the experiences of massachusetts hospitals as statewide health insurance reform was implemented

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

Th e Experiences of Massachusetts Hospitals as Statewide Health Insurance Reform

Was Implemented

Gloria J. Bazzoli, PhDJan 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 fi nancial 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 safetynet hospitals, which play a substantial role in serving the uninsured and Medicaid, had some initial easing of this burden but their fi nancial situation weakened through 2010. Th e U.S. economic recession and Mas-sachusetts budget pressures, which in part resulted from reform implementation, likely off set 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 fi nancial diffi culties.

Key words: Health reform, hospitals, uninsured, safety net.

The 2006 Massachusetts (MA) health reform law ushered in sweeping changes to health care delivery and fi nancing. Aft er these reforms were implemented, the

number of uninsured children dropped by almost one- half.1 Data from the U.S. Cen-sus 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- specifi c 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

ORIGINAL PAPER

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; gbazzoli@vcu .edu; (804) 828-5223. JAN CLEMENT is Professor and Director, Doctoral Program in Health Services Organization and Research, Department of Health Administration at VCU.

64 Experience of Massachusetts hospitals with insurance reform

inpatient services to uninsured patients, but some also arrange preventive, primary care and specialist services through their network of affi liated 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 benefi cial eff ect on the subset of hospitals in a community that are the major safetynet providers. In Mas-sachusetts, two hospitals are widely recognized as major safetynet hospitals: Boston Medical Center and Cambridge Health Alliance. Together, these hospitals had 6% of the state’s staff ed and set-up hospital beds in 2004 but accounted for 46% of statewide hospital uncompensated care costs in that year.9

Th e 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 fi nancial 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 eff ects of the US recession. We discuss the implica-tions of our fi ndings for MA policy makers and hospitals. Potential implications for the national implementation of the Aff ordable 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. Th ese expansions focused on children up to 300% of the federal poverty level (FPL) and certain low- income adults. Th is 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 eff ect in July 2007.10

Aft er the state’s insurance coverage expansions were implemented, MA made sub-stantial changes to funding sources that its hospitals traditionally relied upon to off set 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 (aft er assess-ments 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. Th e 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 safetynet hospitals were scaled back.12 A principal argument for making these changes was that hospitals no longer needed such extensive fi nancial support

65Bazzoli and Clement

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 fi rst year aft er the MA reform law was implemented.13 However, prior studies have not examined the net eff ect of expanded insurance coverage and subsequent payment limits on hospitals in the state. Our study addresses this gap in the literature.

Methods

Study data. Th e primary data for this study were detailed cost reports fi led by hospitals with the MA Department of Health Care Finance and Policy (DHCFP), specifi cally the DHCFP- 403 hospital cost report, for fi scal years 2004 to 2010. Hospitals are required to submit these reports annually, and they are desk- audited or fi eld- audited by the DHCFP. Th e 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. Th e AHRQ HCUP inpatient database dates back to 1990 and its emergency visit fi le began in 1999, and both have been used extensively in health services research. Additionally, we obtained AHRQ hospital- specifi c 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. Th ese fi les 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 fi nancial 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 identifi ed 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 fi nancial 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. Th e MA hospital reports contain service use data for other payers, such as worker’s compensation, CHAMPUS,


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. Th e AHRQ data noted above were used to con-struct 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 nonprofi t institutions, typically absorb these unreimbursed costs as a form of community benefi t.20 Th e DHCFP data contain total billed (gross) charges for each payer but, like other hospital fi nancial 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 off set these costs were measured as payments hospitals expected to receive from the payer sources noted above. Th is 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. Off setting revenues also included special supplements that the two main safetynet hospitals of Boston Medi-cal Center and Cambridge Health Alliance received from the state. Specifi cally, the state builds these into supplemental payments received by the two hospitals through Medicaid Disproportionate Share Hospital and upper payment limit programs to off set some of their costs for the uninsured.

