The concept of a health care safety net conjures up the image of a tightly woven fabric of federal, state, and local programs stretched across the nation ready to catch those who slip through the health insurance system. As has already been cited in the opening chapter of this study, America's safety net is neither secure nor uniform. Rather, it varies greatly from state to state and from community to community, depending on the number of uninsured people, the local health care market, the breadth and depth of Medicaid and other programs directed at the poor and uninsured populations, as well as the general political and economic environment (Baxter and Mechanic, 1997). These variations notwithstanding, most communities can identify a set of hospitals and clinics that by mandate or mission care for a proportionately greater share of poor and uninsured people. Even within the new environment of choice and competition, these core safety net providers continue to be relied upon to play a critical role in providing access to health care for those who fall outside the market, primarily members of the nation's poorest and most disadvantaged groups. A precise measure of the total share of care to the poor and uninsured populations delivered by safety net providers is difficult to come by, given the safety net's variability across communities, the lack of adequate and comparable data, as well as the lack of a consistent definition of the “health care safety net.” Estimates show, however, that although core safety net providers such as community health centers (CHCs) and public hospitals provide a relatively small share of care to the poor and uninsured, that share is disproportionate to that provided by other health care providers. For example, 41 percent of federally qualified health center (FQHC) patients are uninsured, 33 percent are on Medicaid, 86 percent are low income, and 64 percent are people of color (Bureau of Primary Health Care, 1998). For outpatient clinics that are members of the National Association of Public Hospitals and Health Systems (NAPH),1 42 percent of care is to self-paying patients or patients requesting charity care and 30 percent is to Medicaid patients (National Association of Public Hospitals and Health Systems, 1999). From 1990 to 1998, FQHCs saw a 60 percent increase in the number of uninsured patients that they treated (Bureau of Primary Health Care, 1990, 1998).2 As part of their unique role and mission, core safety net providers offer a combination of comprehensive medical and enabling or “wraparound” services (e.g., language interpretation, transportation, outreach, and nutrition and social support services) specifically targeted to the needs of the vulnerable populations. These services rarely generate sufficient revenues to cover their costs and are thus less likely to be provided by others in the community at large. Together with their commitment to the care for the poor and uninsured, core safety net hospitals and health systems offer critical highly specialized services such as trauma care, burn care, and neonatal care to anyone in their communities. For example, in 1997, NAPH members represented 17 percent of hospital beds in the markets but provided more than 25 percent of neonatal intensive care beds, 66 percent of burn care beds, 33 percent of pediatric intensive care beds, 45 percent of Level 1 trauma centers, and 24 percent of emergency department visits (National Association of Public Hospitals and Health Systems, 1999). In addition, major public teaching hospitals train large numbers of physicians and other health professionals. In 1997, for example, NAPH member hospitals trained almost 16,000 residents (National Association of Public Hospitals and Health Systems, 1999). Another major characteristic of core safety net providers is their negligible ability to shift costs, given their payer and patient mix. Cost shifting has, until recently, been a primary vehicle used by non-core safety net providers as a means of subsidizing care for the uninsured population (Cunningham et al., 1999; Davis et al., 1999). However, core safety net providers tend to have a small privately insured patient population, and unlike their non-core safety net counterparts, these providers must rely primarily on federal, state, and local grant funds and other forms of direct-subsidy payments to provide care for the poor (e.g., charitable contributions and donations) (Davis et al., 1999; Rosenbaum, 1999). This inability to shift costs for uncompensated care onto private insurance revenues has become an even more significant problem as revenues from Medicaid, the primary source of third-party financing for the core safety net providers, are restricted. Medicaid is a central rather than marginal third-party payer for the core safety net (Rosenbaum, 1999). As a result, if future Medicaid revenues decline (whether because of a drop in the rate of coverage among the patient population or a drop in payment levels for the patient population), core safety net providers must effectively absorb this loss through the use of revenues and services intended to provide care for those without the ability to pay. Moreover, unlike private practitioners, core safety net providers cannot pass on their revenue shortfalls in the form of patient cost sharing. Not only do the patients of core safety net providers have little or no ability to pay, but the legal or mission-based obligations of the safety net providers prevent this reallocation of financial responsibilities. Two Medicaid compensation systems—the disproportionate share hospital (DSH) payment program in the case of hospitals, and the FQHC program in the case of federally funded health centers and certain other entities—have in the past yielded Medicaid compensation levels for the core safety net that help avoid shifting costs by use of grants and subsidies intended to provide care for the uninsured population. For example, in the case of health centers, the FQHC payment structure has contributed to closer parity between health centers' Medicaid patients and their Medicaid revenues (Figure 2.1). To the extent that these payment arrangements are eliminated or reduced, core safety net providers necessarily will confront the implications of their eroding capacity to treat uninsured individuals (Felt-Lisk et al., 1997). Against this background, this chapter provides a description of the core safety net providers and other providers in the safety net system including their patient and payer profiles, their unique structural characteristics, missions, and core competencies, and how the structures and organizations of safety net systems vary across the country. Poor people who are uninsured, are of minority and immigrant status, live in geographically or economically disadvantaged communities, or have a broad range of social, demographic, and poverty-related health problems must rely disproportionately on the core safety net for their health care (Box 2.1). For some, the primary barrier is a lack of insurance coverage. In recent years the number of uninsured individuals has grown because the cost of employment-based health insurance has become unaffordable for many low-income people and because fewer people are enrolled in Medicaid (Kronick and Gilmer, 1999). Many low-income individuals (especially Medicaid beneficiaries and low-income workers with unstable employment) move on and off of insurance. Almost two-thirds of new Medicaid enrollees lose their coverage with a year and many go on to prolonged spells without insurance (Carrasquillo et al., 1998).  