The Experiences of Massachusetts Hospitals as Statewide Health Insurance Reform Was Implemented Gloria J. Bazzoli, PhD Jan P. Clement, PhD Abstract: Hospitals treat many uninsured patients and shoulder substantial amounts of uncompensated care. Health reform as implemented in Massachusetts, then, would be expected to bode well for hospitals as many people obtain coverage from private and public programs. We examined changes in Massachusetts hospital payer mix, unreimbursed costs of care for the uninsured and those in means-tested public programs, and overall financial condition for the period 2004 to 2010. Despite increases in coverage, unreimbursed costs for the uninsured and those in means-tested government programs did not decrease appreciably for Massachusetts hospitals over the study period. Major safety-net hospitals, which play a substantial role in serving the uninsured and Medicaid, had some initial easing of this burden but their financial situation weakened through 2010. The U.S. economic recession and Massachusetts budget pressures, which in part resulted from reform implementation, likely offset advantages hospitals experienced from reductions in the uninsured. Our analysis suggests that state actions in Massachusetts to change payment programs that the two major safety net hospitals relied on to support indigent care contributed to their financial difficulties. Key words: Health reform, hospitals, uninsured, safety net.


he 2006 Massachusetts (MA) health reform law ushered in sweeping changes to health care delivery and financing. After these reforms were implemented, the number of uninsured children dropped by almost one-half.1 Data from the U.S. Census Bureau’s Current Population Survey indicated that the percentage of MA residents who were uninsured declined from 9.8% in 2004 to 3.4% in 2011, with the number covered by private insurance increasing from 4,777,000 to 4,992,000 and the number of individuals covered by public insurance (i.e., Medicaid, Medicare, and state-specific programs) growing from 970,000 to 1,482,000.2 On the face of it, these changes appear highly favorable for hospitals given the role they traditionally play in the health safety net. Household survey data indicate that many uninsured identify hospitals generally, or emergency departments in particular, as their “usual source of care.”3,4 Not only do hospitals directly provide emergency and GLORIA BAZZOLI is the Bon Secours Professor of Health Administration, Department of Health Administration, Virginia Commonwealth University (VCU), P.O. Box 980203, Richmond, VA 23298-0203; [email protected]; (804) 828-5223. JAN CLEMENT is Professor and Director, Doctoral Program in Health Services Organization and Research, Department of Health Administration at VCU.

© Meharry Medical College

Journal of Health Care for the Poor and Underserved 25 (2014): 63–78.


