Longitudinal Changes in the Operating Efficiency of Public Safety-Net Hospitals

Helton, Jeffrey R., Langabeer, James R., II, Journal of Healthcare Management

EXECUTIVE SUMMARY

Government-operated trauma facilities fill an important role as safety nets in our health system, providing care to millions of individuals who lack health insurance. Because these hospitals are often the most financially constrained, continuous improvement in operating efficiency seems to be a necessary component of their organizational strategy. In this study, we analyze the longitudinal changes in efficiency of a large sample of government-operated safety-net hospitals from 2004 to 2008. Employing an analytical tool called data envelopment analysis, our findings suggest that as a group these hospitals have become more efficient over time, improving by 2.1 percent over the five-year study period.

INTRODUCTION

Approximately 46 million people younger than age 65, or 25 percent of the LIS population in that age group, do not have continuous access to health insurance coverage (Hsieh, Clement, and Bazzoli 2010). The number of uninsured and medically indigent persons has been growing annually in recent years (Andrews et al. 2007). While current health reform efforts may reduce this number by as much as half, a substantial patient population will remain without resources to pay for needed healthcare services (KFF 2010; Ringel et al. 2010). Generally, care for the indigent and uninsured is provided by hospitals under the Emergency Medical Treatment and Active Labor Act (EMTALA) mandate requiring hospitals to treat patients with acute needs without consideration of their ability to pay (Cunningham 2008). Some hospitals provide a large proportion of their services to persons who do not have resources to pay for care. These hospitals are commonly referred to as safety-net hospitals (Zwanziger and Khan 2008).

Many of the facilities making up the nation's safety net are trauma centers operated by local government entities.

Providing care to persons who lack resources to pay for such care places a financial burden on safety-net organizations, even those that are government operated and receive an external subsidy to fund this community benefit mission (Meyer et al. 1999). The pressures of providing care to the increasing ranks of those who cannot pay combined with reimbursement reductions should spur greater efficiency in provider organizations, especially safety-net trauma facilities (Hsieh, Clement, and Bazzoli 2010).

The extent to which the level of efficiency has changed in government-operated safety-net hospitals across the United States in recent years is a question that, if answered, could assist administrators and policymakers in identifying opportunities to improve. This study evaluated changes in the operational efficiency of the nation's government-operated trauma centers during the years 2004-2008. It was conducted using a sophisticated data benchmarking technique known as data envelopment analysis (DEA). The primary contribution of this exploratory study is that it is the first to analyze longitudinal trends in the efficiency of government-operated safety-net hospitals.

BACKGROUND ON SAFETY NETS AND OPERATING EFFICIENCY

The prevailing employer-based health insurance model is in a state of decline as increasing numbers of businesses cease to offer health coverage as a fringe benefit (Cunningham 2008). At the same time, government programs such as Medicaid are facing difficulty maintaining funding levels; as a result, they must institute tightened eligibility criteria. These changes are limiting or reducing the number of persons on public health insurance programs, further increasing the population of uninsured residents (Fronstin 2005). Enactment of the Patient Protection and Affordable Care Act is expected to reduce the number of uninsured by as much as half after 2014 (KFF 2010; Ringel et al. 2010). However, with many remaining uninsured people continuing to seek uncompensated hospital care beyond that date, the policy issue of efficiency in delivering care by safety-net hospitals is one that cannot be ignored.

Lack of access to care has been discussed as a barrier to the uninsured population using mainstream community providers (e.g., primary care physicians). Greenwald, Keefe, and DiCamillo (2004) note that the majority of the uninsured receive care sporadically or in inappropriate settings--such as hospital emergency departments--because they lack insurance and thus have limited access. Often, the hospitals where services are sought are government-operated trauma centers serving as safety-net providers.

The Institute of Medicine (2000) first raised the question of the risk of financial viability of government-operated trauma centers when it noted that adoption of Medicaid managed care contracts might adversely affect providers serving not only large proportions of Medicaid patients but the uninsured as well. In its definition of facilities at risk for financial harm from such changes, it said that the greatest risk was posed to the "core safety-net providers." These providers were characterized as hospitals that "either by legal mandate or explicitly adopted mission, offer care to patients regardless of their ability to pay for services" and "a substantial share of their patient mix are uninsured, Medicaid, and other vulnerable patients." Prominent among the providers included in that analysis were publicly funded trauma centers. At the same time, local government entities struggle to balance funding the healthcare safety net for citizens, other service priorities, and pressures by constituents to minimize community tax burdens (Rollins 2004). Recent declines in the national economy exacerbate the challenge of …

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Publication information: Article title: Longitudinal Changes in the Operating Efficiency of Public Safety-Net Hospitals. Contributors: Helton, Jeffrey R. - Author, Langabeer, James R., II - Author. Journal title: Journal of Healthcare Management. Volume: 57. Issue: 3 Publication date: May-June 2012. Page number: 214+. © 1998 American College of Healthcare Executives. COPYRIGHT 2012 Gale Group.

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