When US hospitals go private, Medicaid patients lose health care access

Over the past four decades, US hospitals have gradually shifted from public to private hands. The share of hospitals owned and operated by government entities — as opposed to private entities, either for-profit or not-for-profit — fell 42 percent from 1983 to 2019.

These trends have serious consequences for poor patients who seek treatment at these hospitals. As private companies assume control of public hospitals, low-income patients on Medicaid are losing access to health care, according to new research into a long-standing but under-analyzed trend in American health care.

A new National Bureau of Economic Research working paper by academics from Stanford, Michigan State, and Penn examines the consequences of 258 hospital privatizations from 2000 to 2018 that can be identified using national data. (Since there were more than 1,000 public hospitals in 1999, that means a quarter of all US public hospitals were privatized during the study period.)

The researchers found that after private companies took over hospitals previously controlled by the government, the hospitals became more profitable. As a public hospital, the facility lost an average of $335 per patient. As a private hospital, they earn $740 per patient.

In an ideal world, hospitals could run more efficiently, and therefore more profitably, without sacrificing access to health care. And the researchers found that hospitals made greater gains by reducing spending on administrative and support personnel than on the people most directly involved in patient care. There was no meaningful reduction in nursing staff, for example, after the transfer of control.

But other ways in which the hospital increases profits are more worrying. Hospitals taken over by private companies experienced an 8.4 percent decline in overall patient volume, partly as a result of hospitals reducing capacity in an effort to increase efficiency.

Admissions to Medicare fell only 5 percent, a statistically insignificant change, according to the researchers. But Medicaid admissions fell 15 percent, as well as a decline in “other” admissions (including uninsured and private insurance, with the former representing another unprofitable line of business for hospitals). Although Medicaid patients made up 20 percent of the hospital’s patient volume, they accounted for 30 percent of the drop in admissions after privatization.

“This pattern is consistent with private owners wanting to reduce their share of Medicaid and other patients in hospitals in order to increase their average revenue per patient,” the paper’s authors wrote.

I asked the author what hospitals turn away Medicaid patients can look like in practice. They can only speculate, as it is beyond the scope of the paper, but Mark Duggan at Stanford told me that perhaps the easiest way is for them to refuse to renew the Medicaid contract, taking the hospital out of the Medicaid provider network. patient. Atul Gupta at Penn also said it could eliminate certain services, such as psychiatric care, that Medicaid patients use more often. Or it can refuse to admit Medicaid patients; when they are forced to stabilize the patient in the emergency room, they have more discretion about which patients are actually admitted to the hospital.

In theory, fewer Medicaid patients could mean fewer unnecessary hospitalizations. But the researchers tested the idea by examining what happened to patient volume in all regions when hospitals were privatized. They found patients with Medicare or private insurance were being absorbed by neighboring hospitals — but Medicaid admissions were down in the area.

In other words, when newly privatized hospitals reduce admissions, patients with better health insurance are taken by other facilities, which will suggest that they still have clinical needs that the market will then follow. But Medicaid patients, whose insurance is not cheap, simply lose access to health care.

“Aggregate declines in Medicaid volume may affect its effectiveness as a social insurance program that ensures access to medical care for vulnerable low-income beneficiaries,” the researchers wrote. “Thus privatization emerges as a channel that can hinder the use of care by Medicaid beneficiaries.”

The consequences of hospital privatization for Medicaid patients have been made more significant by the recent expansion of Medicaid eligibility. Medicaid has now grown to become the largest health insurance company in the United States, covering more than 90 million Americans (including the CHIP program for children). However, as the authors noted in the analysis, the rise in enrollment has not been commensurate. Increase in hospital admissions by Medicaid patients. These findings may help explain why.

Medicaid is essential to the US safety net, providing no-cost insurance coverage to low-income Americans. This also has its problems, with low reimbursement rates resulting in fewer doctors accepting Medicaid patients. One of the most interesting research papers from last year found that the supposedly “adequate” network of doctors for people enrolled in Medicaid managed care plans (which are overseen by private companies) is not as strong as it seems.

Giving people Medicaid coverage is the first step in ensuring that vulnerable Americans get the health care they need — but it’s only the first step. They need to find doctors and hospitals that will accept insurance and treat them. That has been a long-standing struggle because of the program’s low reimbursement rates, which are lower than Medicare or private insurance.

And, according to this new research, the trend towards hospital privatization is making the problem worse.