The Core Safety Net Serves a Wide Range of Vulnerable Populations. Uninsured and underinsured – Working poor whose employers do not offer insurance For those enrolled in Medicaid, traditionally low levels of payments to providers of health care resulted in limited and skewed provider participation, forcing many low-income patients to seek episodic care from emergency departments and hospital clinics. Medicaid coverage is often severely limited for some services such as pharmaceuticals, mental health treatment, and substance abuse treatment. Still other populations have special needs or circumstances that can create impediments to care, such as homelessness or complex health problems, like mental illness or human immunodeficiency virus (HIV) infection/AIDS (see Chapter 6 for an expanded discussion of populations with special needs). Insurance coverage alone is often inadequate to ensure access for these populations who may require outreach and access to specialists or other support programs to meet their special needs. Core safety net providers offer these populations a combination of essential health and social services that go beyond those provided in the commercial insurance model. Many core safety net providers have tailored their services to meet the needs of such medically underserved populations as minority communities and non-English-speaking individuals, groups that are more likely to lack insurance coverage. Using data from the 1997 Current Population Survey and controlling for poverty and employment status, a study by The Commonwealth Fund indicated that adult minorities ages 18–64 are more likely than their white counterparts to be uninsured, suggesting that reliance on the private health insurance market may not result in substantial improvements in coverage rates for minorities (Hall et al., 1999). This means that there will continue to be a disproportionate number of minority individuals who depend on the safety net for care. A study that compared urban safety net hospitals and non-safety net hospitals in the same market areas showed dramatic concentrations of African-American and Hispanic patients at safety net hospitals relative to the concentrations at non-safety net hospitals in the market area (Gaskin, 1996) (Figure 2.2). Among public hospitals in New York City, minority patients accounted for 90 percent of outpatient visits and 88 percent of admissions in 1995 (Siegel, 1996). Similarly, nearly two-thirds of all FQHC patients in 1998 were minorities, more than 85 percent had incomes less than 200 percent of the federal poverty level and 41 percent were uninsured (Figure 2.3). More than 18 percent of the 8.3 million FQHC users in 1997 required translation services; 556 of the 671 FQHCs provided translation services either directly or through a vendor (Lefkowitz, 1999). Local health departments also serve large numbers of uninsured patients, many of whom are seeking specialized services such as treatment for HIV infection/AIDS, sexually transmitted diseases (STDs), or substance abuse. Among 504 local health departments queried in a national survey conducted in March 1999, health officers estimated that one-half of urban health department clients and one-third of clients at health departments serving smaller jurisdictions were uninsured in 1998 (Shields et al., 1999). Nearly half of urban health departments and about a third of smaller health departments reported an increase in the number of uninsured clients served between January 1998 and January 1999, with the greatest increases seen among women and children. In addition, more than 71 million Americans live in medically underserved areas (MUAs) of the country, primarily inner-city and rural areas with minimal or no economic base and very limited access to providers. According to Darnell and colleagues (1995), more than half of these people are located in urban areas and a disproportionate number are poor African-American and Hispanic individuals. In contrast, people in rural communities tend to be white but are also disproportionately poor and are underserved due to the double jeopardy created by poverty and sparse population (Kindig, 1994; Rosenbaum et al., 1998). Although these groups are highly dependent on core safety net providers, the public hospitals that serve rural communities frequently are located in distant metropolitan areas. CHCs are not evenly distributed in rural communities. Thus, vulnerable people in rural settings rely more heavily on the commitment of local providers, such as private physician practices, to maintain an open-door policy regardless of the patient's ability to pay (Ricketts et al., 1998). Core safety net providers are often referred to as “essential community providers” or “providers of last resort.” As part of President Bill Clinton's health care reform initiative, the U.S. Congress in 1993 defined essential community providers as providers of health services located in federally designated MUAs or in designated health professional shortage areas or providers that are serving medically underserved populations. Such designated providers were legally obligated to provide services to the poor or were, by law, located in areas with high levels of need for health care services. Other providers who were located in underserved areas for reasons unrelated to a legal obligation (e.g., a mission to serve the poor) were not entitled to automatic designation as essential community providers. Thus, the definition made a major distinction between voluntary uncompensated care and care provided as part of a legal obligation. The Institute of Medicine's (IOM) committee's definitions of the core safety net and the safety net system have incorporated those mission-driven providers that do not meet the definition of essential community provider but that nonetheless care for a substantial share of the poor and uninsured population. The individuals who use core safety net providers have complex needs that require both medical and enabling services, the funding for which comes from numerous sources. Over the years, Medicaid has become an increasingly important revenue source for these providers, accounting for about a third of revenues. In fact, in 1997 payments from Medicaid accounted for 33 percent of revenues for NAPH member public hospitals and 35 percent of revenues for FQHCs, whereas commercial insurers were only 10 and 9 percent, respectively (Health Resources and Services Administration, 1999; National Association of Public Hospitals and Health Systems, 1999). Thus, core safety net providers also must piece together a number of small grants from a range of federal, state, and local public and private sources to help support their missions. To highlight the patchwork quilt of safety net financing, Boxes 2.2 and 2.3 illustrate the complex funding streams for a major urban safety net provider (Denver Health, Denver, Colorado) and a rural safety-net system (Rural Health Group, Inc., Jackson, North Carolina). Funding Sources for a Major Urban Safety Net Health System, Denver Health. Federal Medicaid (Title XIX) Funding Sources for a Rural Safety Net System, Rural Health Group, Inc. Federal Medicaid (Title XIX) There are an estimated 1,300 public hospitals in the United States (Legnini et al., 1999). Public hospitals' tradition of providing free or uncompensated care goes back more than 200 years to the early public and nonprofit charity hospitals that cared for the poorest individuals at a time when most wealthier individuals were cared for in their homes. Many functioned as charity hospitals in the nation's urban areas. These charity hospitals were outgrowths of what were once the old almshouses for the poor and provided the vulnerable citizens of cities and nearby communities with outpatient clinics, emergency services, hospitalization, and, often, dental care (Gage, 1998). Until the creation of Medicare and Medicaid in 1965, these public hospitals represented virtually the only treatment alternative available to most low-income patients. Today, large public hospitals tend to be located in urban centers and primarily serve Medicaid beneficiaries and uninsured patients. Initially, public hospitals were owned and operated by state or local governments or public authorities. In recent years many public hospitals have closed or changed their governance to gain greater autonomy and flexibility. Some have been acquired by for-profit and not-for-profit hospital systems that may alter the roles public hospitals have been playing (see Chapter 3). In an examination of the sources of revenue for public versus private hospitals (Table 2.1), Rosenbaum (1999) notes several key differences:
