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Open Access Research article

The relationship between safety net activities and hospital financial performance

Jack Zwanziger1, Nasreen Khan2* and Anil Bamezai3

Author Affiliations

1 Health Policy and Administration, School of Public Health, University of Illinois at Chicago, 1603 W Taylor St., Chicago, USA

2 College of Pharmacy, 1 University of New Mexico, Albuquerque, NM, USA

3 RAND Corporation, 1776 Main Street, Santa Monica, CA, USA

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BMC Health Services Research 2010, 10:15  doi:10.1186/1472-6963-10-15

Published: 14 January 2010

Abstract

Background

During the 1990's hospitals in the U.S were faced with cost containment charges, which may have disproportionately impacted hospitals that serve poor patients. The purposes of this paper are to study the impact of safety net activities on total profit margins and operating expenditures, and to trace these relationships over the 1990s for all U.S urban hospitals, controlling for hospital and market characteristics.

Methods

The primary data source used for this analysis is the Annual Survey of Hospitals from the American Hospital Association and Medicare Hospital Cost Reports for years 1990-1999. Ordinary least square, hospital fixed effects, and two-stage least square analyses were performed for years 1990-1999. Logged total profit margin and operating expenditure were the dependent variables. The safety net activities are the socioeconomic status of the population in the hospital serving area, and Medicaid intensity. In some specifications, we also included uncompensated care burden.

Results

We found little evidence of negative effects of safety net activities on total margin. However, hospitals serving a low socioeconomic population had lower expenditure raising concerns for the quality of the services provided.

Conclusions

Despite potentially negative policy and market changes during the 1990s, safety net activities do not appear to have imperiled the survival of hospitals. There may, however, be concerns about the long-term quality of the services for hospitals serving low socioeconomic population.