Looming Medicaid cuts could hurt already vulnerable hospitals

The report, authored by researchers from Tulane University and the Georgia Health Policy Center, projects how the nation's hospitals may be affected by provisions in the Affordable Care Act (ACA) to cut Medicaid disproportionate-share hospital (DSH) payments by $35.1 billion by 2024. The payments, which have long helped hospitals make up for uncompensated care costs for the uninsured, were intended to be significantly reduced as healthcare reform rendered them less necessary by expanding health insurance coverage.

However, residual coverage gaps and the decision by many states not to expand Medicaid will leave as many as 30 million people without insurance. Hospitals will likely bear the brunt of those costs, authors said.

"We sought to identify the hospitals that may be most vulnerable to reductions in Medicaid DSH payments and to analyze their financial condition," said senior author Mark Diana, associate professor of Global Health Systems and Development at Tulane University School of Public Health and Tropical Medicine.

The report analyzed 2,104 acute care hospitals, finding 529 are highly dependent on DSH payments; 225 of those are in weak financial shape. Overall, authors found that of the 551 hospitals rated in weak financial condition, almost 42 percent were highly reliant on DSH payments for revenue.

"These payments are subsidizing many at-risk hospitals," Diana said. "Policymakers should recognize that many hospitals will be affected by these cuts and decreases in revenue will affect their ability to provide care for vulnerable populations."

Hospitals in states not expanding Medicaid are at greater financial risk because there won't be an increased number of patients with insurance to offset their reductions in federal payments, Diana said.