Not only is the proportion of self-paying patients much higher at public hospitals than at private hospitals but also there appears to be a big difference between self-paying patients at a private hospital and at a public hospital (Rosenbaum, 1999). At public facilities, self-paying patients tend to be poor and uninsured and, while they may attempt to pay part of their bill, most of the cost is absorbed by the hospital as bad debt. In contrast, at private hospitals, self-paying patients can include consumers who choose to pay for services not covered by their insurance plans. A 1997 survey of 69 NAPH member hospitals indicated that these facilities provided more than 23 percent of the nation's uncompensated hospital care (measured as the sum of bad debt and charity care3) that year (National Association of Public Hospitals and Health Systems, 1999). These costs represented 26 percent of total costs at these hospitals, compared to 6 percent of total costs at the average hospital in the country. In addition, only 29 percent of these hospitals' patients had a source of insurance other than Medicaid. Therefore the ability of these urban public hospitals to defray the costs of treating vulnerable populations is severely limited. Public hospitals must rely on state and local government subsidies, Medicaid DSH payments, and other funds to partially offset the cost of uncompensated care. Among NAPH member hospitals in 1997, 69 percent of uncompensated care was financed by local subsidies, with an additional 22 percent financed by Medicaid DSH payments (National Association of Public Hospitals and Health Systems, 1999). These funds also underwrite the costs of providing such enabling services as translators, child care, and transportation. In another study, the data reported by hospitals in smaller cities reveal that safety net hospitals recorded 30 percent more inpatient admissions and 39 percent more patient days than their private counterparts. Their critical role in the safety net extends to outpatient care as well, where their provision of services increased by 17.6 percent from 1988 to 1995 (National Association of Public Hospitals and Health Systems, 1997). NAPH recently conducted an in-depth descriptive study of nine member hospital systems that included data from 25 hospitals to better understand who the uninsured are at these hospitals (Gage et al., 1998). The survey compared self-paying patients (largely indigent uninsured) with all other patients on the basis of age, sex, race, income, and service utilization. Among the sample,4 self-paying patients represented 40 percent of total discharges, 51 percent of total outpatient visits, and 63 percent of emergency department visits in 1996. These proportions are higher than those for the general NAPH member hospitals. Nearly 85 percent of all patients had family incomes below 150 percent of the federal poverty level. The typical uninsured patient was male (51 percent) and adult, aged 19 to 64 (78 percent). In contrast, only 59 percent of insured patients were between the ages of 19 and 64 and the majority (56 percent) were female. In the absence of national data, this targeted survey provides some useful insights into who seeks care at safety net hospitals around the nation. Community health centers and freestanding clinics provide primary and preventative health services and tend to be located in communities whose residents have lower incomes, lack health insurance, and have less access to health care services. Some of these centers qualify for federal funds, whereas others primarily rely on state and local government subsidies to support their missions. Many community health centers receive federal Section 330 grant funds under the Public Health Service Act.5 These community-based providers are also commonly referred to as FQHCs because they are qualified to receive cost-based reimbursement under Medicaid and Medicare law (see Chapter 3 for a discussion of Medicaid cost-based reimbursement). FQHC status is also extended to Native American outpatient clinics operating under Section 638 of the American Indian Self Determination Act. To be designated an FQHC, a clinic must
In 1998, 698 FQHCs served a total of 8.7 million patients and furnished health care in all states, the District of Columbia, and the Commonwealth and Trust Territories (Bureau of Primary Health Care, 1998). The median number of health centers in a state was nine. FQHCs are not distributed evenly across the nation and range from 1 in Wyoming to 46 in California. The number of FQHCs does not accurately reflect the actual scope of the program. In 1998, these centers reported approximately 3,000 service sites. The median number of service sites per grantee was three (Bureau of Primary Health Care, HRSA, unpublished Uniform Data System data, 1999). Although FQHCs are divided almost equally between urban and rural locations, the majority of their patients reside in urban areas, mostly inner cities. All health centers provide general medical care, family planning services, outreach, social services, and immunizations to their clients; 60 percent also provide restorative dental care. In addition to the usual primary care services, migrant health centers provide special services in accident prevention and infectious and parasitic disease screening and control. Although the sizes of FQHCs vary nationwide, the average health center consists of six staff physicians, eight nurses, and three nurse practitioners or physician's assistants. Most FQHCs also employ several case managers, education specialists, and pharmacy personnel (Dievler and Giovannini, 1998). Looking at FQHC patients by insurance status in 1998 shows that the great majority of patients were either insured by Medicaid (33 percent, or 2.84 million patients) or uninsured (41 percent, or 3.55 million patients). It is estimated that in 1998, FQHCs served approximately 9 percent of Medicaid beneficiaries, 8 percent of all the uninsured Americans, and 20 to 25 percent of the poor and near poor uninsured Americans. (Bureau of Primary Health Care, 1998). When comparing health centers to physician practices (Table 2.2), the percentage of self-paying patients for health centers is roughly four times that of physician practices. Like public hospital patients, health center self-paying patients are more likely to be low-income uninsured individuals, whereas physician self-paying patients can range from true “charity” patients to affluent individuals who are simply not insured