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Akron Univ. School of Law

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Thursday, August 18, 2005

More Public Hospitals Lost Than Private in Recent Years

Modern Healthcare's Daily Dose reported yesterday that "[t]he number of U.S. public hospitals declined at a faster rate than private hospitals from 1996 to 2002, especially in suburban areas, and public hospitals treated patients for longer lengths of stay."  Here are the numbers:

The number of public hospitals in the suburbs of the nation's 100 largest cities fell 27% to 98 in 2002 from 134 in 1996. The number in the cities themselves dropped 16% during the same period, to 70 from 83. The number of private hospitals also shrank in both the top 100 cities and their suburbs, although not as rapidly . . . .  The loss of private hospitals was 4% in suburban areas, as the total fell to 741 in 2002 from 772 in 1996, and 11% in the cities, as the total fell to 575 from 647.

The numbers are from a study by State University of New York Downstate Medical Center, New York.  The report's "Summary and Conclusions" section is well worth reading in its entirety:

Our conclusions reflect analysis of hospital utilization and capacity in the 100 largest cities and surrounding suburban areas for the years 1996 to 2002.

The results by hospital ownership showed that the role of public hospitals, while highly significant as a safety net provider in both cities and suburbs, appears to be diminishing, as measured by their larger percentage losses and declining volume of total and Medicaid admissions in the largest cities. The analysis by community poverty levels revealed vast city-suburban differences in the distribution of hospital services and resources across low, medium and high poverty groups relative to their proportions of population. These patterns and trends raise questions about the future of the hospital safety net and its ability to adequately serve the most vulnerable residents, particularly in high poverty cities and suburbs, and about the appropriateness of the level of hospital resources concentrated in low and high poverty suburban areas.

Trends in Hospital Ownership

Our review of hospitals by ownership in the largest cities and suburbs revealed several trends about their total numbers and composition, their average size and growth in volume of care, and their share of Medicaid patients. The downward trend in the number of hospitals and total hospital beds in large metropolitan areas continued, with public hospitals showing the largest declines (16% in cities and 27% in suburbs) and the greatest decrease in the percentage of beds. These trends also represent an acceleration in the closing or merging of urban public hospitals, which declined by only 14 percent over a 16-year period between 1980 and 1996, and a continuation of a steep drop in suburban public hospitals, which declined by 43 percent over the same 16-year period.

The remaining urban public hospitals continued to be the largest providers as measured by their average bed size, but their presence across the urban landscape is diminishing. By 2002, non-profit hospitals had essentially pulled even with public facilities in admissions per hospital. Urban public hospitals also provided less inpatient and emergency care in 2002 than in 1996, while other hospital groups saw steady growth. By 1999, for-profit hospitals had surpassed public hospitals in staffed beds and total admissions for the 100 largest cities.

Of the remaining suburban public hospitals, average bed size increased by 26 percent, from 1996 to 2002, suggesting that relatively smaller public hospitals dominated the closings (or conversions/mergers). Correspondingly, the average increase in utilization measures per hospital were large, relative to suburban for-profit and non-profit hospitals. Given that the remaining suburban public hospitals are much larger, and perhaps more vital than ever to the communities they serve, one question is whether their numbers will stabilize or continue to decline.

Hospital Ownership and Medicaid Patients

As safety net providers, public institutions have provided the bulk of hospital care for Medicaid patients. In cities, public hospitals continued to have the largest proportion of Medicaid discharges, while in the suburbs, the proportions were similar across hospital ownership groups. Urban public hospitals were the only group to have a smaller percentage of Medicaid discharges in 2002 than in 1996, while all other groups saw their Medicaid share of total  admissions increase by 4 percent to 15 percent.

We also note that public hospitals in urban and suburban areas had both the longest Medicaid ALOS, and the steepest rise in Medicaid ALOS between 1996 and 2002. The results suggest that, on average, public hospitals treat more seriously ill Medicaid patients than the other hospital types.

What do these findings say about metropolitan area hospitals and their Medicaid patients? They suggest that the landscape for Medicaid hospital care may be shifting. Remaining public hospitals may be diversifying their patient mix to improve their bottom line. These trends could also signal an increasing role for non-profit and for-profit community hospitals as safety net providers, a more even distribution of safety net care responsibilities, and/or an attempt to increase market share by attracting healthier, more profitable Medicaid enrollees.