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inpatient services to uninsured patients, but some also arrange preventive, primary care and specialist services through their network of affiliated providers.5,6 Hadley and his colleagues reported that of the estimated $57.4 billion in uncompensated health care provided to the uninsured nationwide in 2008, hospitals were responsible for about 61% of this care.7 For MA, Holahan and colleagues estimated uncompensated care costs for the uninsured to be $1.1 billion in 2004, with MA hospitals providing 73% of this care.8 Sharp reductions in the uninsured could have an especially beneficial effect on the subset of hospitals in a community that are the major safety-net providers. In Massachusetts, two hospitals are widely recognized as major safety-net hospitals: Boston Medical Center and Cambridge Health Alliance. Together, these hospitals had 6% of the state’s staffed and set-up hospital beds in 2004 but accounted for 46% of state-wide hospital uncompensated care costs in that year.9 The objective of our study is to examine how hospital payer mix, unreimbursed costs of care for the uninsured and low-income individuals covered by public programs, and overall hospital financial performance changed for MA hospitals. We start with a 2004 baseline that is well before state health reform was implemented and consider changes through the post-reform year of 2010. We contrast MA hospitals with national and regional trends, where data are available, and we also conduct statistical analyses that provide some control for potential effects of the US recession. We discuss the implications of our findings for MA policy makers and hospitals. Potential implications for the national implementation of the Affordable Care Act (ACA) are presented, although exact predictions of ACA impact on hospitals nationally are not possible from MA experiences despite similarities between MA and national reform provisions. Background on MA Health Reform. Massachusetts health reform was signed into law in early 2006, and the state expanded its Medicaid program in the summer of that year. These expansions focused on children up to 300% of the federal poverty level (FPL) and certain low-income adults. This was followed in October 2006 by the introduction of a subsidized health insurance program (Commonwealth Care) for individuals with income below 300% of FPL who did not qualify for Medicaid. In early 2007, the state’s health insurance exchange (the Health Connector) was implemented, and the state’s health insurance mandate took effect in July 2007.10 After the state’s insurance coverage expansions were implemented, MA made substantial changes to funding sources that its hospitals traditionally relied upon to offset the costs of care to uninsured and low-income patients. Prior to and during the early reform years, MA operated an Uncompensated Care Pool (UCP) funded (after assessments of hospitals and health plans) by general tax revenues and other supplemental sources from the state. Hospitals received lump-sum payouts from the UCP pools based on qualifying uncompensated care. In 2008, the UCP was replaced with the Health Safety Net (HSN) program, which made case-based payments for qualifying claims. The pool of HSN funds for hospitals in 2008 was $373 million, compared with $620 million the year before through the UCP.11 In addition to these changes that were planned in the original 2006 legislation, MA faced unanticipated budget problems in 2008, and as a result, Medicaid payments for all MA hospitals and special supplements targeted to major safety-net hospitals were scaled back.12 A principal argument for making these changes was that hospitals no longer needed such extensive financial support

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given sharp increases in the number of insured individuals. Indeed, the MA Division of Health Care Finance and Policy reported a 40% decline in uncompensated care in the first year after the MA reform law was implemented.13 However, prior studies have not examined the net effect of expanded insurance coverage and subsequent payment limits on hospitals in the state. Our study addresses this gap in the literature.

Methods Study data. The primary data for this study were detailed cost reports filed by hospitals with the MA Department of Health Care Finance and Policy (DHCFP), specifically the DHCFP-403 hospital cost report, for fiscal years 2004 to 2010. Hospitals are required to submit these reports annually, and they are desk-audited or field-audited by the DHCFP. The reports contain data on hospital service use and total billed charges by payer as well as overall hospital costs. In addition, we obtained annual DHCFP reports on the UCP and HSN programs, which contain data on annual assessments paid by hospitals to support the UCP/HSN pools as well as payments they received out of these pools.14 Data were also obtained from the Agency for Healthcare Quality and Research (AHRQ) to assess national trends in hospital service volume and payer mix through their Health Care Utilization Project (HCUP).15 AHRQ hospital volume and payer mix data are derived from its hospital inpatient and emergency visit databases, which AHRQ maintains through its HCUP partnership activities with data organizations in many states nationwide. The AHRQ HCUP inpatient database dates back to 1990 and its emergency visit file began in 1999, and both have been used extensively in health services research. Additionally, we obtained AHRQ hospital-specific cost-to-charge ratio data that are intended to be used when converting hospital reported charges to costs. AHRQ calculates these cost-to-charge ratios using data obtained from Medicare hospital cost reports, which are submitted annually to the Centers for Medicare and Medicaid Services by all US hospitals participating in the Medicare program.16 AHRQ calculates the cost-to-charge ratio by dividing total allowable costs by total gross patient charges, both calculated across all patients regardless of payer. These files are available for years 2001 to the present. Researchers and policy makers typically use these ratios to convert charges to an estimate of resource costs for treating hospital patients.17,18 Finally, data from Ingenix on acute care hospital financial performance in the Northeast region and nationally were obtained.19 Ingenix has collected this information from the majority of hospitals in the US for decades. Overall, our MA hospital database contained all 67 hospitals identified by the state as acute care hospitals in 2004. We had data on all these MA acute care hospitals throughout our study period, with one facility dropping out of the database in 2009 due to closure. Measures. We extracted hospital service use and financial data for each MA hospital in each study year for Medicare, Medicaid, privately insured, self-pay (i.e., largely the uninsured), Commonwealth Care, and HSN, the latter two of which were implemented through MA health reform. We examined three measures of hospital service use for these payer categories: hospital discharges; outpatient emergency department (ED) visits (i.e., treat and release visits); and non-ED outpatient visits. The MA hospital reports contain service use data for other payers, such as worker’s compensation, CHAMPUS,