for a procedure. Medicaid is a large payer of health center services and a marginal payer of services provided by physicians. Therefore, any changes in Medicaid coverage levels can be expected to have a disproportionate impact on health center services (see Chapter 3). A number of regions, cities, and counties administer and fund their own freestanding primary care clinics in needy communities. For example, the San Francisco Department of Health significantly enhanced the primary care capacity for its low-income and uninsured populations by converting former public health stations into full-spectrum primary care centers. Similar efforts have occurred in Dallas (Schauffler and Wolin, 1996). Some of these freestanding or hospital-sponsored community-based organizations have sought designation as “FQHC look-alikes.” Although they do not receive federal Section 330 grant funds, they must meet FQHC eligibility criteria. Once designated they are eligible for FQHC cost-based Medicaid and Medicare payments. It is estimated that there are 124 FQHC look-alikes throughout the United States (Bureau of Primary Health Care, 1998). This figure, however, understates the community-based safety net capacity since not every eligible provider seeks FQHC look-alike status. During the site visits the committee learned that in some states, like New York, where Medicaid already reimburses on a cost-related basis, freestanding primary care providers have no financial incentive to seek FQHC look-alike status. In fact, in such states there is a disincentive since designation as a FQHC look-alike brings with it the added costs of meeting all the Section 330 requirements. FQHC, FQHC look-alike, and other community-based primary care clinics often rely on a patchwork of small grants to provide care for uninsured and other vulnerable patients and to support special programs (see Box 2.3). Other federal, state, local, and private programs combine to provide a significant portion of CHC grant revenues, including Title V Maternal and Child Health Block grants, Title X Family Planning grants, substance abuse treatment demonstration projects for pregnant women and children, the Healthy Start infant mortality initiative, and Title IV Ryan White CARE Act grants for primary care for people with HIV infection/AIDS. The retrieval and administration of these diverse funding sources exact heavy managerial tolls on CHCs, especially in light of their limited infrastructure resources. However, the existence of multiple funding sources can be advantageous for a center because it lessens the risk that the loss of any single source will be damaging. In addition, to survive financially, CHCs must maximize their ability to use grant, state, and local funds to support the provision of care for the uninsured population but must also maintain an adequate Medicaid revenue stream to maintain a stable fiscal base (Schauffler and Wolin, 1996). The Rural Health Clinic (RHC) program was established in 1977 to recruit physicians, nurse practitioners, and physician's assistants in areas where Medicaid and Medicare populations were having difficulty obtaining primary care (Cheh and Thompson, 1997; U.S. General Accounting Office, 1996). RHCs are legally obligated to serve Medicaid and Medicare beneficiaries and, in return, are entitled to cost-based reimbursement. There are nearly 2,500 federally funded RHCs that provide care to almost 4 million patients, 70 percent of whom are insured through Medicaid or Medicare (Rovner, 1996). RHCs do not have a legal obligation to provide care to uninsured individuals. In fact, there are financial disincentives to providing care to the uninsured to the degree that the provision of such care may cause the unit cost per encounter to decrease, thereby decreasing cost-based reimbursement (Ricketts et al., 1998). More recent studies on RHCs indicated that many areas where RHCs were being certified had preexisting primary care services for the Medicaid and Medicare populations (Cheh and Thompson, 1997). The U.S. Congress, through the Balanced Budget Act of 1997 (BBA), has now restricted future RHC program growth. The new rules affect all RHCs, including those established in places where shortages of health professionals are truly severe, and are beginning to create barriers to access to primary care in some truly underserved rural areas (Ricketts et al., 1998). The role of local health departments (LHDs) in providing direct health care services to vulnerable populations is under debate. IOM's report The Future of Public Health advocated that health departments focus on three core functions: assessment, assurance, and policymaking (Institute of Medicine, 1988). Although great variations in the implementation of the core public health functions exist, all LHDs are responsible for the core public health functions listed by the U.S. Department of Health and Human Services (Baxter, 1998):
According to a recent survey of 380 LHD directors, however, only 12 percent of directors believed that LHDs should be restricted to core public health functions and should provide no direct services (Keane et al., 1999). Many of these agencies provide direct care to vulnerable populations, as well as core public health policy development and assurance functions. These services and the percentage of LHDs that provide them were summarized in a recent IOM (1998) report: immunizations, 96 percent; well-child clinic services, 79 percent; Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), 78 percent; Medicaid Early Periodic Screening, Diagnosis, and Treatment (EPSDT) program, 72 percent; STD testing and counseling for STDs, 71 percent; family planning services, 68 percent; and school-based health clinics, 25 percent. In addition, the Maternal and Child Health Bureau (MCHB), authorized under Title V of the Social Security Act, serves as a critical link in the safety net by funding health care services for mothers and children usually provided or contracted under the aegis of LHDs. Administered by the Health Resources and Services Administration, MCHB operated with a budget of $825 million in fiscal year 1997. MCHB provides services under the auspices of four major programs including (1) MCHB Block Grants, (2) Healthy Start, (3) Emergency Services for Children, and (4) HIV Coordinated Services and Access to Research (Maternal and Child Health Bureau, 1999). Many of the more than 3,000 LHDs remain a critical source of health care for the uninsured, homeless, immigrant, and other vulnerable populations in many locales. Unlike other safety net providers, LHDs tend to specialize in providing free health care services to populations with special needs (e.g., those with HIV infection/AIDS, STDs, or drug dependence). Changes in the delivery system and insurance market, as well as a reexamination of the role of LHDs, have led to declines in the amount of direct care provided by LHDs. The shift to managed care presents real challenges to those LHDs whose financial viability depends on revenues associated with the provision of services to Medicaid patients and other patient populations (Agency for Health Care Policy and Research, 1997). The impact of this change in policy has varied around the country. (See Chapter 3 for a more detailed description of the impacts of policy changes on LHDs.) For example, in the past the Ingham County Health Department (ICHD) of Lansing, Michigan, had the lead role in providing and ensuring the quality of federally mandated EPSDT services to both Medicaid and uninsured children. Now the program has been divided in two. One serves