Serving the Uninsured: Safety-Net Hospitals, 2003

HCUP Fact Book No. 8

Executive Summary

According to recent AHRQ research, about 25 percent of Americans under age 65 lack health insurance at some point during the year. The hospitals in a community collectively serve as an important element of the safety net to treat people who are uninsured and cannot afford to pay the full cost. In a 2000 report, the Institute of Medicine (IOM) stated that the safety net was "intact but endangered" and cautioned that many of the institutions caring for the uninsured, Medicaid patients, and other vulnerable populations face uncertain financial futures. Therefore the IOM recommended improved monitoring of the structure, capacity, and financial stability of the safety net.

Although all hospitals supply services to the uninsured, wide variation exists among hospitals in the proportion of services provided to the uninsured. For this Fact Book, hospitals were separated into three groups by the degree of their commitment of inpatient stays (hospital discharges) for the uninsured:

• Safety-net hospitals. The 10 percent of hospitals with the highest proportion of hospital stays for the uninsured are termed "safety-net hospitals" in this report. In these hospitals, between 9 and 50 percent of the hospital stays are for the uninsured.
• Secondary safety-net hospitals. Another 20 percent of hospitals have a smaller, but still substantial percentage of stays that are uninsured, and thus provide an important "secondary" safety-net. In these hospitals, between 5 and 9 percent of the hospital stays are for the uninsured.
• Non-safety-net hospitals. The remaining 70 percent of hospitals are non-safety-net hospitals. Between 0 and 5 percent of their hospital stays are for the uninsured.

This Fact Book provides a profile of safety-net hospitals, as defined by the proportion of their hospital stays that are for the uninsured. What do we know about these safety-net hospitals, and what is the impact of their effort on patients and on the hospitals themselves? An analysis of data from the 2003 Healthcare Cost and Utilization Project (HCUP) Nationwide Inpatient Sample (NIS), combined with information from the American Hospital Association Annual Survey Database and Medicare Hospital Cost Reports, provides a telling profile:

Safety-net Hospitals Provide a Critical Point of Access for the Uninsured

• Although they represent only a tenth of all hospitals, safety-net hospitals care for almost one-third of the hospital stays for the uninsured.
• Secondary safety-net hospitals care for another 24 percent of hospital stays for the uninsured.

Safety-net Hospitals Span All Locations, Sizes, and Ownership Groups

• About 56 percent are in urban areas and 44 percent are in rural areas.
• Most (66 percent) are in the South.
• One in 5 is a teaching hospital.
• Over half are small hospitals, maintaining fewer than 100 beds.
• They include all types of ownership: 43 percent are publicly owned, 45 percent are non-profit, and 12 percent are investor-owned, for-profit.

Safety-Net Hospitals Are More Likely to be Public Hospitals

• Publicly owned hospitals represent 43 percent of the safety-net hospitals, but only 19 percent of non-safety-net hospitals.
• Non-profit hospitals make up 45 percent of safety-net hospitals and 66 percent of non-safety-net hospitals.
• Investor-owned hospitals make up 12 percent of the safety-net hospitals and 16 percent of the non-safety-net hospitals.
• While safety-net hospitals in both rural and urban areas are more likely than non-safety-net hospitals to be publicly owned, safety-net hospitals in rural areas are more likely than safety-net hospitals in urban areas to be publicly owned. In rural areas, 58 percent of safety-net hospitals are public hospitals, whereas in urban areas, the percentage drops to 31.