Experience of Massachusetts hospitals with insurance reform

and out-of-state Medicaid, but we excluded these payers from our analysis because the number of patients with these payers was small, representing less than 1% of overall hospital service use for each category. The AHRQ data noted above were used to construct national trends in inpatient discharges and outpatient ED visits by payer type to compare results derived from the MA data. Measures were also constructed for the total costs of care for self-pay patients and those in means-tested government programs, namely Medicaid, Commonwealth Care, and HSN. We focused on these patients because hospitals historically have received payments for patients in these types of means-tested programs that are less than the costs of their care, and hospitals, especially non-profit institutions, typically absorb these unreimbursed costs as a form of community benefit.20 The DHCFP data contain total billed (gross) charges for each payer but, like other hospital financial databases, costs of care are not presented by payer. As noted above, AHRQ constructed cost-to-charge ratios were used to estimate costs given data on billed charges. Revenues that offset these costs were measured as payments hospitals expected to receive from the payer sources noted above. This includes payments directly from patients, third-party payments from public programs, and supplemental payments through the UCP or HSN program. For both UCP and HSN, we measured hospital net payments from these pools by subtracting annual assessments they paid to support the pool from the gross payments they ultimately received. Offsetting revenues also included special supplements that the two main safety-net hospitals of Boston Medical Center and Cambridge Health Alliance received from the state. Specifically, the state builds these into supplemental payments received by the two hospitals through Medicaid Disproportionate Share Hospital and upper payment limit programs to offset some of their costs for the uninsured. To improve comparability across hospitals of different size, we measured costs of care and offsetting revenues relative to hospital average daily census, using American Hospital Association (AHA) data on this measure in each year. Average daily census equals the average number of inpatient hospitals beds that are occupied on a daily basis throughout a hospital reporting period. This measure has advantages over set-up and staffed hospital beds in that average daily census accounts for variations in hospital occupancy across institutions and over time. We had also considered using a size measure like AHA adjusted admissions, which is a composite measure that combines both inpatient and outpatient care. However, adjusted admissions uses inpatient and outpatient revenues to transform outpatient care into inpatient equivalents, which implies that the conversion factor would be confounded with our offsetting revenue variable. All of our cost and revenue measures were converted to 2004 dollars using the CPI-Hospital Services inflation index.21 We were unable to compare MA-specific data on these measures to hospitals in other states because these data are unique to the state of MA based on its required financial reports. Finally, we examined data on hospital profitability across all operational activities and patient care delivered, which is captured through hospital operating margins. This measure allows us to assess whether any operating losses resulting from treating the uninsured and those in means-tested public programs are offset by gains generated by other patient types and other operating revenue.

