title: Disproportionate-share hospital payment reductions may threaten the financial stability of safety-net hospitals.
abstract: Safety-net hospitals rely on disproportionate-share hospital (DSH) payments to help cover uncompensated care costs and underpayments by Medicaid (known as Medicaid shortfalls). The Affordable Care Act (ACA) anticipates that insurance expansion will increase safety-net hospitals' revenues and will reduce DSH payments accordingly. We examined the impact of the ACA's Medicaid DSH reductions on California public hospitals' financial stability by estimating how total DSH costs (uncompensated care costs and Medicaid shortfalls) will change as a result of insurance expansion and the offsetting DSH reductions. Decreases in uncompensated care costs resulting from the ACA insurance expansion may not match the act's DSH reductions because of the high number of people who will remain uninsured, low Medicaid reimbursement rates, and medical cost inflation. Taking these three factors into account, we estimate that California public hospitals' total DSH costs will increase from $2.044 billion in 2010 to $2.363-$2.503 billion in 2019, with unmet DSH costs of $1.381-$1.537 billion.
authors.affiliation: Katherine Neuhausen (klneuhausen@vcu.edu) is director of delivery system reform in the Office of Health Innovation and a clinical assistant professor in the Department of Family Medicine and Population Health, Virginia Commonwealth University, in Richmond.
authors.forename: Katherine
authors.initials: K
authors.lastname: Neuhausen
authors.affiliation: Anna C. Davis is a PhD student in the Department of Health Policy and Management, Jonathan and Karin Fielding School of Public Health, University of California, Los Angeles (UCLA).
authors.forename: Anna C
authors.initials: AC
authors.lastname: Davis
authors.affiliation: Jack Needleman is a professor in the Department of Health Policy and Management, Jonathan and Karin Fielding School of Public Health, UCLA.
authors.forename: Jack
authors.initials: J
authors.lastname: Needleman
authors.affiliation: Robert H. Brook is a professor of medicine and public health in the David Geffen School of Medicine and the Jonathan and Karin Fielding School of Public Health and codirector of the Robert Wood Johnson Foundation Clinical Scholars Program, UCLA. He is also the distinguished chair in health services at RAND and a professor in the Pardee RAND Graduate School.
authors.forename: Robert H
authors.initials: RH
authors.lastname: Brook
authors.affiliation: David Zingmond is an assistant professor in residence in the Division of General Internal Medicine and Health Services Research, David Geffen School of Medicine, UCLA.
authors.forename: David
authors.initials: D
authors.lastname: Zingmond
authors.affiliation: Dylan H. Roby is an assistant professor in the Department of Health Policy and Management and director of health economics and evaluation research at the Center for Health Policy Research, both in the Jonathan and Karin Fielding School of Public Health, UCLA.
authors.forename: Dylan H
authors.initials: DH
authors.lastname: Roby
mesh_terms: D002140:California; D005377:Financial Management, Hospital / Q000191:economics*; D017721:Hospital Costs / Q000706:statistics & numerical data*; D006766:Hospitals, County / Q000191:economics; D006779:Hospitals, Public / Q000191:economics; D006801:Humans; D008329:Managed Care Programs / Q000191:economics; D008484:Medicaid / Q000191:economics*; D017057:Medically Uninsured / Q000706:statistics & numerical data; D058991:Patient Protection and Affordable Care Act / Q000191:economics*; D012051:Reimbursement Mechanisms / Q000191:economics*; D020444:Reimbursement, Disproportionate Share / Q000191:economics*; D064876:Safety-net Providers / Q000191:economics*; D017664:Uncompensated Care / Q000191:economics; D014481:United States
keywords: Financing Health Care; Health Reform; Hospitals; Medicaid; Safety-Net Systems