the Medicaid population through health maintenance organizations and the other serves the uninsured at LHDs. This has compromised ICHD's ability to conduct population-based activities that track delivery and quality of care across the entire low-income population. In Little Rock, Arkansas, loss of EPSDT activities to state-contracted health plans has resulted in a 30 percent drop in the LHD's Medicaid revenue. This has forced a reappraisal of the LHD's mission and role. On the other hand, in Cleveland, Ohio, the Cuyahoga County Board of Health is typical of LHDs that have not traditionally provided personal health services to Medicaid beneficiaries for some time. They are experiencing fewer changes as a result of Medicaid reform (Martinez and Closter, 1998). A recent study found that of 49 LHDs that provide direct care, 27 had plans to discontinue these services in favor of more traditional public health functions. Funding of city and county health departments comes predominantly from the state (40 percent) or local (37 percent) government, whereas Medicaid and categorical federal funding provide most of the remaining funds: 7 and 6 percent, respectively (Grantmakers in Health, 1998). There is no doubt that the emergence of managed care has presented LHDs with both challenges and new opportunities to use resources to carry out core public health functions. In addition, managed care has introduced the possibility that well-positioned LHDs in certain communities will develop a package of special services (e.g., school health or family planning services) that the LHD is skilled in providing and that are needed by managed care plans (Agency for Health Care Policy and Research, 1997). In most communities, the safety net includes a broader set of providers and organizations that support the delivery of health care to a variety of vulnerable populations. Although the burden for the provision of this care is highly concentrated among core safety net hospitals, many private not-for-profit hospitals either collectively or individually also provide substantial amounts of charity care and are often referred to as “the hidden health care safety net” (Altman and Guterman, 1998). Whether through emergency departments, other outpatient settings, or inpatient departments, community hospitals collectively incur approximately 60 percent of all uncompensated costs (Mann et al., 1997). An analysis of 1994 data from the American Hospital Association's (AHA's) Annual Survey of 5,229 community hospitals found that more than half of the hospitals in the top decile for the provision of uncompensated care were public municipal, county, hospital district, or state government entities (Fishman, 1997).8 The top decile, however, included a substantial percentage (i.e., 46 percent) of private hospitals, among them many faith-based and private hospitals that receive little funding from state or local governments to support their charity missions. The average free-standing children's hospital, for example, devotes nearly 50 percent of its care to children who are either on Medicaid or uninsured (National Association of Children's Hospitals, 1999). These hospitals also serve as important graduate medical teaching sites. Teaching hospitals, particularly large public teaching hospitals, are major providers of care to vulnerable populations. Teaching hospitals are often part of an academic health center (AHC) and have an affiliation with a medical school to provide clinical training. AHCs and other major teaching hospitals are often the sole providers in their communities of technologically advanced procedures for a small number of specific conditions (e.g., kidney transplants, trauma care, burn units, bone marrow transplants, and other organ transplants). Much of the uncompensated care provided by AHCs is to uninsured patients who have been transferred from other hospitals (Wyatt et al., 1997). Transferred patients have been shown to stay in the hospital twice as long as other patients, incurring double the charges. A national study of urban academic medical centers (AMCs) reviewed their role in care for the medically underserved population, looking not only at the medically indigent but also members of minority and poor populations (Moy et al., 1996). The study confirms previous observations that these medical centers provide a large and disproportionate share of care for medically underserved members of minority and poor populations. Furthermore, the proportion of patients from these groups admitted to all urban hospitals is rising and this growth is faster among AMCs than among other hospitals. At the same time uncompensated care has also become increasingly concentrated in these teaching hospitals, particularly those under public ownership. According to AHA data, from 1989 to 1994 the share of uncompensated care provided by public teaching hospitals increased by one-third, whereas it increased by 12.4 percent among other nonteaching public hospitals (Reuter and Gaskin, 1998). In addition, 51 percent of total patient revenues for AHCs came from either Medicaid or Medicare (Blumenthal et al., 1997). Surveys suggest that physicians in private practice play an important collective role in the provision of care for medically indigent individuals in their communities. In a household survey conducted by the Center for Studying Health System Change, more than one-third of the uninsured who responded reported a physician's office as a usual source of care. Data collected by the American Medical Association's (AMA's) Socioeconomic Monitoring System showed that uncompensated care (charity care and bad debt expenses) increased between 1990 and 1994 (Cunningham and Tu, 1997). According to the survey, in 1994 the amount of uncompensated care provided by physicians was equal to if not greater than that provided by hospitals. Although the uncompensated care provided by physicians is noteworthy, there is some evidence that for the most part private physicians tend to treat patients who are temporarily uninsured and who have incomes above 300 percent of the poverty level (Sara Rosenbaum, Washington, DC workshop testimony, May 1999; see also Table 2.2). For the purpose of this study, three practitioner groups deserve special mention for their disproportionate contribution of care to vulnerable populations: private rural physicians, rural pharmacists, and private inner-city minority physicians. Rural physicians are more likely than private physicians in other parts of the country to accept Medicaid or uninsured patients (Komaromy et al., 1995). Although 56 percent of physicians in nonmetropolitan areas surveyed by the AMA were full Medicaid participants,9 the proportion dropped to 46 percent for physicians in small metropolitan areas and 41 percent for those in large metropolitan areas (Perloff et al., 1995). Among physicians in office-based practices in rural medically underserved areas, Medicaid patients account for almost 25 percent of patients (Slifkin and Crook, 1998). Although not a perfect comparison, about 12 percent of all general and family practice revenue nationwide comes from Medicaid (American Medical Association, 1998). Private rural physicians are generally included in Medicaid managed care networks, but the extent to which these providers are losing a substantial number of insured patients to urban-based managed care is unknown (Felt-Lisk et al., 1997). Anecdotal evidence offered by rural health care providers suggests that this is occurring as large employers with primarily urban workers switch their employees, including those who