Medicaid DSH cuts won’t impact quality

This study provided weak evidence to suggest an association between net Medicaid DSH payments and hospital quality of care. Its results suggest an inelastic response to declining Medicaid DSH payments. Of the 9-quality measures that were created, there showed larger reductions in DSH payments reduced the probability of low-mortality DRGs and congestive hear failure (CHF) death for privately insured patients as well as the rates of CHF deaths among Medicaid and uninsured patients.

Even though this study showed minimal impact on the quality of care delivered, it is worth evaluating how facilities were able to maintain sufficient business revenue through either cost sharing mechanisms and/or shifting of services, labor inputs, patient volume, payer-mix and resources that may have withdrawn from quality of care in other areas not measured within this study.  Especially with the passing of Assembly Bill 394 (AB394) that set minimal nurse staffing requirements for the state of California, this too may also impact the effect of DSH payment reduction on hospital quality of care.

Even though this study did not demonstrate an impact in DSH payments within the 8 years studied, there should be much consideration placed on how these cuts will impact quality of care with the overwhelming projected increase in healthcare expenditures over the next 8 years. This study collected data during a time period that pre-dated implementation of the ACA coverage expansion and as a result of implementation, health care expenditure is expected to grow rapidly with an average annual growth rate of 5.2% between 2012 and 2022.

One major oversight of this study was the exclusion of hospitals that closed during the 8-year study period. This did not allow for researchers to capture if cuts in DSH payments resulted in financial instability and ultimately closure. Due to lack of capturing this information, the study may in fact underestimate the realized impact of DSH payment reductions.

This study demonstrates the need for continued close monitoring of hospital quality of care for low-income populations during the implementation of health reform. It also demonstrates the need to expand and standardize the scope of quality metrics and scale it up to determine the national impact of reducing programs that compensate facilities for providing uncompensated care to the most vulnerable of populations.

Abstract

BACKGROUND: Medicaid Disproportionate Share Hospital (DSH) payments are one of the major sources of financial support for hospitals providing care to low-income patients. However, Medicaid DSH payments will be redirected from hospitals to subsidize individual health insurance purchase through US national health reform.

OBJECTIVES: The purpose of this study is to examine the association between Medicaid DSH payment reductions and nursing-sensitive and birth-related quality of care among Medicaid/uninsured and privately insured patients.

METHODS: Economic theory of hospital behavior was used as a conceptual framework, and longitudinal data for California hospitals from 1996 to 2003 were examined. Hospital-fixed effects regression models were estimated. The unit of analysis is at the hospital level, examining 2 aggregated measures based on the payer category of discharged patients (ie, Medicaid/uninsured and privately insured).

PRINCIPAL FINDINGS: The overall study findings provide at best weak evidence of an association between net Medicaid DSH payments and hospital quality of care for either Medicaid/uninsured or the privately insured patients. The magnitudes of the effects are small and only a few have significant DSH effects.

CONCLUSIONS: Although this study does not find evidence suggesting that reducing Medicaid DSH payments had a strong negative impact on hospital quality of care for Medicaid/uninsured or privately insured patients, the results are not necessarily predictive of the impact national health care reform will have. Research is necessary to monitor hospital quality of care as this reform is implemented. PMID: 24714580 Hsieh, HM, et al. Med Care. 2014; 52: 415-421.

by

Ellana Stinson, MD