Viewpoint: Protect the safety net by designating essential hospitals

More than two decades ago, the Institute of Medicine called the nation's healthcare safety net "intact but endangered" and cited multiple factors contributing to its uncertain future, from a rising number of uninsured to a precarious fiscal environment.

While some relief followed, such as the expansion of Medicaid, little has changed in the 20-plus years since the IOM recommended a "targeted federal initiative" and dedicated funding for hospitals that care for uninsured and marginalized patients — a group the IOM highlighted but stopped short of fully defining.

Essential hospitals are the vanguard of that group, and they still face the uncertain future foreshadowed by the IOM. Due to their mission to care for low-income, uninsured and underinsured people, these hospitals struggle with the high and uncompensated costs of treating many complex patients. Essential hospitals depend heavily on Medicaid and Medicare, whose reimbursements typically fall short of care costs. With only about a quarter of their patients commercially insured, essential hospitals have limited opportunities to offset those losses and rely on patchwork public support to keep their doors open.

Because narrow — sometimes negative — margins and limited resources are status quo for essential hospitals, unanticipated financial hardships can quickly push them past the breaking point. We have seen this during the COVID-19 pandemic and the inflation that followed. When the pandemic began, essential hospitals not only started behind the pack financially but sustained the heaviest costs as they cared for communities disproportionately harmed by the virus. Making matters worse, initial federal aid to hospitals failed to account for these baked-in disadvantages, creating a funding imbalance that saw too few dollars directed to the safety-net providers that needed dollars most.

The safety net's troubles continue to this day. Essential hospitals still battle high labor and supply costs and other cost pressures that all but rob them of hope for a quick recovery from the pandemic. Stories from among our more than 300 member hospitals illustrate the problem: For example, tens of millions of dollars in shortfalls due to unbudgeted labor costs.

The pandemic underscored what we have long known about hospitals that form our healthcare safety net: They are unique for the patients they treat, the communities they serve — and the support they need. The IOM recognized this with its call for a targeted federal initiative to aid these providers.

We believe that initiative should be a formal federal designation of essential hospitals.

Designation must start with a definition. We first can turn to the characteristics essential hospitals share: foremost, their mission to serve low-income and other underrepresented people and advance health equity. They also provide level 1 trauma care and other specialized, lifesaving services, and they train large numbers of healthcare professionals. Further, essential hospitals fill an indispensable public health and emergency response role, and they operate large ambulatory networks to reach people where they are.

In crafting policy, we should favor available metrics that point to the defining characteristics of their mission and the people they serve: disproportionate patient percentage, deemed disproportionate share hospital status, and Medicare's uncompensated care payment factor. Designation also should allow for economic, demographic and other variations across states.

We have ample precedent for statutorily defining hospitals that share distinctive characteristics or serve specific populations or regions. Examples include sole community hospitals, critical access hospitals and prospective payment system-exempt cancer hospitals, all congressionally established designations with favorable reimbursement policies. For these designations and others, policymakers responded to a threat — closures of financially shaky rural hospitals, for example — and identified a need to stabilize certain types of providers to protect access to care.

It is past time we give essential hospitals that same recognition and protection — and, in turn, protect access to the high-quality care they provide for people who rely on the safety net.

About those people: Essential hospitals' patients are disproportionately people of color who live in communities with high rates of poverty, food insecurity, homelessness, and other social and economic factors that negatively impact health. Their communities are among those most susceptible to the damage climate change causes. They experience persistent health disparities that stem from racism and other systemic and structural barriers.

Beyond sustaining the essential hospitals on which these people and communities depend, federal designation can advance the cause of equity, dismantle barriers to care and improve lives. Designation is an investment we can and should make today — and one that will bring lasting returns in better health and more equitable care.

Bruce Siegel, MD, MPH, is president and CEO of America's Essential Hospitals, which represents more than 300 U.S. hospitals and health systems that provide safety-net care.

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