reside in rural areas, to urban managed care organizations (IOM committee conference call with rural safety net providers, October 7, 1998; see Appendix H for a full list of participants). The loss of these privately insured patients could seriously hamper the ability of rural physicians to continue to serve in their safety net role (Ricketts et al., 1998). Rural pharmacists are the most readily accessible health professional outside metropolitan areas and are recognized as providing advice and referrals when other health care professionals are absent or scarce (American Pharmaceutical Association, 1996; Billow et al., 1991). There are signs, however, that independent rural pharmacies are disappearing as the industry becomes characterized by chain pharmacies, which are usually located in larger retail stores and shopping centers, and by mail-order pharmacy services (Gangeness, 1997; Smith and Coons, 1990). State studies indicate that although access is only marginally lower, existing rural pharmacies are showing marked declines in profit levels and financial viability (Straub and Straub, 1998). It may be only a matter of time before access to pharmacies and pharmacy-related services becomes a more serious problem in rural areas. In their report to The Commonwealth Fund, Darnell and colleagues (1995) take special note of the role played by inner-city minority physicians in the care of poor and uninsured individuals. Studies have found that these physicians are more likely to care for patients who are racial and ethnic minorities, Medicaid beneficiaries, and uninsured (Moy and Bartman, 1995). Surveys have shown that more than half of minority medical students would prefer to practice in large cities and that 40 percent (compared with only 9 percent of nonminority students) planned to practice in socioeconomically deprived areas (Association of American Medical Colleges, 1994). There is some anecdotal evidence that some minority physicians are finding it more difficult to enter managed care arrangements (Darnell et al., 1995; Mackenzie et al., 1998). The only known systematic evaluation of this issue (Bindman et al., 1998) was conducted in California, using a mail survey of a sample of physicians providing primary care in the state's 13 largest urban counties. The study found no statistical evidence that minority physicians were disproportionately experiencing denials or terminations in managed care contracting. The study suggests, however, that managed care plans may be more reluctant to contract with office-based physicians who provide a greater share of charity care. In the absence of comparable assessments from other parts of the country, concern remains that the special role of key providers serving vulnerable inner-city populations may be uniquely threatened by the growth of managed care. The first school-based centers were established in the early 1970s to ensure quality health care for all school-age children regardless of their families' socioeconomic status. Since the 1990s, school-based health centers have proliferated. According to a recent survey, the number of school-based health centers in the United States in 1998 had increased to 1,157, almost double the number in 1994 (The Robert Wood Johnson Making the Grade Program Office, 1998). Of the 40 school-based clinics participating in the Robert Wood Johnson Foundation Making the Grade Program, 63 percent are in urban areas, with a little more than half in elementary schools or schools for kindergarten through grade 12; the rest are in middle schools and high schools. Almost 70 percent operate full time (defined as 25 hours a week). School-based centers provide physical and behavioral health care interventions and use multidisciplinary teams of nurse practitioners, physicians, and social workers. Traditionally, these centers have relied on private funds as well as federal, state, and local grants. Sponsorship is 20 percent hospital, 25 percent CHC, 20 percent LHD, 10 percent school district, 10 percent community-based organization, and 15 percent school health care organization (The Robert Wood Johnson Making the Grade Program Office, 1998). Recently, however, they have turned to third-party reimbursement, in particular, Medicaid managed care plans, as a source of revenue. Many believe that the State Children's Health Insurance Program will be another promising source of funding. Yet, there are continuing concerns about the financial sustainability of school-based centers (Friedrich, 1999). According to the Making the Grade Program survey, federal funding for school-based clinics has declined by $2.5 million since 1996. The locations of school-based clinics—63 percent are in urban areas— and their emphases on behavioral as well as physical health make these clinics attractive sources of care for newly insured children. Clinics in 38 states are eligible for Medicaid reimbursement, and 25 states have encouraged the clinics to participate in Medicaid managed care. About half of the states have established standards of operation, and seven states license school-based clinics (The Robert Wood Johnson Foundation Making the Grade Program Office, 1998). Although not the subject of this study, the committee wishes to acknowledge the roles of the Veteran Health Administration (VHA) and the Indian Health Service (IHS) in the provision of care to the poor and uninsured individuals. These providers care for about 4 million veterans and Native Americans and Alaska Natives, many of whom might otherwise add to the demand on the core safety net. The original mission of the VHA was to provide hospital care for veterans with service-connected disabilities. Over the years this mission has expanded to include both inpatient and outpatient care for veterans with service-connected disabilities and for veterans with non-service-connected disabilities (National Health Policy Forum, 1998). Veterans Affairs (VA) hospitals and ambulatory care services are often an unrecognized but significant source of safety net services. In fact, the VA medical center system is one of the nation's largest health care systems, with 173 hospitals, 600 outpatient clinics, 133 nursing homes, 40 domiciliaries, 206 counseling centers, and 185,000 employees. Each year these facilities serve approximately 10 percent of the total veteran population, providing comprehensive services to approximately 2.5 million veterans annually. Only about 12 percent of those treated at a VA facility are treated for a service-connected disability. The majority are poor; 70 percent have annual incomes less than $21,610 (National Health Policy Forum, 1998). IHS works in conjunction with 547 federally recognized tribes to deliver health care to Native Americans and Alaska Natives throughout the country. IHS is the primary, and often the sole, provider of health services for many Native Americans and Alaska Natives. IHS has a staff of 14,500 that operates with approximately $2.2 billion in federal appropriations and that serves 1.4 million beneficiaries in 500 direct care centers. In addition, IHS operates the Contract Health Services program with non-IHS providers, which currently accounts for 18 percent of all expenditures. Although direct and contracted patient care is a large component of IHS, it also provides environmental and educational services. Hospital and ambulatory care, preventive services, and alcohol treatment account for most of the IHS expenditures on direct services. IHS provides services through a broad range of facilities and personnel: 37 IHS hospitals, including 3 major medical centers; 