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Strengthening the Health Care Safety Net

Understanding Variation


Stephen Zuckerman, Ph.D., Principal Research Associate, The Urban Institute, Washington, DC.

Irene Fraser, Ph.D., Director, Center for Organization and Delivery Studies, Agency for Healthcare Research and Quality (AHRQ), Rockville, MD.

This session identified the key indicators used to assess the behavior and status of safety net providers (SNPs) and described how these indicators vary significantly across States and communities. This session also described the use of hospital services by Medicaid and uninsured patients and described a forthcoming template with national benchmarks that policymakers will be able to use to identify these patterns in their States and communities using discharge data.

Dr. Stephen Zuckerman is Principal Research Associate at The Urban Institute in Washington, DC. He has been studying the evolution of Federal and social policy in The Urban Institute's Assessing the New Federalism (ANF) project. ANF began in 1996 with the goals of monitoring and documenting changes in design, administration, and financing of public programs for low-income populations; measuring trends in indicators of well-being; and assessing the impact of programmatic changes. ANF has been focusing its analysis on 13 States that are geographically diverse and represent a range of public policies related to addressing the uninsured problem and providing safety net services.

Dr. Zuckerman addressed the forces affecting SNPs including:

  • The number of uninsured and demand for safety net services.
  • Market forces such as Medicaid and private managed care, and competition from for-profit hospitals.
  • Provider subsidies such as Federal disproportionate share hospital (DSH) payments and State and local supports.

Lack of insurance creates a demand for safety net care. State policies that affect insurance coverage include:

  • Income eligibility limits.
  • Medically needy programs.
  • State-only programs.
  • Various approaches to coverage.

Dr. Zuckerman also discussed the various means of financial support for the safety net, including:

  • Cost-based reimbursement for federally qualified health centers (FQHCs).
  • Federal grants and State subsidies to clinics.
  • Local revenues that can account for up to 40 percent of the provider budget.
  • Medicaid and Medicare DSH payments.

Dr. Zuckerman illustrated the variations in the forces and financial supports affecting SNPs. Boston is an example of a less vulnerable area, with high private insurance coverage and expanded public insurance coverage. Boston has a large bad debt and charity care pool, with matching DSH funds. The city also has a less aggressive form of private managed care, and Medicaid managed care consists mostly of primary care case management.

Conversely, Houston has a high uninsurance rate, low private coverage, and limited Medicaid coverage. Houston's local financing of SNPs is fragile and receives below-average DSH payments. With regard to managed care, Houston has a small but growing Medicaid managed care system that is attracting patients from public hospitals, and a growing influence of private managed care and entry of for-profit hospitals.

Dr. Zuckerman cited Jackson, Mississippi, as another example of the variation across States. Although it resembles Houston in terms of high insurance rates, Jackson, on the other hand, receives high DSH payments. Jackson has low levels of competition and a strong market share for indemnity insurance. Medicaid managed care is limited, consisting mostly of primary care case management.

Dr. Zuckerman stressed that variation in uninsurance rates is central to defining pressure on SNPs. For example, SNPs in California and Texas, where more than 19 percent of the non-aged population is uninsured, are under greater stress than those in Minnesota and Massachusetts, where less than 10 percent are uninsured. He concluded by saying that, although local financing and funding initiatives will likely play an important role, in the future, resiliency and responsiveness of SNPs will continue to be critical to survival.

Dr. Irene Fraser is Director of the Center for Organization and Delivery Studies at AHRQ. The Center manages the Healthcare Cost and Utilization Project (HCUP), a Federal-State industry partnership to build a multistate health care data system. Sponsored by AHRQ, the Center has collected data from 22 States thus far. HCUP databases include: Nationwide Inpatient Sample; State Inpatient Databases; and State Ambulatory Surgery Databases. For more information about HCUP, visit

The focus of Dr. Fraser's presentation profiled hospitals serving Medicaid and uninsured persons using data from the HCUP Nationwide Inpatient Sample (NIS). According to preliminary 1997 data, one in five hospital discharges is Medicaid or uninsured, raising such fundamental questions as: How do hospitals vary in level of effort? What do "high-effort" hospitals look like? And how has this profile changed over time?

Dr. Fraser described a study that Peggy McNamara and she are conducting that uses the following approach:

  • Look at the payer mix in each hospital.
  • Rank hospitals by the ratio of Medicaid and uninsured discharges to total discharges.
  • Identify high-effort hospitals.
  • Examine the characteristics of these hospitals.
  • Identify trends over time.

A fact book is forthcoming from the Center for Organization and Delivery Systems profiling hospitals that serve Medicaid and uninsured patients. It will be also be available on the AHRQ Web site at


Agency for Healthcare Research and Quality. HCUPnet: Interactive tool for identifying, tracking, analyzing, and comparing statistics on hospital care. Rockville, MD: Agency for Healthcare Research and Quality. 2000 Feb. AHRQ Publication No. 00-0051.

Elixhauser A, Yu K, Steiner C, Bierman AS. Hospitalization in the United States, 1997. Healthcare Cost and Utilization Project (HCUP) Fact Book No. 1. Rockville, MD: Agency for Healthcare Research and Quality. 2000 May. AHRQ Publication No. 00-0031.

Fraser I. Access to health care. Rockville, MD: Agency for Healthcare Research and Quality. 1997 Oct. AHRQ Publication No. 98-R003.

McCormick MC, Kass B, Elixhauser A, et al. Annual report on access to and utilization of health care for children and youth in the United States—1999. Rockville, MD: Agency For Healthcare Research and Quality. 2000 Jan. AHRQ Publication No. 00-R014.

Norton SA, Lipson DJ. Public policy, market forces, and the viability of safety net providers. Assessing the New Federalism, Occasional Paper Number 13. Washington DC: The Urban Institute. 1998 Sept.

Ormand BA, Zuckerman S, Lhila A. Rural/urban differences in health care are not uniform across States. Assessing the New Federalism, National Survey of America's Families, Series B, No. B-11. Washington DC: The Urban Institute. 2000 May.

Spillman BC. Adults without health insurance: do State policies matter? Health Aff 2000 July/Aug;19(4):178-87.

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