Caught in the Competitive Crossfire: Safety-Net Providers Balance Margin and Mission in a Profit-Driven Health Care Market

Health Affairs Article: Safety Net Providers Adopt Strategies to Attract Higher-Paying Patients

News Release
Aug. 12, 2008

Alwyn Cassil (202) 264-3484 or

WASHINGTON, DC—As private physicians and hospitals shed unprofitable patients and services, safety net providers are balancing their mission to serve the needy with steps to attract higher-paying patients to shore up their margins, according to a study by the Center for Studying Health System Change (HSC) published today as a Web Exclusive in the journal Health Affairs.

To maintain financial viability, some safety-net providers—the patchwork of hospitals, community health centers (CHCs) and free clinics that either have an explicit mission to serve low-income and uninsured patients or are widely recognized as playing that role in their communities—are trying to limit exposure to uncompensated care and adopting such private-sector strategies as renovating and expanding facilities and focusing on lucrative specialty care to attract higher-paying privately insured and Medicare patients, according to the study funded by the Robert Wood Johnson Foundation.

"Safety-net providers really are caught in the competitive crossfire of an increasingly profit-driven health care marketplace—they have to maintain their margins to meet their mission of providing care regardless of patients’ ability to pay, but some of the steps they are taking to maintain their margins can threaten their mission," said HSC Senior Fellow Peter J. Cunningham, Ph.D., lead author of the study with HSC consulting researchers Gloria Bazzoli, Ph.D., of Virginia Commonwealth University, and Aaron Katz, C.P.H., of the University of Washington.

The Health Affairs article, titled "Caught in the Competitive Crossfire: Safety-Net Providers Balance Margin and Mission in a Profit-Driven Health Care Market," is based on HSC’s 2007 site visits to 12 nationally representative communities—Boston; Cleveland; Greenville, S.C.; Indianapolis; Lansing, Mich.; Little Rock, Ark.; Miami; northern New Jersey; Orange County, Calif.; Phoenix; Seattle; and Syracuse, N.Y. HSC has been tracking change in these markets since 1995.

"Our findings are similar to previous studies in that safety-net providers continue to experience financial pressures in part as a result of increasing numbers of uninsured people," the authors write. "However, some providers are responding in ways that we have not observed previously. These responses include actions to limit their exposure to indigent care, as well as actions that often mimic non-safety-net providers’ efforts to increase revenue and attract a more favorable patient mix."

The study identified the following safety-net provider strategies to shore up their bottom lines:

The article concludes that safety-net providers’ ability to maintain "the balance between their mission and the requirements for financial viability has been tenuous for some time, but is becoming even more so in a marketplace that is becoming more competitive and profit-driven."

### ###

The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded principally by the Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.