[Congressional Record Volume 143, Number 90 (Tuesday, June 24, 1997)]
[Extensions of Remarks]
[Page E1308]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   WHO WILL CARE FOR THE POOR? NEW DATA SHOWS THE IMPENDING HOSPITAL 
                                 CRISIS

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                         Tuesday, June 24, 1997

  Mr. STARK. Mr. Speaker, we have just received the June report from 
our congressional hospital payment advisory panel--the Prospective 
Payment Assessment Commission--and it carries a dire warning about the 
future of the Nation's safety net hospitals in the era of managed care.
  The report, ``Medicare and the American Health Care System, Report to 
the Congress, June, 1997,'' contains the following statement and table. 
It is a matter of life and death to millions of our fellow citizens 
that we address the problem of the uninsured in these good economic 
times. When an economic downturn comes, the pressure on these safety 
net hospitals will be unbearable--and then who will care for the 
uninsured and poor?

       Rising financial pressure has raised concern about the 
     willingness or ability of many hospitals to continue 
     providing uncompensated care in a more competitive 
     marketplace. A previous ProPAC analysis suggested that high 
     managed care enrollment is associated with increased 
     financial pressure from private payers and with greater 
     reductions in the amount of uncompensated care hospitals 
     provide.\43\ Between 1992 and 1994, private payer payment 
     to cost ratios declined 4.5 percent for hospitals located 
     in urban areas with high managed care penetration; 
     uncompensated care burdens for these hospitals also fell 
     by 4.5 percent (see Table 3-14). The experience of 
     hospitals located in areas with low managed care 
     penetration was quite different: Their private payer 
     payment to cost ratios rose 4.1 percent, while 
     uncompensated care burdens fell only 0.1 percent.

  CHANGE IN HOSPITAL FINANCIAL PERFORMANCE, BY MANAGED CARE PENETRATION 
                              RATE, 1992-94                             
                              [in percent]                              
------------------------------------------------------------------------
         Financial performance              Low       Medium      High  
------------------------------------------------------------------------
Private payment to cost ratio..........        4.1        3.8       -4.5
Total payment to cost ratio............        0.9       -0.8       -2.0
Uncompensated care burden..............       -0.1       -1.4       -4.5
Cost per adjusted admission............        8.2        7.0       7.3 
------------------------------------------------------------------------
Note: Managed care penetration rates are based on enrollment in health  
  maintenance and preferred provider organizations as a percentage of   
  the total population in the metropolitan statistical area (MSA). Low  
  penetration is less than 41 percent; medium is from 41 percent to less
  than 50 percent; high is from 50 percent to less than 60 percent. This
  analysis is limited to 89 of the largest MSAs and excludes those with 
  penetration rates of 60 percent or more.                              
SOURCE: ProPAC analysis of data from the American Hospital Association  
  Annual Survey of Hospitals and the National Research Corporation.     

       The situation is particularly tenuous for hospitals that 
     furnish a large amount of indigent care. They often lack the 
     private payer base that can offset uncompensated care losses. 
     Private payers' share of costs in pubic major teaching 
     hospitals, for instance, is less than 15 percent (see Table 
     3-7). Moreover, compared with other institutions, these 
     hospitals are already getting substantially higher private 
     payments relative to costs, which makes it difficult for them 
     to compete. The private payer payment to cost ratio for these 
     facilities is 154 percent compared with an all-hospital 
     average of 124 percent.
       These hospitals are also in much weaker financial condition 
     than other institutions, despite the additional subsidies 
     they receive. Total gains for public major teaching 
     hospitals, for instance, were only 1.5 percent in 1995, far 
     below those for other hospitals. Given that one of their 
     missions is serving the poor, they may not be able to reduce 
     uncompensated care, particularly if other hospitals are doing 
     so. Consequently, any increase in uncompensated care burdens 
     could put such hospitals at serious financial risk.

     

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