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We examined trends in median margins for MA hospitals and compared these to acute care hospital trends nationally and also in the Northeast region of the US. In addition to the state of Massachusetts, the Northeast region includes Pennsylvania, New Jersey, New York, Connecticut, Rhode Island, Massachusetts, New Hampshire, Vermont, and Maine. We examined county-level data from the Bureau of Labor Statistics Area Resource File to assess whether MA differed in key economic variables prior to and after MA reform and also during the recession. Specifically, we examined annual county-level data on the percent of working age adults who were unemployed, percent of individuals living in poverty, and the percent uninsured. County-level percent unemployed did not differ significantly between MA and other Northeast region counties during the study years. In the years before the recession, county-level unemployment ranged from 4.5 to 4.9% and increased to 8.3 to 8.6% after 2008 for MA and other Northeast region counties. Similarly, no statistically significant differences were present between MA counties and other Northeast counties in the percent of the population living in poverty. Also, the percent of individuals uninsured in MA counties and the percent uninsured in other Northeast counties were not significantly different for the years before MA health reform but then post-reform, as one would expect, became significantly lower in MA counties. Comparison groups. We used MA-specific criteria to identify Disproportionate Share Hospitals (DSH) based on patient charges attributed to selected payers. Specifically, the state deems hospitals to be DSH providers if their sum of patient charges for Medicare, Medicaid, other government payers, and free care equals 63% or more of total hospital charges. Although this categorization is in part based on Medicare, which includes patients not necessarily of low-income, the high payer share threshold used by MA (i.e., 63%) likely mitigates the effects of including this particular payer. Indeed, our application of the state criteria yielded 16 or 17 hospitals deemed as DSH in each study year, which compares favorably to the 17 safety-net hospitals identified in an earlier study, which used a 20% threshold for the combined payer share of Medicaid, self-pay, Commonwealth Care, and HSN.22 We defined a hospital’s DSH status in 2004, retaining this designation throughout the study period so that changes we observed in payer mix and unreimbursed costs of care were not the result of changing composition of the hospital groups. Sixteen hospitals were identified as DSH in that year, and 51were non-DSH. The two primary safety-net hospitals in the state –Boston Medical Center and Cambridge Health Alliance—were deemed “Major DSH hospitals” and the others “Other DSH hospitals”. This distinction is important not only given the large volume of care these two institutions provide to uninsured and low income patients but also because the state provides special subsidies for these two facilities. In our national and regional comparisons, we could not replicate this criteria to distinguish DSH hospitals because we lacked comparable data on hospital payer mix. Thus we conducted comparisons relative to all acute care hospitals. Analytical approach. We constructed descriptive trends in key variables over the study period so that we could assess how these variables changed during the MA health reform implementation period (2006 to 2008) and the post-reform period (2009 and 2010) relative to the pre-reform period (2004 and 2005) and by hospital DSH status. As noted above, we also provide statistics or direct comparisons to non-MA hospitals as


Experience of Massachusetts hospitals with insurance reform

data were available. It was not possible to conduct complex multivariate analysis with multiple control variables because we had only 66 or 67 annual MA hospital observations. We did, however, conduct a multivariate analysis that took advantage of the longitudinal MA data, allowing us to control for time invariant hospital fixed effects and also provided some degree of control for the effects of the deep US recession that began in 2008. Specifically, we examined hospital-level measures of unreimbursed costs for the uninsured and those in means-tested programs and also operating margin as dependent variables in separate fixed effects models. Each of these models included as explanatory variables: a 0/1 indicator for the MA implementation period (2006 to 2008), a 0/1 indicator for the post-reform period (2009 and 2010), interactions of hospital DSH status with these two variables, and finally, a 0/1 indicator for the recession period of 2008 to 2010. Rather than report these models, which have coefficients that on their own are hard to interpret, we used significance tests of specific individual and linear combinations of coefficients to assess whether changes observed in the figures displaying descriptive trend data were significant.