Hospitals in Low, Medium and High Poverty Urban and Suburban Areas

Our review of hospital capacity and utilization by community poverty levels tells a dramatically
different story for urban than suburban areas. High poverty cities accounted for a somewhat larger proportion of hospital use relative to their proportion of the total urban population, while the opposite was true for low poverty suburbs. The availability of specialty services such as trauma care, and PET scanners across the urban poverty groups was generally in line with the population distribution across these groups. Only with NICU beds was capacity proportionally greater in low poverty cities relative to their percentage of urban population.

At the same time, the overall and Medicaid average lengths of stay for hospitals in high poverty cities were the highest among urban areas, suggesting that these hospitals are serving relatively sicker patients compared with hospitals in low and medium poverty cities. Other research supports the effect of an “urban health penalty,” that is, higher rates of disease and mortality in cities with higher rates of poverty.

Among suburban areas, high poverty communities represented the greatest proportion of suburban population in 2000 but had the smallest proportion of total inpatient use, outpatient use, level 1 or level 2 trauma centers, and PET scanners in 2002. The opposite was true of low poverty suburbs, which represented the smallest proportion of total suburban population, but had the largest proportions of suburban hospital use and specialty care capacity. Low poverty suburbs also saw exponential growth in the number of hospital PET scanners between 1996 and 2002 and the largest increase in NICU beds.

This lopsided distribution of hospital resources and use suggests that low poverty suburban areas may be attractive markets for hospitals. The population characteristics suggest that, on average, residents of low poverty suburbs are the most affluent residents of metropolitan America, and likely are the best insured. By the same token, hospital systems may be reluctant to expand into high poverty suburbs. Although we do not have data on uninsured rates for these areas, we noted earlier that the high poverty suburban areas averaged the largest percentages of Hispanic and foreign-born populations. Surveys have documented these groups as having among the highest uninsured rates in the country. A lack of health coverage may be a contributing factor in the relatively small proportion of hospital resources available in high poverty suburbs.

Between 1996 and 2002, these high poverty areas also saw the greatest decline in the number of suburban hospitals, which may exacerbate access problems, particularly for those with limited or no insurance and limited transportation options. Perhaps as an indicator of unmet need for primary care as well, hospitals in high poverty suburbs had the greatest increase in emergency department visits of all city or suburban poverty areas. The findings raise questions about whether residents in high poverty suburban areas, especially those who are poor or uninsured, will become increasingly dependent on nearby city public hospitals. This contention has already surfaced in Dallas, where the president of the city's public hospital stated that indigent or uninsured patients residing in five surrounding suburban counties accounted for 16 percent of the hospital's $1.2 billion in uncompensated care in 2002. This situation in Dallas and other cities creates the potential for a backlash among urban taxpayers about the care of suburban residents in their public hospitals.

Finally, the financial situation of hospitals in both urban and suburban high poverty areas raises concerns about their future–more so than with facilities in low and medium poverty cities and suburbs. Hospital operating margins were generally the lowest among hospitals in high poverty cities and suburbs. Hospitals in these areas also saw the smallest increases in net revenues and the smallest rise in Medicaid net revenues, and yet they have the greatest dependence on this payer.

Implications for Availability and Access to Care

What do these results by ownership and poverty say about the future of hospital care in urban and suburban areas? Although it is not possible to draw conclusions about the specific roles and changes of each community's hospital safety net, the continued losses of public hospitals in both cities and suburbs inject uncertainty as to where the sickest of the poor and the uninsured will access care in the future.

The fallout from these changes in cities may differ significantly from the suburbs. In large central cities, the size of public and other primary safety net institutions, their constituency, their presence as an employer and the political issues surrounding their status suggest that communities are more likely to demand a careful assessment of impact, as well as a viable, alternative safety net plan. Suburban areas losing their public or primary safety net hospitals may be less likely to have the strong constituencies found in central cities. As a result, there may be a less vocal and concerted effort to assure a viable alternative is available. Ultimately, regional cooperation may be required to ensure adequate financing and access to hospital care for the area's poor and uninsured, particularly in metropolitan areas with a high poverty central city or high poverty suburban area.

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