2014

Funding shortfall of more than $1.3 billion could push safety-net hospitals to financial brink


A new study from the Center for Health Policy Research reveals that California will fare better than other states but will still feel pain.

Public hospitals in California that serve the poorest patients could face a $1.54 billion funding shortfall in 2019, when federal funding cuts go into effect. Those cuts, along with health-care cost inflation, could jeopardize the financial stability of the state’s safety-net hospital system, according to a new study by the UCLA Center for Health Policy Research and Virginia Commonwealth University published in the June issue of the journal Health Affairs.

Several county hospitals — including LAC + USC Medical Center, Santa Clara Valley Medical Center, Alameda Health System, Harbor–UCLA Medical Center and Olive View–UCLA Medical Center — may be especially vulnerable because they receive the highest disproportionate-share hospital (DSH) payments in the state and are located in regions with large numbers of undocumented immigrants who are not eligible for Medi-Cal, California’s version of the Medicaid program.

"Hospitals that can least afford a cut are the most at risk," said Dylan Roby, director of the UCLA center’s Health Economics and Evaluation Research Program. "Policymakers should ensure that the impending shift in federal funding does not destabilize institutions that are the backbone of public health in California."

California’s safety-net hospitals rely heavily on federal DSH funding, which compensates them for treating the most vulnerable patients — those who are uninsured and those on Medicaid, primarily children, pregnant women, the disabled and the elderly. In 2010, DSH funds paid more than half of $2 billion in DSH costs ($1.1 billion) to the 21 safety-net hospitals included in the study, with county and state funds covering the rest.

But with impending DSH cuts, the study estimates payments would drop to roughly $830 million to $980 million and leave hospitals struggling to cover $1.38 billion to $1.54 billion in DSH costs in 2019. As many as 4 million Californians and 30 million Americans nationwide are still likely to be uninsured at that time. Without a strong safety-net hospital system, those patients will have few places to turn to for care.

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