Results Payer mix changes over time. Figures 1 and 2 display data for payer trends in inpatient discharges and outpatient ED visits, respectively, reporting average annual volume for hospitals in the three comparison groups. We constructed a similar exhibit for nonemergency outpatient visits but because it parallels those here, it is not included but available from the authors upon request. Figure 1 shows the substantial decline in the self-pay category of hospital discharges, most notably for the major DSH hospitals. On average, these two hospitals had 4,458 self-pay discharges in 2004 and this fell to just 184 in 2010, representing a decline from 20% of their 2004 discharges to less than 1% in 2010. Other DSH hospitals and nonDSH hospitals also experienced declines in self-pay but started at much lower levels for these patients: from an average of 599 discharges in 2004 for other DSH hospitals to 139 in 2010; and from 366 discharges on average for non-DSH hospitals in 2004 to 91 in 2010. The number of patients covered by Medicare and privately insured was generally stable over the period for all hospital types, but Medicaid grew as did volume Commonwealth Care and HSN payer types when these were introduced. In relation to Medicaid, major DSH hospitals experienced 20% growth in volume between 2004 and 2010, other DSH hospitals experienced 18% growth, and non-DSH experienced 28% growth. AHRQ national estimates of inpatient hospital stays for 2004 to 2010 indicate that Medicaid discharges grew by 13% from 2004 to 2010, implying a substantially higher rate of increase for all MA hospital categories arising from the state’s Medicaid expansion. Figure 2 reports results for outpatient ED visits. For all hospital types, self-pay volume declined substantially and Medicaid volume grew. For major DSH hospitals, average self-pay ED visits fell from 37,486 (41% of all ED visits) in 2004 to 5,502 (5%) in 2010. The average volume of self-pay ED visits fell from 6,266 (13% of all ED visits) in 2004 to 2,743 in 2010 (5%) for other DSH hospitals, and fell from an average of 3,966 (10%) in 2004 to 1,345 (3%) in 2010 for non-DSH hospitals.

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Figure 1. Payer mix trends in inpatient discharges.a Note: aData for each year represents average values for hospitals in each hospital category. Vertical black lines delineate transition period for implementation of MA health reform. DSH defined as Disproportionate Share Hospitals as defined based on MA criteria and hospital payer mix in 2004.


Experience of Massachusetts hospitals with insurance reform

Figure 2. Payer mix trends in emergency department visits.a Note: aData for each year represents average values for hospitals in each hospital category. Vertical black lines delineate transition period for implementation of MA health reform. DSH defined as Disproportionate Share Hospitals as defined based on MA criteria and hospital payer mix in 2004.

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Available data indicate that outpatient ED visits also increased nationally in the study period. AHRQ national estimates for outpatient ED visits based on its National Emergency Department Survey only span the period 2006 to 2010, but these data indicate that these visits increased 8% over this period. Calculating comparable measures for MA hospitals over the 2006 to 2010 period, total outpatient ED visits increased by 7% for major DSH, 11% for other DSH, and 1% for non-DSH hospitals. AHRQ national estimates also indicated that Medicaid outpatient ED visits increased by 22% between 2006 and 2010 but for MA hospitals during this period they increased to a larger degree: 34% for major DSH, 64% for other DSH, and 37% for non-DSH hospitals. Financial burden from unreimbursed costs of care. Figure 3 reports our analysis of costs of care and offsetting revenues for uninsured patients and those covered by means-tested public programs. The figure reports inflation-adjusted costs and revenues, both of which are summed across hospitals in each category and then divided by the sum of hospital average daily census across institutions in that category. Starting with major DSH hospitals, health reform appeared to reduce the burden these institutions had for uninsured and low-income publicly insured patients through 2007. In 2004, these hospitals had about a $273,000 gap between costs and offsetting revenues and by 2007, inflation adjusted costs and inflation adjusted revenues were basically equal. However, subsequently, a gap grew between costs and offsetting revenues and increased from about $188,000 per occupied bed in 2008 to $215,000 in 2009. This gap diminished somewhat by 2010 to $121,000 per occupied bed. Other DSH and non-DSH hospitals experienced consistently higher inflation adjusted costs than inflation adjusted offsetting revenues in each study year. This was true in all study years without much change during health reform implementation or afterwards. The gap for other DSH hospitals was about $33,000 per occupied hospital bed in 2004 and $50,000 in 2010. For non-DSH hospitals, the gap was $44,000 per occupied bed in 2004 and was $54,000 in 2010. Our hospital fixed effects analysis examined a measure for the gap between costs of care and offsetting revenues to assess changes over time and confirmed the observations noted above (results of model available from lead author on request). For major DSH hospitals, the gap between costs and offsetting revenues diminished significantly during the health reform implementation period relative to the pre-reform period (p = .003) but then was not significantly different post-reform relative to pre-reform. Other DSH hospitals experienced no significant change in unreimbursed costs in the implementation or post-reform period relative to the pre-reform period. Non-DSH hospitals experienced no significant change in unreimbursed costs during the implementation period but the fixed effects analysis suggested a significant increase in unreimbursed costs post-reform when compared to pre-reform. Overall hospital financial performance. Our final analysis, in Figure 4, examines hospital operating margins. National and regional comparative data were only available from 2005 to 2010. Here, we examined the two major DSH hospitals separately, labeling them as major DSH 1 and major DSH 2, because their operating margins were very different. For all other hospital categories, we report median operating margins. Throughout the study period, operating margins for other DSH and non-DSH MA hospitals followed similar trends and tracked closely with acute care hospitals in the


