Report: Safety-Net Hospitals Need Increased Medicaid Rates

Because safety-net hospitals play a critical role in providing care to vulnerable populations, they should receive higher Medicaid reimbursements to sustain their financial operations and stimulate high performance, according to a report from The Commonwealth Fund.

The report proposed a three-part strategy to reduce the healthcare divide among vulnerable populations, which typically include low-income families, families without insurance and racial and ethnic minorities. The three parts of the strategy include ensuring health coverage provides sufficient access and financial protection to those populations, coordinating care delivery with all community resources available and strengthening the safety-net system that directly serves these patients, according to the report.

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Safety-net hospitals rely heavily on large numbers of low-income patients, which usually involves a heavy reliance on Medicaid payments and disproportionate share hospital payments. Under the Patient Protection and Affordable Care Act, DSH payments will be phased out, and more people will be eligible for Medicaid, which could financially cripple many safety-net hospitals.

The report recommended three principles to help these safety-net hospitals:

•    In states where Medicaid hospital reimbursement rates are below the normal cost of care, states should increase those Medicaid rates paid to the hospitals with the highest share of Medicaid patients and lowest share of privately insured patients.

•    States should also consider the relationship between inpatient and outpatient services and incentivize the delivery care be held in the most "appropriate and efficient setting" across hospitals and other healthcare providers.

•    States should increase reimbursement rates for services at safety-net hospitals where there is not enough capacity to meet the needs of all Medicaid beneficiaries.

To read the entire report from The Commonwealth Fund, click here (pdf).

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