Safety-Net Hospitals Are Financially Vulnerable

• Compared with non-safety-net hospitals, safety-net hospitals have substantially more Medicaid patients and fewer privately insured and Medicare patients. This patient mix makes it more difficult for the safety-net hospitals to cross-subsidize care for the uninsured.
• Safety-net hospitals have a -3.0 percent median patient revenue margin, compared with -1.1 percent for non-safety-net hospitals and -1.5 percent for secondary safety-net hospitals.
• After subsidies and government budget allocations are added to net patient revenue, safety-net hospitals have a median total income margin of about 2.4 percent. This is slightly more than the median total income margin of secondary safety-net hospitals (2.1 percent), but still lower than non-safety-net hospitals (3.0 percent).
• Over a third (36 percent) of safety-net hospitals experienced negative total income margins, despite a median total income margin of 2.4 percent. This was more than the percentage for non-safety-net hospitals (28 percent) and slightly more than that for secondary safety-net hospitals (32 percent).

Public Safety-Net Hospitals Fare Worse Financially Than Other Safety-Net Hospitals

• In terms of patient revenue margin, public safety-net hospitals fared much worse than other hospitals; they had a -6.7 percent margin compared to -0.8 percent for non-profits and 2.2 percent for investor-owned safety-net hospitals.
• Public safety-net hospitals had a lower median total income margin (1.7 percent) than non-profit (2.6 percent) and investor-owned (2.5 percent) safety-net hospitals.
• One third (34 percent) of the public safety-net hospitals experienced a negative total income margin, which was similar to the proportion for the non-profit (37 percent) and investor-owned (36 percent) safety-net hospitals.
• Public safety-net hospitals have a greater proportion (81 percent) of their uninsured patients who are seen for non- obstetrical reasons, as compared to non-profit (75 percent) and investor-owned (61 percent) safety-net hospitals. Non-obstetrical treatment tends to be more costly than other categories of treatment.

Rural Safety-Net Hospitals Are Especially Vulnerable

• After subsidies and government budget allocations are added to net patient revenue, rural safety-net hospitals have a median total income margin five times lower than urban safety-net hospitals: 0.5 percent compared to 2.5 percent.

Financial Status of Teaching Safety-Net Hospitals is Mixed

• Teaching safety-net hospitals have a lower total income margin than non-teaching safety-net hospitals: 1.2 percent versus 2.5 percent.
• The percent of hospitals with negative total income margins was similar for teaching and non-teaching hospitals.

Safety-Net Hospitals Admit Fewer patients for Specialized Surgery and More for Alcohol and Mental health Services

• Patients of safety-net hospitals have the same types of medical and surgical conditions as patients of non-safety-net hospitals in four out of five broad categories of conditions (based on groupings of diagnosis related groups). However, safety-net hospitals are somewhat less likely to see patients for special surgical needs.
• The top 10 most common reasons for admission (principal diagnoses) to safety-net hospitals and secondary safety-net hospitals include 1 mental health condition (depression or bipolar disorder) and 1 respiratory condition (asthma) not included in the top 10 for non-safety-net hospitals.
• Alcohol abuse is among the top 10 coexisting conditions (comorbidities) for patients seen in safety-net hospitals. In contrast, it is not among the top 10 comorbidities for secondary safety-net or non-safety-net hospitals.

Safety-Net Hospitals Have Patients with Resource needs Similar to Those of Patients in Non-Safety-Net Hospitals

• A hospital's casemix index is a measure of the average expected resources (costs) needed to care for the mix of patients that it treats. There are no sizable differences between safety-net and non-safetynet hospitals in average casemix.
• The average length of stay for safety-net hospitals is similar to that of non-safety-net hospitals.

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Foreword

The mission of the Agency for Healthcare Research and Quality (AHRQ) is to improve the quality, safety, efficiency, and effectiveness of health care for all Americans. To help fulfill this mission, AHRQ develops a number of databases, including the powerful Healthcare Cost and Utilization Project (HCUP). HCUP is a Federal-State-Industry partnership designed to build a standardized, multi-State health data system; HCUP features databases, software tools, and statistical reports to inform policymakers, health system leaders, and researchers.

For data to be useful, they must be disseminated in a timely, accessible manner. To meet this objective, AHRQ launched HCUPnet, an interactive, Internet-based tool for identifying, tracking, analyzing, and comparing statistics on hospital utilization, outcomes, and charges (http://www.hcupnet.ahrq.gov/). Menu-driven HCUPnet guides users in tailoring specific queries about hospital care online; with a click of a button, users receive answers within seconds.

