A recent study by researchers at Emory's Rollins School of Public Health found that safety net hospitals hospitals that serve large shares of poor and underserved populations — were more likely than other hospitals to be penalized under key provisions of the Affordable Care Act (ACA). 

The study appears in the August issue of the journal, Health Affairs.

Led by Edmund Becker, PhD, professor in the Department of Health Policy and Management at Emory's Rollins School of Public Health, the team examined California hospitals to determine whether safety-net hospitals are disproportionately penalized under programs such as value-based purchasing (VBP), the Hospital Readmissions Reduction Program (HRRP) and electronic health record (EHR) meaningful-use criteria. They also compared the performance, health outcomes and costs of safety net and non safety-net hospitals.        

In October 2012, Medicare began rewarding hospitals that provide high-quality care for their patients through the new VBP program.  Hospitals with higher VBP scores receive increased levels of revenue based on those scores while lower VBP scores result in penalties.  Additionally, not all hospitals have EHRs. In 2012, only 44 percent of hospitals have a basic EHR.

"We focused on California hospitals as a reflection of these types of effects nationwide because their Medicaid disproportionate-share hospital program makes payments to only a small percentage of hospitals," explains Becker. "The state effort to track and improve hospital quality is also extensive, therefore, if safety-net hospitals in California are more likely to be penalized under these programs, it could suggest even worse consequences for safety-net hospitals in other states."

The VBP, the HRRP, and the EHR meaningful-use programs have important consequences for hospital payment. VBP shifts financial incentives away from a supply-driven model to patient-centered health care based on value as reported by the patient. The HRRP levies financial penalties against hospitals with readmission rates that are deemed excessive. The rates are compared with actual readmission rates in a given period to determine an adjustment factor.  Penalties are assessed when the observed rate exceeds the expected rated.  The EHR meaningful-use program is the federal standard of eligibility for physicians and hospitals to receive incentive payments from CMS for adopting and using an electronic health record. 

"These programs redistribute prospective payments under Medicare to reward higher hospital performance and, ultimately penalize lower-performing hospitals," says Becker.

Findings suggested that safety-net hospitals in California provided better health outcomes than other hospitals at a reasonable cost, suggesting good performance and yet they were penalized more than non-safety-net hospitals.

"The safety-net population receives less in health care services than the non safety-net population," explains Becker.  "As a result, this population is more likely to lack a usual source of care, to delay needed care, and to be hospitalized for an avoidable cause. Our results show the need to reexamine policies that will better align incentives and prevent unintended consequences from placing further financial pressure on safety-net hospitals," says Becker.