Now, in a perverse twist, many of the poor people who rely on safety-net hospitals like Memorial will be doubly unlucky. A government subsidy, little known outside health policy circles but critical to the hospitals’ survival, is being sharply reduced under the new health law.
The subsidy, which for years has helped defray the cost of uncompensated and undercompensated care, was cut substantially on the assumption that the hospitals would replace much of the lost income with payments for patients newly covered by Medicaid or private insurance. But now the hospitals in states like Georgia will get neither the new Medicaid patients nor most of the old subsidies, which many say are crucial to the mission of care for the poor.
“We were so thrilled when the law passed, but it has backfired,” said Lindsay Caulfield, senior vice president for planning and marketing at Grady Health in Atlanta, the largest safety-net hospital in Georgia.
It is now facing the loss of nearly half of its roughly $100 million in annual subsidies known as disproportionate share hospital payments.
Traditionally, safety-net hospitals have played a special role in caring for poor people. They make up just 2 percent of acute care hospitals in the country, but provide about a fifth of all uncompensated care, according to Dr. Arthur Kellerman, dean of the F. Edward Hébert School of Medicine in Bethesda, Md. The subsidy was created in the 1980s to help hospitals with large shares of patients who were uninsured or had government insurance that did not pay very much. Many hospitals came to depend on it.
A full third of Grady’s patients have no insurance, and, if that does not change, the hospital will have no choice but to cut services, said John M. Haupert, Grady’s chief executive. The hospital’s large outpatient mental health program, which handles 58,000 visits a year and is critical to keeping poor patients with behavioral problems from seeking treatment in the emergency room, would most likely be hit, Mr. Haupert said.
