The critical condition of have-not hospitals

MEMO TO healthcare reform advocates: Don't forget the safety-net hospitals.

These hospitals are in poor, urban communities across Massachusetts. They provide a vital safety net to the Commonwealth's most vulnerable citizens -- the working poor and uninsured. These hospitals and healthcare centers don't have the luxury of negotiating the majority of their payments for the care they deliver. Instead, they must rely on payments determined by legislation and government regulation.

While some thought has been given to protecting the safety-net providers, the financial net they rely on has too many holes. They are more vulnerable than other hospitals to downward shifts in state revenue. In recent years, state lawmakers enacted special supports for these hospitals, because 63 percent or more of their revenue comes from Medicare, Medicaid, and the state's free care pool. A fund with $34.5 million to $46 million, known as the state's distressed-provider trust fund, provided resources to safety-net hospitals and healthcare centers in Massachusetts. Supplemental Medicaid payments and a minimum reimbursement of cost for care to the uninsured have been put in place by the Legislature to help these hospitals meet the needs of the large populations of working poor, marginally employed, and uninsured.

Here's the tough, but realistic, diagnosis: Those fixes weren't enough.

There are haves and have-nots in the hospital world, just as there are in the rest of the world. There are the resource-rich teaching hospitals, which are an unquestioned source of pride and economic stimulus for Massachusetts. And then there are the poorer community hospitals, which play an equally vital role in the Bay State's healthcare network. Even with government supports, these safety-net healthcare providers are in a financially precarious position. Many lose money on hospital operations, and those that don't have razor-thin margins. In the most recent fiscal year, the average operating margin of the safety-net hospitals was 0.53 percent, while the average operating margin for the other hospitals in the state was 1.71 percent. The main cause is shortfalls in Medicaid payment rates, compounded by an inability to make up the difference through negotiations with private health plans.

The diminished financial health of the state's safety-net providers -- who are also their communities' largest employers -- should set off alarms.

Because of their location in poor cities like Lawrence, Fall River, and Brockton, the safety-net hospitals in Massachusetts provide more than 62 percent of healthcare to the uninsured. They are the state's partners in this health coverage endeavor, and the impact of reform should be measured in large part by how successful they and their related physicians, clinics, and health centers are in delivering affordable, quality care to the uninsured and those who gain access to health coverage under reform. These hospitals are key players in the state's efforts to expand coverage to the uninsured. They require the continued financial considerations the state has given them in prior years. Substantial resources such as those in the distressed-provider trust fund are also needed to ensure that the hospitals thrive.

The safety-net hospitals weathered the impact in recent years of cuts in Medicaid enrollment and Medicaid payments. These cuts affected the safety-net providers much more than other hospitals because the communities they serve have larger numbers of Medicaid enrollees. These hospitals need a continuation of current minimum payments for care to the uninsured; supplemental payments on Medicaid rates; and the distressed-provider trust fund. Without that protection, safety-net providers are significantly more vulnerable to cuts during times of declining state revenues.

The healthcare reform proposals under consideration call for Medicaid eligibility expansion and subsidies to cover more of the uninsured, and they envision Medicaid as well as uncompensated care payment increases to all hospitals. But all hospitals are not created equal. Some need more help than others and any reform legislation should take the differences into account.

The poorest residents of our state deserve quality care and hospitals with state-of-the-art technology. Continued supports are critical especially during the transition phase of this coverage expansion. Let's embrace true healthcare justice and make certain we preserve the safety net in Massachusetts.

Ellen T. Murphy, former vice president of Lawrence General Hospital, is a healthcare consultant.