A Leak in the Lifeboat: The effect of Medicaid managed care on the vitality of safety-net hospitals

Abstract

States are increasingly adopting Medicaid managed care in efforts to address budgetary concerns. The intent is that by releasing Medicaid oversight to private organizations, competition will drive down healthcare expenditures so that savings may be passed to the state. Yet there are concerns that this competitive solution to cost savings might compromise safety-net hospitals. Managed care organizations cut costs by restricting the providers that enrollees are allowed to see. If movement in Medicaid patients disrupts safety-net hospitals' casemix, this could affect their ability to cross-subsidize care. This study estimates the impact of Medicaid managed care on safety-net hospitals by exploiting a Florida pilot program that required Medicaid recipients in five counties to enroll in managed care. The results suggest this mandate led to a small reduction in safety-net hospitals' average ratio of payment-to-cost. There is also some evidence that the effect on safetynet hospitals was disproportionate. This disproportionality was such that hospitals nearest the margin were pushed the furthest towards the edge.

Association Between Federal Value-Based Incentive Programs and Health Care–Associated Infection Rates in Safety-Net and Non–Safety-Net Hospitals

“…Whatever their cause, these disparities in health care–associated infection rates contribute to the disproportionate representation of safety-net hospitals among penalized institutions and may have unintended consequences for the financial stability of the safety net and the quality of health care for the patients served. Although Medicaid expansion under the Affordable Care Act reduced uncompensated care costs for many safety-net hospitals, these hospitals continue to have low operating margins and often rely on nonclinical sources of revenue or state and federal funds, particularly DSH payments, to offset financial losses associated with remaining uncompensated care and Medicaid reimbursement that is below actual costs . For example, in 2017, the mean operating margin for members of the safety-net hospital organization America’s Essential Hospitals was 1.6% compared with 7.8% for all hospitals nationwide.…”