Experience of Massachusetts hospitals with insurance reform

Figure 3. Costs of care and offsetting revenue for uninsured and means-tested publicly insured patients: 2004–2010.a a Data for each year represents sum of costs or revenues (both inflation adjusted) for all hospitals in a category divided by the sum of average daily census for hospitals in that category. Vertial black lines indicate transition period for implementation of MA health reform, including Medicaid expansions, introduction of Commonwealth Care, health insurance mandate

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Figure 4. Operating margins of MA Hospitals by DSH status compared to all Northeast region and national acute care hospitals.a a Vertical black lines indicate transition period for implementation of MA health reform, including Medicaid expansions, introduction of Commonwealth Care, health insurance mandate and exchanges, and transition of UCP program to HSN program. Sources: MA hospital data come from reports of the MA Department of Health Care Finance and Policy; see Note #11 for information on reports obtained. Regional and national data come from Ingenix reports. See Note #14 for information on reports obtained. Northeast region includes: Pennsylvania, New Jersey, New York, Connecticut, Rhode Island, Massachusetts, New Hampshire, Vermont, and Maine.

same region and nationally. Margins for these hospital groups declined in 2008, most likely due to the US recession, and subsequently rebounded in 2009 and 2010. One of the major DSH hospitals was profitable for many years and the second major DSH hospital commonly experienced operating losses before MA health reform was implemented. The second major DSH hospital, however, nearly attained break-even in 2007 but losses returned in 2008 that met or exceeded pre-reform levels. The other major DSH hospital maintained positive operating margins through 2008 but then it experienced a sharp decline and losses in 2009 and 2010. Similar to the analysis of unreimbursed costs, we conducted a fixed effects analysis using hospital operating margin as the dependent variable and the same explanatory variables used in the cost analysis (results of model available from lead author on request). After controlling for a recession period effect, the estimated models suggested no statistically significant change in operating margin for non-DSH and other DSH during the MA reform implementation period relative to the pre-reform period, but both hospital types had significantly higher margins in the post-reform period relative to the pre-reform period (p = .031 and p = .001, respectively). Looking at both major DSH hospitals as a group, they experienced no significant change in operating margin


Experience of Massachusetts hospitals with insurance reform

during MA reform implementation relative to the pre-reform period but a decline in margin post-reform, after controlling for the recession period effect (p = .038).

