Payment Reform for Safety-Net Institutions

Improving Quality and Outcomes

C. Jason Wang, M.D., Ph.D., has a message for lawmakers as they debate an overhaul of the nation’s health care system: Don’t pay for health reform on the backs of the poor.

If current health care reform legislation becomes law without additional payment reform efforts, he says, "safety-net" hospitals that serve low-income people and other vulnerable populations risk financial ruin. And without these institutions, low-income people will have nowhere to turn in times of crisis.

Wang, an assistant professor of pediatrics and public health at Boston University and Boston Medical Center and a Robert Wood Johnson Foundation (RWJF) Physician Faculty Scholar, sounded this alarm in a commentary he and his colleagues published last month in the New England Journal of Medicine.

"You can talk all you want about quality and outcomes, but at the end of the day, if you don’t provide adequate compensation for safety-net institutions, most of them are going to go bankrupt," he says.

Wang ought to know. An employee of the largest safety-net hospital in New England, he has seen firsthand the unintended consequences for the poor from a 2006 law that provided nearly universal access to health insurance to residents of Massachusetts.

While many low-income people have benefited from increased access to insurance coverage, health care facilities that serve these populations are struggling financially because they now lack the resources they need to provide care for an influx of newly insured, low-income patients, he says.

Under the new law, funds previously used to reimburse safety-net institutions for uncompensated care were used to pay for health insurance for the uninsured, he says. As a result, safety-net facilities are now having trouble paying health care bills for their low-income patients, who tend to be more expensive to treat than wealthier clients because they have a greater predisposition to a range of illnesses and often have more severe forms of illnesses when they arrive at health care facilities.

The Boston Medical Center and other safety-net institutions in the state have filed lawsuits to recoup some of those lost funds. Wang says other safety-net institutions around the country also face great financial risk if Congress follows the Massachusetts model.

But Wang doesn’t believe his message is being heard on Capitol Hill.

Lawmakers are weighing payment reform, he says, but they aren’t giving serious consideration to proposals to increase payments to safety-net hospitals to compensate them for the higher cost of treating low-income patients.

"They're ignoring the issue," he says. "People are talking about paying for quality using a bundled payment scheme, but they have forgotten that they need to do adequate risk adjustment to ensure that health care facilities that serve the poor are able to survive under a new health care system."