The Health Care Safety Net in a Post-Reform World

Chapter 9 The Declining Public Hospital Sector

200 Public hospitals have long served as the backbone of the health care safety net, caring for the poor, uninsured, and racial and ethnic minorities, as well as providing critical regional services. In major metropolitan areas, public hospitals provide more than 20 percent of emergency and 33 percent of outpatient visits, as well as 60 percent of burn and 36 percent of trauma care. Medicaid and uninsured patients account for more than 50 percent of all public hospital visits (NAPH 2009). In rural areas, they are major components of local health systems, representing nearly 40 percent of hospitals. Public hospitals have also traditionally provided extensive outpatient services, community public health programs, and culturally and linguistically appropriate care. Under health reform, there will continue to be a need for safety-net hospital services. It has been estimated that, following the implementation of health reform, 23 million Americans will still be uninsured and 16 million will be covered by Medicaid or the State Children’s Health Insurance Program, populations historically reliant on public hospitals (CBO 2010). In the wake of the 2008 recession, state and local governments have been under financial pressure, which has in turn threatened the financial stability of public hospitals. State and local budget crises have prompted large cutbacks in funding for many institutions while the number of uninsured and those covered by Medicaid have grown at record rates (Hartocollis 2010; KFF 2010; Skipp 2010; Sun and Mummolo 2010). Prior to the economic downturn, public hospitals were already battling financial and political pressures to survive in an increasingly cost-driven health care market, and many were closed or converted to private ownership The Declining Public Hospital Sector Chapter 9 Jack Needleman and Michelle Ko (Lewin and Altman 2000). When considering future changes in health care and implications for access to care, particularly for the most vulnerable Americans, it is important to understand the trends in the decline of the public hospitals that are major providers of safety-net care. In this chapter, we examine the shifts in US public hospital supply from 1983 to 2003. We focus on hospital closures and conversions to private ownership, and regional and rural-versusurban differences. We also examine the countertrend of development of new public hospitals. We describe the role of these institutions in their respective communities and augment the analysis of the trends with the discussion of individual cases. The Characteristics of Public Hospitals at the Beginning of the Period of Decline There were 5,894 community hospitals in the United States in 1980; 1,801 (31 percent) were public, 3,337 (56 percent) were nonprofit, and 756 (13 percent) were for-profit. By 2009 the number of community hospitals had declined by 15 percent to 5,008, largely the result of mergers and closures, with some offsetting development of new hospitals. The number of public hospitals, however, had declined by 39 percent to 1,092, in sharp contrast to the 13 percent decline in nonprofit hospitals and 32 percent increase in for-profits (based on author calculations from American Hospital Association Annual Survey of Hospitals, 1980 and 2009). For a detailed analysis of the decline in hospitals, we focus on the twentyyear period of 1983–2003, for which we have confirmed changes in ownership in the American Hospital Association (AHA) annual survey data. For these years, we have reviewed change of ownership data that would signal a hospital conversion from public to nonprofit or for-profit. Where the data reported to the AHA were anomalous (such as one year in a new ownership status, or ping-ponging back and forth for several years) we confirmed conversions using ownership data from the Medicare cost report, directly contacting the hospital, contacting state licensure officials, or reviewing web-based resources when a hospital had closed or could not confirm the date of ownership changes. We also focus on general medical and surgical hospitals. We have augmented the AHA annual survey data with county level data from the 1980, 1990, and 2000 censuses. In 1983 there were 5,671 general nonfederal hospitals, of which 1,691 were public, 3,224 nonprofit, and 756 for-profit (table 9.1). There were strong regional differences in numbers and the mix of ownership types, with the Northeast (New England and the Middle Atlantic) hospitals being overwhelming The Declining Public Hospital Sector 201 nonprofit...