To make HCUP data even more accessible, AHRQ disseminates HCUP Statistical Briefs, an online publication series that presents simple, descriptive statistics on a variety of specific, focused topics (http://www.hcup-us.ahrq.gov/reports/statbriefs.jsp). Statistical Briefs are made available online regularly throughout the year and have covered topics such as hospitalizations among the uninsured, the national bill for hospital care by payer, and hospitalizations related to childbirth.

In addition, AHRQ produces the HCUP Fact Books to highlight statistics about hospital care in the United States in an easy-to-use, readily accessible format. Each Fact Book provides national information about specific aspects of hospital care—the single largest component of our health care dollar. These national estimates are benchmarks against which States could compare their own data. Previous Fact Books provided overviews on hospital stays and procedures; care for women, children, and adolescents; and preventable hospitalizations.

This Fact Book presents a detailed examination of hospitals that treat a disproportionate share of uninsured patients. We refer to these hospitals as "safety-net" hospitals because they typically are the only source of health care for millions of Americans who lack health insurance. The Fact Book includes an in-depth look at the patients being served by these hospitals and the financial status of safety-net hospitals. Other recent AHRQ initiatives related to the safety-net are described in the Appendix.

We invite you to tell us how you are using this Fact Book or other HCUP data and tools, and to share suggestions on how HCUP products might be enhanced to further meet your needs. Please E-mail us at hcup@ahrq.gov or send a letter to the address below.

Irene Fraser, Ph.D.
Director
Center for Delivery, Organization, and Markets
Agency for Healthcare Research and Quality
540 Gaither Road
Rockville, MD 20850

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Contributors

HCUP is based on data collected by individual State Partners (including State government agencies, hospital associations, and private organizations). These organizations provide the data to AHRQ where the data are converted to uniform data products. Without the following State Partner organizations, the Healthcare Cost and Utilization Project and this Fact Book would not be possible:

Arizona Department of Health Services
California Office of Statewide Health Planning & Development
Colorado Health & Hospital Association
Connecticut Hospital Association (Chime, Inc.)
Florida Agency for Health Care Administration
Georgia An Association of Hospitals and Health Systems (GHA)
Hawaii Health Information Corporation
Illinois Department of Public Health
Indiana Hospital & Health Association
Iowa Hospital Association
Kansas Hospital Association
Kentucky Department for Public Health
Maine Health Data Organization
Maryland Health Services Cost Review Commission
Massachusetts Division of Health Care Finance and Policy
Michigan Health & Hospital Association
Minnesota Hospital Association
Missouri Hospital Industry Data Institute
Nebraska Hospital Association
New Hampshire Department of Health & Human Services
New Jersey Department of Health & Senior Services
New York State Department of Health
North Carolina Department of Health and Human Services
Nevada Department of Human Resources
Ohio Hospital Association
Oregon Association of Hospitals & Health Systems and Office for Oregon Health Policy & Research
Pennsylvania Health Care Cost Containment Council
Rhode Island Department of Health
South Carolina State Budget & Control Board
South Dakota Association of Healthcare Organizations
Tennessee Hospital Association
Texas Department of State Health Services
Utah Department of Health
Vermont Association of Hospitals and Health Systems
Virginia Health Information
Washington State Department of Health
West Virginia Health Care Authority
Wisconsin Department of Health & Family Services

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Introduction

Recently published AHRQ research has shown that about 25 percent of Americans under age 65 lack health insurance at some point during the year.¹ Even though most uninsured people are in working families, low incomes put timely access to many health care services beyond their means.² Compared to individuals with insurance, people without health insurance are more likely to lack a usual source of care, more likely to use emergency departments, and less likely to use primary care services.² They also tend to be sicker when admitted for care.^3,4 Because most uninsured patients have limited ability to pay, the institutions that care for them are also vulnerable.² Traditionally, a patchwork of hospitals, community health centers, local health departments, and other providers willing to provide free or reduced-fee services have provided a "safety net" for the uninsured.^2,5-7