To improve comparability across hospitals of diff erent size, we measured costs of care and off setting 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. Th is measure has advantages over set-up and staff ed 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 off setting revenue variable. All of our cost and revenue measures were converted to 2004 dollars using the CPI- Hospital Services infl ation index.21 We were unable to compare MA- specifi c data on these measures to hospitals in other states because these data are unique to the state of MA based on its required fi nancial reports.

Finally, we examined data on hospital profi tability across all operational activities and patient care delivered, which is captured through hospital operating margins. Th is measure allows us to assess whether any operating losses resulting from treating the uninsured and those in means- tested public programs are off set by gains generated by other patient types and other operating revenue.


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 diff ered in key economic variables prior to and aft er MA reform and also during the recession. Specifi cally, 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 unem-ployed did not diff er signifi cantly 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% aft er 2008 for MA and other Northeast region counties. Similarly, no statistically signifi cant diff erences 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 signifi cantly diff erent for the years before MA health reform but then post- reform, as one would expect, became signifi cantly lower in MA counties.

Comparison groups. We used MA- specifi c criteria to identify Disproportionate Share Hospitals (DSH) based on patient charges attributed to selected payers. Specifi -cally, 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 eff ects 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 safetynet hospitals identifi ed in an earlier study, which used a 20% threshold for the combined payer share of Medicaid, self- pay, Commonwealth Care, and HSN.22

We defi ned 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 identifi ed as DSH in that year, and 51were non- DSH. Th e two primary safetynet hospitals in the state – Boston Medical Center and Cambridge Health Alliance—were deemed “Major DSH hospitals” and the others “Other DSH hospitals”. Th is 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 repli-cate this criteria to distinguish DSH hospitals because we lacked comparable data on hospital payer mix. Th us 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


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 longitu-dinal MA data, allowing us to control for time invariant hospital fi xed eff ects and also provided some degree of control for the eff ects of the deep US recession that began in 2008. Specifi cally, 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 fi xed eff ects models. Each of these models included as explana-tory 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 fi nally, a 0/ 1 indicator for the recession period of 2008 to 2010. Rather than report these models, which have coeffi cients that on their own are hard to interpret, we used signifi cance tests of specifi c individual and linear combinations of coeffi cients to assess whether changes observed in the fi gures display-ing descriptive trend data were signifi cant.

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 non- emergency 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 non- DSH 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. Th e 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. Th e 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.


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 defi ned as Disproportionate Share Hospitals as defi ned based on MA criteria and hospital payer mix in 2004.


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 defi ned as Disproportionate Share Hospitals as defi ned based on MA criteria and hospital payer mix in 2004.


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 Emer-gency 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 off setting revenues for uninsured patients and those covered by means- tested public programs. Th e fi gure reports infl ation- 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 off setting revenues and by 2007, infl ation adjusted costs and infl ation adjusted revenues were basically equal. However, subsequently, a gap grew between costs and off setting revenues and increased from about $188,000 per occupied bed in 2008 to $215,000 in 2009. Th is gap diminished somewhat by 2010 to $121,000 per occupied bed.

Other DSH and non- DSH hospitals experienced consistently higher infl ation adjusted costs than infl ation adjusted off setting revenues in each study year. Th is was true in all study years without much change during health reform implementation or aft erwards. Th e 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 fi xed eff ects analysis examined a measure for the gap between costs of care and off setting revenues to assess changes over time and confi rmed the observations noted above (results of model available from lead author on request). For major DSH hospitals, the gap between costs and off setting revenues diminished signifi cantly during the health reform implementation period relative to the pre- reform period (p = .003) but then was not signifi cantly diff erent post- reform relative to pre- reform. Other DSH hospitals experienced no signifi cant change in unreimbursed costs in the implemen-tation or post- reform period relative to the pre- reform period. Non- DSH hospitals experienced no signifi cant change in unreimbursed costs during the implementation period but the fi xed eff ects analysis suggested a signifi cant increase in unreimbursed costs post- reform when compared to pre- reform.

