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ATLANTA — Drive around this city long enough, and you’ll see the billboards that have become a staple of the skyline. They read: Atlanta can’t live without Grady.

For many here, that’s indeed the case. Grady Memorial Hospital, a safety net hospital with more than 950 beds, is where people go if they come down with the flu or if they suffer a gunshot wound, but can’t afford care anywhere else. In a state home to the third-highest percentage of uninsured residents, Georgia’s largest hospital last year spent $246 million treating patients who couldn’t afford their medical bills. The hospital was paid back for about third of those costs thanks to an overlooked-but-important federal program — but one that may abruptly end if Congress doesn’t take action before the end of the month.

That possibility has hospitals across the country — especially those that treat low-income individuals — concerned.


Since the ’80s, Disproportionate Share Hospitals payments — a part of Medicaid and Medicare — have offset a portion of the uncompensated care hospitals provide to patients every year. But because of a quirk of Obamacare’s implementation, the payments were slated to be gradually cut over an eight-year period. After temporary extensions over the past three years, the first of a total $43 billion in payment cuts are set to kick in on October 1.

And safety net hospitals — which care for low-income patients as part of their mission — are poised to be hit hardest: They provide on average eight times more uncompensated care than other hospitals. If nothing happens, hospital administrators worry they may have to scale back or shutter departments, postpone plans for new treatment centers, or scrap preventive care programs intended to lower the total costs of care.


“[The cuts] would be absolutely devastating,” said Beth Feldpush, senior vice president of policy and advocacy for America’s Essential Hospitals, which advocates for the interests of about 300 safety net hospitals. “If these cuts move forward, it’s be going to be very hard for safety net hospitals to continue to offer services to those in their communities who otherwise don’t have access to everything from primary care visits to emergency care services.”

But amid senators’ legislative frenzy of a Sept. 30 deadline to pass a bill to repeal and replace Obamacare, the issue of DSH cuts has hardly been aired.

“We don’t sleep well night,” said Dr. Michael Waldrum, CEO of Vidant Health in eastern North Carolina. “We are in the business of taking care of people. But it doesn’t help us run health care companies. It definitely leads to stress.”

When the Affordable Care Act passed in 2009, the law originally required states to expand Medicaid and set a timeline to reduce annual DSH payments. The thinking was that, with more insured Americans, there would be less uncompensated care needed. But the U.S. Supreme Court tossed out the mandate for states to expand Medicaid in 2012. Eighteen states decided not to move forward with the key provision of the federal health law.

The SCOTUS ruling therefore left safety net hospitals stuck in the middle of an unintended policy gap. Because Congress hasn’t fixed the underlying problem, administrators say these short-term delays have created an environment of constant uncertainty that forces them to be preoccupied with the business of staying open rather than the business of serving patients.

“If you’re a private business, you couldn’t run like this,” said Katherine Yoder, vice president of government relations for the nonprofit Parkland Health and Hospital System in Dallas. “We don’t like this uncertainty. But we’re used to it.”

For Medical University of South Carolina Health, Executive Director Dr. Patrick Cawley said the funding cuts, starting at $6 million for his health system in 2018, would potentially “put on hold” a new mental health crisis stabilization center. The center was planned to divert nearly two dozen patients from the emergency department each night toward specialized care that Cawley said would be better for patients and cheaper for the hospital.

In southwest Florida, Lee Health’s plans to expand its facilities — in part to accommodate a state with a growing Medicaid population — would be hampered by DSH payment cuts. Dr. Larry Antonucci, president and CEO of Lee Health, said the company is considering delaying projects including a 250-bed expansion, clinics in underserved areas, and a cancer center.

“We live and die by Medicaid and Medicare reimbursements,” Antonucci said. “Not only could [DSH cut delays] fall through the cracks, but there’s the specter of lawmakers letting the system fall apart, so they can rebuild it. Patients will be affected by it.”

For its part, Grady Health System faces the prospect of at least $11 million in cuts in 2018 — growing to $45 million in 2024 — that would be a “major hit to Grady’s bottom line,” according to CEO John Haupert. In recent years, Haupert has warned that cuts to DSH payments may force his hospital to close either its OB-GYN clinic or mental health department — the latter being the second-largest provider of mental health services in Georgia.

Delaying DSH payment cuts, VCU Health CEO Dr. Marsha Rappley said, would offer stability at a time when potential changes to CHIP and the 340B drug pricing program have also threatened to destabilize hospitals caring for residents of Richmond, Va. Rappley was one of 89 hospital administrators to sign a letter last week asking lawmakers to delay cuts to DSH payments for another two years.

Still, Feldpush of America’s Essential Hospitals said, senators “aren’t talking about pending DSH cuts” because of the all-consuming focus on the Graham-Cassidy health care plan.

If the deadline passes, lawmakers could potentially circle back to the issue of DSH payments. “It would be best for Congress to deal with the DSH delays before the deadline,” said Sean Brown, vice president of communications for the Federation of American Hospitals. “But if they don’t — it is our understanding that it can be done retroactively.”

With the deadline looming, three congressmen circulated a letter on Thursday urging House leadership to delay cuts to DSH payment before it’s too late.

“Our nation’s hospitals cannot sustain losses of this magnitude,” read the letter co-authored by Reps. Eliot Engel of New York, John Culberson of Texas, and Steven Palazzo of Mississippi. “Institutions will be forced to shutter, leaving our constituents without a safety net. We ask that you work swiftly to delay these cuts for at least two fiscal years, through 2020, or until a more sustainable, permanent solution is reached.”

As of Friday, America’s Essential Hospitals said more than 150 members of Congress have signed onto the letter, making some hospital administrators cautiously optimistic that their concerns will be heard. Others, though, simply feel resigned to make do with whatever resources they have, even if it may soon be less than they had before.

“Nobody else provides care for this group,” Rappley said. “People work in these institutions because they believe it’s the right to do. We’re determined to find a way to fulfill our mission.”