CHANGES IN U.S. SAFETY-NET HOSPITAL FINANCES IN THE FIRST YEAR OF THE COVID-19 PANDEMIC

ABSTRACT

BACKGROUND: The Covid-19 pandemic introduced myriad financial challenges for hospitals nationally. These challenges may have been particularly for midable for safety-net hospitals that disproportionately serve lowincome patients, given the baseline financial constraints of these hospitals and the burden of Covid-19-related illness among low-income patients. Understanding how safety-net hospitals have financially fared during the pandemic is critical to informing how policymakers can bolster these hospitals. METHODS: We conducted a national retrospective cohort study of safety-net hospitals, defined as hospitals with the largest shares of Medicaid patients, and non-safety-net hospitals. Using data from Medicare Cost Reports, 2015-2020, we examined differential changes across three measures of hospital finances (operating margins, total margins, share of uncompensated care), between safety-net and non-safety-net hospitals, before (pre-2020) and after the onset of the pandemic (post-2020). In main analyses, the sample was limited to hospitals with the most complete reporting of 2020 Cost Reports;in sensitivity analyses, all hospitals were included regardless of the completeness of 2020 reporting. We performed additional sensitivity analyses using an alternate definition for “safety-net hospitals” based on the disproportionate share hospital index. RESULTS: The sample included 230 safety-net hospitals and 1,858 nonsafety-net hospitals. Operating margins at safety-net hospitals differentially declined since the beginning of 2020 compared to non-safety-net hospitals (3.3% pre-2020 vs. 3.8% post-2020 among safety-net hospitals;3.2% pre2020 vs. 5.3% post-2020 among non-safety-net hospitals;-1.2 percentage point change, p=0.02). Similar patterns were evident for total margins (5.0% pre-2020 vs. 6.2% post-2020 among safety-net hospitals;4.7% pre-2020 vs. 7.0% post-2020 among non-safety-net hospitals;-0.9 percentage point change, p=0.07). There were also non-significant differential increases in uncompensated care at safety-net hospitals compared to non-safety-net hospitals since 2020 (6.8% pre-2020 vs. 7.4% post-2020 among safety-net hospitals;6.9% pre-2020 vs. 7.1% post-2020 among non-safety-net hospitals;0.4 percentage point change, p=0.08). Results were consistent when using a different definition for “safety-net hospitals”, as well as when the sample included hospitals with less complete financial reporting in 2020 (707 safety-net hospitals vs. 4,205 non-safety-net hospitals). CONCLUSIONS: Safety-net hospitals experienced differential declines in operating margins compared to non-safety-net hospitals since the onset of the pandemic in 2020. These hospitals provide essential care for low-income patients but have faced longstanding financial challenges that were only exacerbated by the pandemic. Understanding drivers of these declines will be critical for the viability of these hospitals as well for policymakers seeking to bolster safety-net health care delivery in the pandemic era.