AHA seeking new federal designation for safety net hospitals

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The American Hospital Association is advocating for a new federal designation and funding for a category of urban safety net hospitals, in a new report released last week.

These Metropolitan Anchor Hospitals (MAHs), as the AHA has labeled them, serve large numbers of urban, low-income and historically marginalized individuals. This subset of hospitals, which treat more Medicaid patients than typical hospitals and have higher-than-average uncompensated care costs, tend to have lower margins than comparison hospitals.

What the AHA wants to do is elevate the role of MAHs in the healthcare delivery system and to convince lawmakers to adopt policies that support such hospitals.

WHAT’S THE IMPACT?

During the last two years, the COVID-19 pandemic has stretched the capacity and tested the strength of the healthcare system, with hospitals across the country operating at full or beyond capacity during prolonged coronavirus surge periods.

The pandemic has placed great strain on all hospitals, including hospitals that play a safety net role. Government relief funding provided to hospitals during the pandemic helped offset the financial losses they experienced, but pandemic surges continue to put financial pressures on hospitals.

An MAH, according to the AHA, is defined as being located in an urban area, with a Medicaid inpatient utilization rate (MIUR) greater than the statewide average, and with either a disproportionate patient percentage greater than 70% or a DPP greater than 34.5%, combined with a ratio of uncompensated care costs-to-beds of $35,000 or more.

The AHA’s data indicated that MAHs provide an outsized portion of uncompensated care and Medicaid care within their urban market areas. MAHs are typically larger, accounting for 33% of beds and an estimated 34% of market-wide inpatient revenue. They also provide a disproportionately high amount of care to historically marginalized populations, accounting for about 48% of Medicaid inpatient days and 49% of uncompensated care costs.

Overall, the average MIUR of a MAH is nearly 37%, compared with 17% in other hospitals in those same markets. This means MAHs are more likely to assign inpatient beds to Medicaid beneficiaries than the other metropolitan hospitals serving the same area.

Operating margins tend to be lower at MAHs than other urban hospitals in the same markets. In 2019, they had a median operating margin of 1.6%, compared with 4.4% in other hospitals in the same market. 

2019 was a low year for MAHs, with median operating margins typically being above 2.3% from 2014; the median operating margin in comparison hospitals is consistently at least 1.5% points higher than MAHs. As MAHs tend to be larger hospitals, they typically have higher total operating revenues than comparison hospitals (a median of $348 million in 2019 among MAHs, compared with $217 million). However, operating incomes were equivalent or lower among MAHs with a median of $4.8 million in 2019, compared with $6.6 million.

According to the AHA, 67% of MAHs are involved with teaching the next generation of healthcare professionals and are major employers in their communities. Future work could explore these organizations’ workforce and teaching programs further, the community benefit or charitable practices of these organizations, Medicare and Medicaid claims and quality reporting data to determine the demographics of people who use these hospitals, and the quality of care they provide.

THE LARGER TREND

Together, between 25% and 35% of the U.S. population either lacks insurance or relies on Medicaid, and more than half are part of historically marginalized groups, the AHA said.

During the pandemic, Medicaid enrollment increased from 70.7 million in February 2020 to 83.2 million by June 2021, and in 2020, an estimated 31.6 million additional Americans lacked health insurance. Historically marginalized populations are disproportionately uninsured or Medicaid beneficiaries and face health inequities, immense structural barriers, and need timely, culturally competent care.

The AHA stated its case for an MAH designation to congressional leaders in a letter written this week. “These hospitals serve as a lifeline in communities that include patients who are low income, and often challenged in accessing comprehensive, quality healthcare,” the AHA wrote in the letter.
 

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