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At a glance
Last year, Indiana classified Disproportionate Share Hospitals as those that devoted at least 36.93 percent of total patient-days caring for uninsured and Medicaid patients.
A Lutheran Health Network spokesman said the organization doesn’t track treatment rates by individual hospital or network within the company.
A Parkview Health spokesman said that organization treatment rate last year averaged 43 percent uninsured and Medicaid patients.
The following health care facilities in northeast Indiana are designated Disproportionate Share Hospitals: Parkview Health
Parkview Hospital Randallia
Parkview Regional Medical Center
Parkview Noble
Parkview Huntington Lutheran Health Network
St. Joseph Hospital
Source: Parkview and Lutheran officials
Photos by Samuel Hoffman | The Journal Gazette
Dr. Abby Massey, center, and other doctors and nurses check on patients’ records at Parkview Regional Medical Center.

Safety net hospitals worry

Health care law cuts budget for indigent care; implications unclear

ER technician Bethany Till rolls equipment to another room at Parkview Regional Medical Center emergency room.

Life’s been tough lately. You lost your job – and your health insurance.

Rest assured, though, that if you have a heart attack or break your leg, a hospital will treat you. People in need of urgent medical attention can’t be turned away.

But providing that care isn’t free, and the pot of federal money that reimburses some hospitals for treating uninsured patients is scheduled to shrink after the Affordable Care Act takes effect.

A report released this month by private consulting firm Alvarez & Marsal warned that the health care law “may actually worsen the status of many safety net hospitals.”

The term “safety net” isn’t a technical one, said Brian Tabor, the Indiana Hospital Association’s vice president of government relations.

“It typically means a hospital that serves a relatively high proportion of indigent patients, but it could also be a hospital that is the only provider of critical services in a region,” he said in an emailed response to questions.

One way to identify safety net hospitals is to look at those that qualify for the Disproportionate Share Hospital program. Those hospitals treat uninsured and Medicaid patients at rates well above the state average, Tabor said.

The federal government sets guidelines for the Disproportionate Share Hospital program, but individual states can establish different rules for payment eligibility, Tabor said.

The front lines

Eric Looper, CEO of St. Joseph Hospital, is one of the hospital administrators grappling with budget implications of upcoming funding cuts.

St. Joe in downtown Fort Wayne receives Disproportionate Share Hospital program payments as one of about 1,500 hospitals nationwide known as “safety net” providers. St. Joe is part of the Lutheran Health Network.

Like other health care officials nationwide, Looper isn’t sure what financial effects the Affordable Care Act will have on his hospital. Some changes in the health care overhaul are expected to help the bottom line, and others are bound to hurt it.

Some previously uninsured Americans will gain coverage under the act, which goes into effect Jan. 1. That means more people will have insurance, generating more income for all health care providers – including primary care doctors.

“Our belief all along has been that expanded access to coverage via the ACA will help a greater number of patients receive preventive and wellness care in an office setting so they can avoid a more costly trip to the hospital,” Looper wrote in an emailed statement.

“What’s unclear right now is the impact newly insured patients will have on the system and how many people will actually be insured,” Looper said. “Options for uninsured Hoosiers may involve an expanded Medicaid program, the Healthy Indiana Plan or a health insurance exchange.”

Parkview Health operates four area hospitals that are considered “safety net” providers because they serve a significantly disproportionate number of low-income patients. As part of the Disproportionate Share Hospitals program, they receive higher reimbursement for uninsured patients.

Parkview leaders are also waiting to see how things unfold.

Eric Clabaugh, spokesman, said there are “too many variables” to speculate about potential effects on reimbursement.

“One key question is whether Indiana will receive funding to expand Medicaid services, insuring those who currently don’t have insurance,” Clabaugh said in an emailed statement.

Gov. Mike Pence wants to use federal money to expand the Healthy Indiana Program.

“The number of uninsured residents could vary dramatically,” Clabaugh said, “depending on what Washington leaders decide.”

‘Tsunami of cuts’

The Affordable Care Act layers three big spending cuts on top of reductions that states have made during the recession.

First, the law slows the rate of regularly scheduled pay bumps from the federal government, meant to help hospitals keep pace with growing health care costs.

Safety-net hospitals also will bear the brunt of cuts in “disproportionate share payments,” money that the federal government sends hospitals that cover a high level of uninsured patients. These payments, which come from the Medicaid and Medicare programs, will fall by more than $30 billion over the next decade.

Health experts initially thought that those funds would become unnecessary, as the expanded access to health coverage lessened demand for uncompensated care.

After the Supreme Court declared the Medicaid expansion optional, several Republican governors declined to move forward – leaving hospitals worried that they will still see high numbers of uninsured patients.

Last, the health care law tethers a small portion of hospitals’ Medicare payments to the quality of care they provide and to patient satisfaction rankings.

If hospitals don’t hit certain targets, they stand to lose 1 percent of their Medicare income.

Safety net hospitals, separate research suggests, may have a tough time hitting the goals, because they tend to receive lower patient satisfaction ratings than competitors who treat fewer uninsured people.

“The challenge for a lot of these institutions are that they rely heavily on federal subsidies,” study author David Gruber said. “Now it’s like a tsunami of cuts hitting at the same time.”

Trying to adapt

The Obama administration has responded to some of the hospitals’ concerns.

In the president’s budget released this month, the White House proposed delaying some of the cuts in disproportionate share payments by one year, as states continue to debate the Medicaid expansion.

Researchers who have studied the safety-net hospitals echo some of the Alvarez & Marsal report’s concerns, but note that the health law offers many benefits for these providers.

“What the Affordable Care Act really means for the hospitals is going to vary,” said Teresa Coughlin, a health policy researcher at the Urban Institute.

“It will depend on whether their states take the Medicaid expansion, how many people are left uninsured, and what happens with state and local funding,” she said.

Coughlin recently published a study looking at how five large safety-net systems were adapting to the health-care law. Some, she said, are building new facilities and putting a new focus on quality, so they can compete for the patients who do gain coverage under the health law.

“It’s not all doom and gloom,” she said.

Still, safety-net hospitals remain concerned over what lies ahead under the health law. That includes Looper at St. Joe.

“What we’re dealing with is a moving target, so determining how we will need to adapt won’t be completely clear until more concrete information is available,” he wrote.

But something will have to give somewhere. St. Joe, like other hospitals, doesn’t have unlimited resources.

“What everyone needs to realize, though,” Looper said, “is funding cuts make it more difficult for us to expand services to meet the ever-changing needs of Fort Wayne.”

The Washington Post contributed to this story.