As the number of uninsured grows, the availability of a strong safety net becomes both more vital and more difficult. In 2000, the Institute of Medicine (IOM) reported that the U.S. health care safety net is "intact but endangered." The report cautioned that many of the institutions providing care to the uninsured, to those with Medicaid, and to other at-risk patients face uncertain financial futures, especially because of ever-changing financial, economic, and social environments. The IOM called for improved monitoring of the structure, capacity, and financial stability of the safety net to meet the health care needs of the uninsured and other vulnerable populations.² AHRQ has responded to this challenge through developing this Fact Book and several initiatives (go to Appendix).

This Fact Book focuses on hospitals, one vital part of the health care safety net. In 2004 alone, hospitals provided $27.4 billion in uncompensated care (i.e., care that is not directly reimbursed).8 For reasons of geography, mission, or a mix of factors, some hospitals have few uninsured patients. At the other extreme are hospitals that care for a high proportion of uninsured patients.

Although many definitions of "safety net" have been applied to hospitals, this analysis focuses only on care for the uninsured
(rather than uninsured plus Medicaid) and the uninsured proportion of patients cared for by hospitals. Discharges for which the expected primary payer was "self-pay" or "no charge" are categorized as "uninsured." Detailed definitions can be found in the Methods section.

Nearly one-third of all uninsured patients are cared for by 10 percent of hospitals. Some of these hospitals are large, others are small, but all treat a disproportionately high share of the uninsured; therefore, these institutions are the core of the hospital "safety net." This Fact Book provides a profile of these core safety-net hospitals: where and what they are, the kind of care they provide, and their financial status. The information is based on discharge-level data from the 2003 Healthcare Cost and Utilization Project (HCUP) Nationwide Inpatient Sample, supplemented with data from the 2003 American Hospital Association Annual Survey Database. This combination of data—data from nearly 8 million discharges from nearly 1,000 hospitals—yields a unique and comprehensive picture of safety-net hospitals in the United States. In addition, information from Medicare Hospital Cost Reports is used for financial comparisons of facilities.

This Fact Book examines safety-net hospitals in three unique ways by analyzing:

1. Hospital structural and geographic characteristics.
2. Hospital financial status.
3. Patient clinical characteristics.

The following definitions are used in this report:

• Safety-net hospitals. The 10 percent of hospitals with the highest proportion of hospital stays (discharges) for the uninsured are "safety-net hospitals" in this report. In these hospitals, between 8.7 and 49.6 percent of the hospital stays are for the uninsured. This definition differs from other research that utilized only financial data on uncompensated care levels to define safety-net hospitals. This definition is discussed further in the Methods section.
• Secondary safety-net hospitals. Another 20 percent of hospitals have a smaller, but still substantial percentage of stays that are uninsured, and thus provide an important "secondary" safety net. In these hospitals, between 5.2 and 8.7 percent of the hospital stays are for the uninsured.
• Non-safety-net hospitals. The remaining 70 percent of hospitals are non-safety-net hospitals. Between 0.0 and 5.2 percent of their hospital stays are for the uninsured.

Overview: Safety-net Hospitals Provide a Critical Point of Access for the Uninsured

• The uninsured represented 5 percent (1.8 million) of 38 million discharges from hospitals in the United States in 2003.
• Even though safety-net hospitals represent only 10 percent of all U.S. community hospitals, they were responsible for nearly one-third of the uninsured discharges in 2003.
• The secondary safety-net hospitals care for another 24 percent of hospital stays for the uninsured.

Select for Figure 1 (8 KB), Hospital Stays by Payer Mix.

Select for Figure 2 (8 KB), Type of Hospital and Proportion of All Community Hospitals, and Share of Uninsured Discharges.

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