Urban safety-net hospitals: The unseen victims of Medicaid cuts

Urban safety-net hospitals could get the biggest whack under President Donald J. Trump's federal spending law, also known as the One Big Beautiful Bill Act.

Signed by Trump over the summer, the One Big Beautiful Bill Act (OBBBA) includes significant cuts to healthcare spending, particularly affecting the Medicaid program. The safety-net program is slated to see nearly $1 trillion in cuts over the next decade, as millions are likely to become uninsured due to the law.

With such a high magnitude of changes to Medicaid coming, hospitals are bracing for increased uncompensated care costs and billions in potentially lost revenue. In particular, safety-net hospitals, which care for a disproportionate share of Medicaid-covered and uninsured individuals, are worried about the impact of OBBBA.

With Medicaid spending being slashed, an analysis by researchers at the Harvard Quality and Outcomes Lab and The New York Times sought to identify the characteristics of hospitals that would be most affected by the OBBBA changes. It found that, while rural hospitals are vulnerable to changes under the law, 85% of hospitals most vulnerable to the Medicaid cuts were located in urban areas.

The analysis found 109 hospitals that were either critical access or safety-net hospitals and already financially distressed, in addition to having a high Medicaid payer mix. Of these hospitals, they were more likely to be in urban areas, as well as the Northeast and West.

The hospitals were also more likely to be located where the Medicaid market was less concentrated and part of a health system. A higher percentage of these hospitals were also owned by a private equity firm -- 7.3% versus 4.9% of the overall hospital sample.

Researchers said that their findings suggest "that urban hospitals represent an underappreciated group that may be particularly vulnerable to OBBBA-related challenges, due to the combination of safety-net status, existing financial distress, and high Medicaid payer mix."

Urban safety-net hospitals have not gotten as much spotlight as their rural counterparts. Lawmakers made a conscious effort to support rural hospitals in light of the Medicaid changes under the OBBBA. For example, Congress earmarked $50 billion in funds for rural hospital support.

However, rural critical access hospitals were not "highly represented in this final group of hospitals most vulnerable to OBBBA Medicaid cuts," according to the Harvard researchers. They stated that the cost-based reimbursement structure of critical access hospitals, which are required to be located in rural areas, may mitigate some of the financial impact of OBBBA Medicaid cuts.

Failure to include urban, safety-net hospitals and even children's hospitals in the support funding package "is a glaring oversight," researchers added.

Without additional support, safety-net hospitals across the U.S. may have to eliminate some services or convert to emergency rooms or outpatient facilities, they explained. As a result, access to care, patient experience and clinical outcomes are also at risk as a result of OBBBA Medicaid cuts.

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.