Safety net hospitals are a key component of California’s health care safety net, accepting all patients regardless of their ability to pay or their immigration status. Some also help train physicians and operate high-level trauma centers. These essential health care providers were hit hard by the pandemic, and in its wake some are struggling financially despite a large influx of federal COVID relief funds.
What about health insurance payments? Does a hospital’s payer mix—that is, the share of revenue coming from different sources of insurance—look different for safety net hospitals that have recently reported they are struggling financially?
The recent closure of Madera Community Hospital—and severe service cuts among others—has revived these questions. The California Hospital Association (CHA), the main industry group representing the state’s hospitals in Sacramento, warns that even more hospitals are at risk. Both Madera Community Hospital and CHA have said that low Medi-Cal reimbursements are one of the primary reasons California hospitals are struggling. It’s well established that Medicaid (the federal version of Medi-Cal) pays lower rates than Medicare (the federal program that covers people with disabilities and age 65 and older) and that private or commercial health insurance plans pay the highest rates, on average.
Hospital finances are complicated to be sure, but looking at payer sources across different types of hospitals in California can provide some insight. Here we compare the patient payer mix in 2021 (the most recent year data is available) across four main hospital types, which allows us to highlight safety net hospitals that have recently indicated they are struggling financially:
- Public county hospitals: operate in 12 large counties; receive funding from county sources and Medicaid waiver funds.
- Disproportionate Share Hospitals (DSH): receive Medi-Cal supplemental payments for serving higher shares of low-income people.
- Struggling: recently indicated serious financial hardship; all of these hospitals received DSH funding in 2021.
- All other: all other general acute care hospitals in the state.
Struggling hospitals do not differ noticeably from other DSH hospitals in terms of their payer mix. Public county hospitals have the highest share of patient days paid for by Medi-Cal and far fewer shares of Medicare payments; public hospitals have other sources of revenue, including county funds. Hospitals in the “other” category, which do not receive DSH funding, have much lower shares of Medi-Cal funded patient days and much higher shares of Medicare and private payers.
Regardless of how much different payer sources can affect a hospitals’ bottom line, there is little doubt that some hospitals across the state continue to struggle in the aftermath of the pandemic. In recognition of this problem, state policymakers have already signed off on a program to provide $150 million in no-interest loans for hospitals at immediate risk of closure.
Despite approving the loan program, the governor did not include major emergency relief funding for hospitals in the May Revision of the state budget. It remains to be seen if additional public financial assistance will be needed to support the state’s safety net hospitals; a recent CHCF report suggests more hospitals may require help after greater financially struggles in 2022. It will be important that any and all state relief funding is well targeted, with a focus on maintaining access to care for all Californians.