Abstract
BackgroundDuring the 1990's hospitals in the U.S were faced with cost containment charges, which may have disproportionately impacted hospitals that serve poor patients. The purposes of this paper are to study the impact of safety net activities on total profit margins and operating expenditures, and to trace these relationships over the 1990s for all U.S urban hospitals, controlling for hospital and market characteristics.MethodsThe primary data source used for this analysis is the Annual Survey of Hospitals from the American Hospital Association and Medicare Hospital Cost Reports for years 1990-1999. Ordinary least square, hospital fixed effects, and two-stage least square analyses were performed for years 1990-1999. Logged total profit margin and operating expenditure were the dependent variables. The safety net activities are the socioeconomic status of the population in the hospital serving area, and Medicaid intensity. In some specifications, we also included uncompensated care burden.ResultsWe found little evidence of negative effects of safety net activities on total margin. However, hospitals serving a low socioeconomic population had lower expenditure raising concerns for the quality of the services provided.ConclusionsDespite potentially negative policy and market changes during the 1990s, safety net activities do not appear to have imperiled the survival of hospitals. There may, however, be concerns about the long-term quality of the services for hospitals serving low socioeconomic population.
Highlights
During the 1990’s hospitals in the U.S were faced with cost containment charges, which may have disproportionately impacted hospitals that serve poor patients
Studies of hospitals in New York City and California documented a widened gap between financially strong and financially weak hospitals [5,6]. The latter findings are of particular concern to policy makers since many of the financially weakest hospitals were those with significant burdens of “safety net” activities or that served low socioeconomic populations, Medicaid, and uninsured patients [7]
Data We focused our analysis on urban hospitals, defined as those located in any metropolitan statistical area (MSA)
Summary
During the 1990’s hospitals in the U.S were faced with cost containment charges, which may have disproportionately impacted hospitals that serve poor patients. Younis et al (2005) examined the hospital’s total profit margin before and after the BBA of 1997 [2] Their results indicated that hospitals profitability decreased post BBA. Studies of hospitals in New York City and California documented a widened gap between financially strong and financially weak hospitals [5,6]. The latter findings are of particular concern to policy makers since many of the financially weakest hospitals were those with significant burdens of “safety net” activities or that served low socioeconomic populations, Medicaid, and uninsured patients [7]
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