64 health centers; 5 school-based health centers; 50 health stations; and an array of physicians, dentists, nurses, pharmacists, and other health care professionals (Indian Health Service, 1997). As health care continues its transformation toward a more market-oriented, performance-based system, special treatment for designated classes of providers—even those providers with important social missions—will be highly dependent on their proven ability to add value and operate efficiently. Despite their laudable track record for caring for disproportionate numbers of this nation's poorest and sickest population groups, core safety net providers are often viewed as operating in a less efficient manner than other groups of providers and with less ability to document their unique contributions to health outcomes for their patient populations (Harrington et al., 1998; Thorpe and Brecher, 1987). In addition, the committee heard and read evidence that safety net hospitals and clinics operated by state, municipal, or other government subdivisions may be at a disadvantage in their ability to make timely business decisions, form strategic partnerships, or succeed in a more competitive environment given the hiring, procurement, and other rules with which such publicly owned entities have to comply (Bovbjerg and Marsteller, 1998; Siegel, 1996; West, 1999). Evaluations of safety net providers in some of the states that have received 1115 waivers found that many of these providers have weak existing business and administrative functions largely because the bulk of their business has been limited to the Medicaid, Medicare, and uninsured populations, none of which required strong business skills (Hoag et al., 1999). In a system of surplus capacity and downsizing, the ability to measure and demonstrate competitive financial and quality performance is becoming a critical requirement for future survival, for both private and traditionally publicly sponsored health care providers. Although concerns about inefficiencies are occasionally cited, the committee found very limited evidence with which to assess the relative efficiency of safety net providers. The majority of articles devoted to this issue point to safety net providers' more complex patient population and the broader array of services that they have to offer. These “product” differences make assessments of comparative efficiency more difficult (Landon and Epstein, 1999; Lipson, 1997; Savela et al., 1998; Schauffler and Wolin, 1996). The move to a more market-based system has called renewed attention on issues of efficiency and effectiveness in health care. The phaseout of cost-based reimbursement for FQHCs in the 1997 BBA was propelled in part by a perception in the U.S. Congress and among state governors that such cost-based reimbursement provides few incentives for efficient behavior. A 1998 study with data from 328 health centers assessed the impact of cost-based reimbursement for FQHCs on revenue and utilization. Although the sample was not perfectly representative of all CHCs, the study demonstrated that the shift to cost-based reimbursement increased the total number of users and Medicaid beneficiaries who receive care at CHCs but that there was no direct link to overall increases in medical encounters per user. The focus on volume is important because states are already allowed to apply caps and productivity screens to the per visit rate (Lewis-Idema et al., 1998). However, some policy makers contend that despite the potential for internal controls, the cost-related payment system of FQHC is not consistent with an emphasis on managed care. Therefore, a number of bills were introduced in the 106th U.S. Congress to develop some type of prospective payment system for FQHCs to replace the current cost-based reimbursement system. Lack of agreement on a new method led to the BBA Refinements Act of 1999, which tempered the cost reimbursement phaseout as outlined in the 1997 BBA and called for a study to assess alternative payment strategies. Unresolved payment issues aside, studies have demonstrated that these providers can be uniquely effective in addressing the special needs of certain vulnerable populations (Andrulis and Goodman, 1999; Rosenbaum et al., 2000). For example, New York City's Health and Hospital Corporation, the country's largest public hospital system, serves about 55 percent of the city's patients with AIDS, 48 percent of its patients with tuberculosis, and about 36 percent of its patients who need inpatient psychiatric treatment (LaRay Brown, Health and Hospital Corporation, personal communication, March 2000). A study to assess whether the presence of a public hospital in a community increased access to care among the poor found that the presence of such a hospital not only increased the volume of care provided to the medically indigent population, but also reduced the uncompensated care burden for private hospitals (Thorpe and Brecher, 1987). The study also found that public hospitals in cities with a substantial level of graduate medical education delivered proportionately more uncompensated care than nonteaching public hospitals. A 1990 study by Bindman and colleagues found that the closing of a public hospital in a semirural area of northern California had a significant effect on access to health care and was associated with a decline in the self-reported health status of patients previously served by the closed hospital (Bindman et al., 1990). A number of comprehensive literature reviews of CHCs and the Medicaid program have documented that the effectiveness and cost-effectiveness of CHCs in improving access to ambulatory care, reducing inappropriate hospitalizations, and delivering quality care, was comparable to that of other types of providers (Davis and Schoen, 1977; Dievler and Giovannini, 1998; Hawkins and Rosenbaum, 1998). A study that looked at the impact on access to health care after the introduction of CHCs in five low-income areas across the country found that the availability of CHCs not only increased access to medical and dental care but also resulted in a major shift in care from hospital clinics to CHCs and a significant reduction in hospital inpatient use (Okada and Wan, 1980). The new CHCs also attracted people with no previous source of care. The study found, however, that although Medicaid and the presence of CHCs greatly facilitated the use of health services, disparity in the utilization of health and dental care remained between the study areas and the averages for the nation. The impact of health centers on outcomes was demonstrated by a national analysis of county data using multivariate techniques which attributed 12 percent of the decline in black infant mortality from 1970 to 1977 to the presence of CHCs (Goldman and Grossman, 1988). A seminal study by a team of researchers at the Johns Hopkins School of Hygiene and Public Health that looked at the relationship between efficiency in the use of resources and quality of care in different primary care settings targeted mainly to Medicaid beneficiaries found that, irrespective of costs, the quality of medium-cost health centers met or exceeded the quality of other providers (Starfield et al., 1994). Another study by a Johns Hopkins-based team compared Medicaid utilization and expenditures for users of health centers and other providers and found that, after adjusting for case mix, health center users had costs and inpatient admissions similar to those for patients who used private physicians for their primary care and less than those who used hospital clinics (Stuart and Steinwachs, 1993). A more recent but related study on income, inequality, primary care, and health indicators, also conducted by researchers at Johns Hopkins, found that availability of primary care may in part help overcome the severe adverse impact of income inequalities on health (Shi et al., 1999). Other recent analyses found that Medicaid users of CHCs experience a 22 percent lower rate of hospitalization for ambulatory care sensitive conditions than Medicaid beneficiaries who receive medical services from other primary care providers (Falik et al., 1998). A nationally representative survey of health center patients conducted by Mathematica Policy Research, Inc. in 1995 for the Bureau of Primary Health Care found that female health center patients are more likely to obtain mammographies, clinical breast exams, and Pap smear tests than a comparison group drawn from the National Health Interview Survey (Regan et al. 1999). Moreover, both this study and a survey for the Picker-Commonwealth Fund based on a representative sample of health center patients reported high levels of satisfaction, respectful treatment, increased access over other providers, convenient hours, and availability of translation/interpretation into their own language (Regan et al., 1999; Zuvekas et al., 1999). A longitudinal study on the impact of pediatric visits to hospital emergency departments after the establishment of a neighborhood health center found that inappropriate emergency department visits declined significantly with the establishment of the center in a poor Rochester, New York, neighborhood (Hochheiser et al., 1971). No such decline was observed among residents of a control community that remained without a CHC. The study suggests, however, that the proximity of underserved populations to health services is an important but not an overriding inducement to use. Access and provision of quality care for poverty residents, the study shows, must be associated with aggressive outreach, cultural considerations, and effective communications. A study that looked at the effects of Florida's Medicaid eligibility expansions for pregnant women found that access and birth outcomes improved for low-income women who did not have private insurance (Long and Marquis, 1998). These improvements in access and outcome were linked to the availability of county health department services. Study results showed the importance of linking expanded insurance coverage for low-income women with a delivery system that can accommodate their special needs. However, a study by researchers at the Agency for Health Care Policy and Research and the University of California challenged these findings and showed that Medicaid-eligible women who obtained multidisciplinary prenatal care at private physician's offices that were reimbursed by Medicaid for enhanced care had equal or better outcomes than women served by local health departments (Simpson et al., 1997). A more recent study from California sheds additional light on this issue. Using telephone surveys of residents in urban California communities, Grumbach and colleagues found that physician supply alone may not guarantee effective access to care for disadvantaged populations (Grumbach et al., 1997). The study suggests that in poor communities physician supply may need to be linked with organizational structures that address the multiple sociodemographic factors that can impede access to care. Today's environment of change and challenge will likely have important policy and program implications for the nation's traditional safety net providers. As the rolls of the uninsured continue to expand, other major players in the delivery system are finding it more difficult to sustain their past commitment to uncompensated care, placing more of the burden on public hospitals and CHCs. Despite this reliance and the acknowledged contributions of safety net providers, profound questions are being raised today about how the future financing of health care and health care for poor and uninsured individuals should be organized and funded. Devolution and the market paradigm with its dynamics of competition, consumerism, and choice have focused major interest in expanding access to affordable insurance for low-income Americans as an alternative to continued government support for a designated set of providers. Whereas core safety net providers have always survived on a tenuous patchwork of funding, the policy and political mindsets in many quarters support the notion that these, as well as other providers, should be challenged to operate more effectively and efficiently even with more limited resources and with patients with more complicated medical conditions and socioeconomic challenges. The committee concludes that the safety net system is a distinct delivery system, however imperfect, that addresses the needs of the nation's most vulnerable populations. In the absence of total reform of the health care system and while the new market paradigms are unfolding, it seems likely that the nation will continue to rely on safety net providers to care for its most vulnerable and disadvantaged populations. Chapter 3 provides a comprehensive analysis of the major factors that affect the health care safety net. REFERENCES
1 NAPH represents over 100 safety net hospitals and health systems in metropolitan areas around the country. Most members are major teaching hospitals or academic health science centers. 2The 60 percent increase from 1990 to 1998 also reflects the expansion of the CHC program to include homeless and public housing programs, adding 400,000 to 500,000 users, most of whom are uninsured (Bonnie Lefkowitz, personal communication, February 2000). 3Uncompensated care is often considered an imprecise measure of the amount of care provided to low-income individuals. However, a recent study of bad-debt and free-care patients in seven Massachusetts hospitals found that most patients incurring bad debt rather than receiving charity care had incomes below the federal poverty level (Weissman et al., 1999). 4The surveyed hospital systems included: Boston Medical Center, Cook County Hospital (Chicago), Cooper Green Hospital (Birmingham), Denver Health Medical Center, Harris County Hospital District (Houston), Los Angeles County Department of Health Services, New York City Health and Hospitals Corporation, Parkland Health and Hospital System (Dallas), and The Regional Medical Center at Memphis. 5Section 330 grant funds support traditional community health centers, migrant health centers, Health Care for the Homeless Programs, and Public Housing Primary Care Programs. 6This criterion is not required for homeless grantees. 7The Health Resources and Services Administration defines cultural competence as the ability to deliver effective medical care to people from different cultures by understanding, valuing, and incorporating the cultural differences of America's diverse population and examining one's own health-related values and beliefs (Health Resources and Services Administration, 2000). 8State-owned hospitals are primarily teaching hospitals that are under common ownership with a public university. 9Full Medicaid participants are those physicians who participate in Medicaid and accept all new Medicaid patients. In contrast, limited participants participate in Medicaid but accept only some new Medicaid patients or none at all (Perloff et al., 1995). |
What is a condition that most people would not expect the safety net of the government to provide for?
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