Discussion Massachusetts health reform resulted in a sharp decline in the number of uninsured patients treated at MA hospitals and a commensurate increase in volume of care among Medicaid patients and those covered by newly developed means-tested public programs. During the period studied, the volume of care provided to privately insured and Medicare patients remained strong and steady for study hospitals. On the face of it, one would view these as very favorable payer mix changes, but our analysis suggests that MA hospitals did not experience sharp or sustained reductions in unreimbursed costs of care for the remaining uninsured and those in means-tested public programs. Operating margins appeared to have improved for non-DSH and other DSH in the post-reform period relative to the pre-reform period, but declined sharply for the two major DSH hospitals of Boston Medical Center and Cambridge Health Alliance. This latter finding held even after controlling for the impact of the recessionary period of 2008 to 2010, and thus, suggests that state actions in MA to change supplemental payment programs that the two institutions relied on to support indigent care contributed to their financial difficulties. This finding is consistent with those in a recent national study of safety-net hospitals, which suggested that when these types of institutions are profitable, it was largely due to state and local government subsidies and Medicaid supplemental payments they receive.23 There are several limitations to our analysis worth noting. First, the presence of only 66 or 67 MA hospitals per year implied that only limited multivariate analysis was possible due to few degrees of freedom. We did, however, exploit the longitudinal nature of the data to control for hospital fixed effects and the potential effects of the US recession in some analyses. However, residual confounding due to individual hospital and localized market changes may still be present. Second, the data examined for MA were all at the hospital-level, and thus, we could not examine patient-level changes in patterns of care. It may be that more subtle changes in patient casemix were occurring across hospitals as patients gained insurance coverage, with some hospitals gaining or losing more profitable types of patients to other facilities. Nevertheless, our study provides new insights with implications for state policy makers and hospitals. Foremost among these is that hospital payer mix changes related to health reform cannot be viewed in a vacuum relative to other policy and environmental influences on hospitals. MA health reform occurred at a very complex point in time not only for the state but also nationally given the substantial economic downturn. State actions in MA to reduce UCP/HSN support and supplemental hospital support may have seemed reasonable in 2008 when one strictly considers the declining uninsured and uncompensated care in the state. However, a large array of additional factors, some of which were planned but others not, affected major safety-net providers. When taken together, these factors likely resulted in financial difficulties for these hospitals. This is an important consideration for the nation given provisions of the Affordable Care Act. Although safety-net hospitals nationwide will, like those in MA, experience reductions

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in the number of uninsured patients, this will occur at a time when traditional sources of support for safety-net hospitals, specifically Medicaid and Medicare Disproportionate Share Hospitals payments, will be reduced and redirected to subsidize individual insurance purchase.24,25 Of course, the primary objective of MA health reform, like the Affordable Care Act, is not to ensure the financial health of hospitals but rather to expand health coverage. However, even an expansive law such as implemented in MA left a number of residually uninsured individuals because they lacked access to an affordable plan, fell outside the purview of the law, or simply chose to face the tax penalty rather than obtain coverage. It is worth noting that each of the two major DSH hospitals continued to provide about 5,500 uninsured outpatient ED visits on average in 2010 and that other DSH hospitals in the state provided an annual average of around 2,700 uninsured outpatient ED visits, four years after the MA law was enacted. These service volumes are much smaller than pre-reform levels, but certainly represent a non-trivial amount of patient care. Thus, despite substantial insurance expansion, MA experienced a continuing need for safety-net care. In thinking about national health reform enacted through the Affordable Care Act, it is also important to realize that major safety-net institutions will need a sound financial base if they are to make the changes expected of them. Hospitals that incur losses in delivering care have several options to try to shore up their financial soundness, such as expanding net revenues from private payers, seeking additional government or private subsidies, or holding down costs of care. However, hospitals may also adopt cost saving strategies that reduce access to some patients who remain uninsured or are covered by public programs with low payments. They may also more slowly adopt new technologies or invest less in quality improvement programs. It also may be more difficult for these hospitals to meet new expectations to invest in health information technology, participate in the development of new care models such as patient-centered medical homes and Accountable Care Organizations, and manage financial risk through new payment models.26,27 Generally, safety-net institutions have limited access to capital resources, and thus, are more reliant on sources of operating revenue to support implementation and planning for new activities.28 Hospitals nationally should also draw important lessons from the experiences of MA hospitals during this study period. In the past, hospitals have focused attention on the financial pressures they experience due to caring for the uninsured in their communities. Payer mix improvements, though, may not necessarily translate into less financial pressure. Hospitals will continue to see uninsured patients and may have to deal with fewer dedicated resources than they had previously to offset the costs of these unsponsored patients. Financial pressures on the states and at the federal level, either due to the costs of insurance expansion or because of economic downturns, will increase interest in slowing health expenditure growth for those covered by public programs. Additionally, individuals who continue to be covered through private employers or who purchase insurance on their own in accordance with the Affordable Care Act will likely raise concern if insurance premiums grow too quickly, and call for government oversight and action. Hospitals must continue to be innovative in identifying ways to hold down costs of care so that can function effectively with the revenues they receive.

