Rural and safety net hospitals brace for federal funding cuts

Rural and other safety-net hospitals are bracing for a body blow. Most are already operating on thin  profit margins, which sometimes disappear, and now they're facing cuts in funding for charitable care. Funding for such programs was expanded under the the Patient Protection and Affordable Care Act, but it had an expiration date. Unless Congress votes to protect that funding within the next few weeks, hospitals nationwide will lose it, Michael Ollove reports for Stateline.

"The federal money reimburses hospitals for the care they provide to people who can’t afford to pay and offsets the cost of care that hospitals provide to Medicaid patients that Medicaid does not cover. The federal cuts amount to $4 billion this year and $44 billion through 2025," Ollove reports. "The hospitals’ total loss of funding could be even more significant because the program includes state matching funds. If state cuts are commensurate with federal ones, the overall reduction would go from $4 billion to more than $7 billion in 2020."

Disproportionate-share hospitals, which have a larger than average share of Medicaid patients, increasingly rely on such funding to stay afloat. DSH payments totaled $18.2 billion in 2014, covering more than half of the uncompensated care costs for hospitals that received the money. "By 2019, the total DSH allotment was $22 billion, 57 percent of which came from the federal government; the rest came from state governments," Ollove reports. 

The ACA was meant to reduce hospitals' charitable care expenditures by expanding Medicaid and affordable private insurance; that's why it had a built-in DSH funding decrease. But things didn't go according to plan, Ollove notes: the Supreme Court ruled that states didn't have to expand Medicaid (19 haven't), and Congress rolled back the individual mandate to purchase insurance.

"Those actions, which likely kept millions in the ranks of the uninsured, undercut the premise of the cutbacks in DSH payments: Hospitals needed the money after all. Congress took notice. Four times, it voted to delay the cuts, and in September passed a continuing resolution that would keep funding at 2019 levels through Nov. 21, Ollove reports. "Still, the U.S. Centers for Medicare and Medicaid Services last month issued rules for states on how to calculate the DSH cuts."

A House bill would cut the DSH reductions by $16 billion in the next three years, but the Senate hasn't produced a similar bill, Ollove reports.