high levels of uncompensated and charity care.
In 2017, three-quarters of essential hospitals' patients were uninsured or covered by Medicaid or Medicare and 53 percent were racial or ethnic minorities. They served 360,000 homeless individuals, 10 million with limited access to healthy food, 23.9 million living below the poverty line, and 17.1 million without health insurance, the study said.
The association's members averaged 17,000 inpatient discharges, or 3.1 times the volume of other acute-care hospitals. They operated 31 percent of level I trauma centers and 39 percent of burn care beds nationally.
ON THE RECORD
"Our hospitals do a lot with often limited resources, but this year's Medicaid DSH cuts will push them to the breaking point if Congress doesn't step in," said association President and CEO Dr. Bruce Siegel. "Our hospitals are on the front lines of helping communities and vulnerable people overcome social and economic barriers to good health, and they do much of this work out of their own pocket. They do this because they know going outside their walls means healthier communities and lower costs through avoided admissions and ED visits."
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