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Some institutions may believe that the need for these efforts will decline as they face less pressure to shift resources from more generous payers to cover unreimbursed costs for unsponsored or poorly compensated patients. However, this represents a narrow view on one set of changes triggered through health reform, namely decreasing uninsured, rather than the complex and interconnected array of changes that will be at work. Although, one cannot identify concrete strategies relevant to national health reform from our study given the uniqueness of MA and the period in which reform was implemented, our study does point to some specific areas of research that will be important as ACA is implemented. Analysis of patient-level as well as hospital-level data will be important to determine how patterns of care change and how this might affect the circumstances of hospitals. In addition, qualitative research focused on safety-net hospitals would be worthwhile to better understand the opportunities and challenges they face and how they respond to them as ACA is implemented. Finally, close monitoring of the financial circumstances of these hospitals is worthwhile to consider how ACA affects them. This will be particularly important so that institutions continuing to serve the residual uninsured are targeted with remaining Medicare and Medicaid DSH support that is not redirected to assist individuals in purchasing health insurance.

Notes 1.








Kenney GM, Long SK, Luque A. Health reform in Massachusetts cut the uninsurance rate among children in half. Health Aff (Millwood). 2010 Jun;29(6):1242–7. http:// dx.doi.org/10.1377/hlthaff.2010.0314; PMid:20530363 U.S. Census Bureau. Health Insurance Historical Tables, H1B Series. Washington, DC: U.S. Census Bureau, 2012. Available at: http://www.census.gov/hhes/www/hlthins /data/historical/HIB_tables.html. Walls CA, Rhodes KV, Kennedy JJ. The emergency department as usual source of medical care: estimates from the 1998 National Health Interview Survey. Acad Emerg Med. 2002 Nov;9(11): 1140–5. http://dx.doi.org/10.1111/j.1553-2712.2002.tb01568.x; PMid:12414462 Irvin CM, Fox JM, Smude B. Are there disparities in emergency care for uninsured, Medicaid, and privately insured patients? Acad Emerg Med. 2003 Nov;10(11): 1271–7. http://dx.doi.org/10.1111/j.1553-2712.2003.tb00612.x; PMid:14597504 Hall MA. Access to care provided by better safety-net systems for the uninsured: measuring and conceptualizing adequacy. Med Care Res Rev. 2011 Aug;68(4):441–61. Epub 2011 May 2. http://dx.doi.org/10.1177/1077558710394201; PMid:21536602 Cunningham P, Felland L, Stark L. Safety-net providers in some US communities have increasingly embraced coordinated care models. Health Aff (Millwood). 2012 Aug; 31(8):1698–707. http://dx.doi.org/10.1377/hlthaff.2011.1270; PMid:22869647 Hadley J, Holahan J, Coughlin T, et  al. Covering the uninsured in 2008: current costs, sources of payment, and incremental costs. Health Aff (Millwood). 2008 Sep– Oct;27(5): w399–415. Epub 2008 Aug 25. http://dx.doi.org/10.1377/hlthaff.27.5.w399; PMid:18725375 Holahan J, Bovbjerg R, Hadley H. Caring for the uninsured in Massachusetts: what does it cost, who pays and what would full coverage add to medical spending. Boston, MA: Report for the Blue Cross Blue Shield of Massachusetts Foundation, 2004.

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19. 20. 21. 22.



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The experiences of Massachusetts hospitals as statewide health insurance reform was implemented.

Hospitals treat many uninsured patients and shoulder substantial amounts of uncompensated care. Health reform as implemented in Massachusetts, then, w...
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