Overall hospital fi nancial performance. Our fi nal analysis, in Figure 4, examines hospital operating margins. National and regional comparative data were only avail-able 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 diff erent. For all other hospital categories, we report median operating margins.

Th roughout 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


Figure 3. Costs of care and off setting revenue for uninsured and means-tested publicly insured patients: 2004–2010.a

aData for each year represents sum of costs or revenues (both infl ation 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


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 profi table for many years and the second major DSH hospital commonly experienced operating losses before MA health reform was implemented. Th e second major DSH hospital, however, nearly attained break- even in 2007 but losses returned in 2008 that met or exceeded pre- reform levels. Th e 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 fi xed eff ects 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). Aft er controlling for a recession period eff ect, the estimated models suggested no statistically signifi cant 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 signifi cantly 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 signifi cant change in operating margin

Figure 4. Operating margins of MA Hospitals by DSH status compared to all Northeast region and national acute care hospitals.a

aVertical 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.


during MA reform implementation relative to the pre- reform period but a decline in margin post- reform, aft er controlling for the recession period eff ect (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. Th is latter fi nding held even aft er controlling for the impact of the recessionary period of 2008 to 2010, and thus, suggests that state actions in MA to change supplemental pay-ment programs that the two institutions relied on to support indigent care contributed to their fi nancial diffi culties. Th is fi nding is consistent with those in a recent national study of safetynet hospitals, which suggested that when these types of institutions are profi table, it was largely due to state and local government subsidies and Medicaid supplemental payments they receive.23

Th ere 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 fi xed eff ects and the potential eff ects 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 profi table types of patients to other facilities.

Nevertheless, our study provides new insights with implications for state policy mak-ers 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 infl uences 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, aff ected major safetynet providers. When taken together, these factors likely resulted in fi nancial diffi culties for these hospitals. Th is is an important consideration for the nation given provisions of the Aff ordable Care Act. Although safetynet hospitals nationwide will, like those in MA, experience reductions


in the number of uninsured patients, this will occur at a time when traditional sources of support for safetynet hospitals, specifi cally Medicaid and Medicare Disproportion-ate 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 Aff ordable Care Act, is not to ensure the fi nancial 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 aff ordable plan, fell outside the purview of the law, or simply chose to face the tax penalty rather than obtain cover-age. 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 aft er the MA law was enacted. Th ese service volumes are much smaller than pre- reform levels, but certainly represent a non- trivial amount of patient care. Th us, despite substantial insurance expansion, MA experienced a continuing need for safetynet care.

In thinking about national health reform enacted through the Aff ordable Care Act, it is also important to realize that major safetynet institutions will need a sound fi nancial 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 fi nancial 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. Th ey may also more slowly adopt new technologies or invest less in quality improvement programs. It also may be more diffi cult for these hospitals to meet new expectations to invest in health information technology, partici-pate in the development of new care models such as patient- centered medical homes and Accountable Care Organizations, and manage fi nancial risk through new payment models.26,27 Generally, safetynet 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 fi nancial pressures they experience due to caring for the uninsured in their communities. Payer mix improvements, though, may not necessarily translate into less fi nancial pressure. Hospitals will continue to see uninsured patients and may have to deal with fewer dedicated resources than they had previously to off set 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 Aff ordable 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 eff ectively with the revenues they receive.


Some institutions may believe that the need for these eff orts 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 imple-mented, our study does point to some specifi c 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 aff ect the cir-cumstances of hospitals. In addition, qualitative research focused on safetynet 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 fi nancial circumstances of these hospitals is worthwhile to consider how ACA aff ects them. Th is 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.

Notes1. 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

2. 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.

3. Walls CA, Rhodes KV, Kennedy JJ. Th e 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

4. 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

5. Hall MA. Access to care provided by better safetynet 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

6. 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

7. 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

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Available at: http:// bluecrossmafoundation .org/ sites/ default/ fi les/ 041116RTCCostsCaringForUninsuredHolahan .pdf.

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the experiences of massachusetts hospitals as statewide health insurance reform was implemented

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