The Effects of Early Medicaid Expansion in California on Inpatient Utilization of Safety Net Hospitals

Expansions in health insurance coverage and reductions in the number of uninsured through the Affordable Care Act are expected to benefit many of the nation’s safety net hospitals that serve a large number of uninsured patients, especially by reducing the amount of uncompensated care. The objective of this study is to examine the impact of early Medicaid expansion in California on trends in inpatient admissions among safety net hospitals and non-safety net hospitals. Using data from the Healthcare Cost and Utilization Project (HCUP) State Inpatient Databases and the California Office of Statewide Health Planning (OSHPD), the study examines changes in inpatient admissions for California using difference-in-difference methods. Specifically, we examine 2010-2013 changes in hospital utilization for California and several neighboring states that had no significant changes in Medicaid or public coverage programs during the same time period. Comparison states include Arizona, Nevada, and Washington. We look specifically at changes in utilization among safety net hospitals, defined as hospitals that serve a disproportionately high number of uninsured and Medicaid patients, and compare these to changes at non-safety net hospitals. The analysis controls for other patient, hospital, and local area characteristics. Our main data sources are supplemented by data from the American Hospital Association annual survey and the Area Health Resources File.  

We find that both safety net and non-safety net hospitals in California observed increases in Medicaid admissions and decreases in uninsured admissions relative to the comparison states. Acuity levels of Medicaid patients increased to a greater extent at safety net hospitals compared to non-safety net hospitals, suggesting some evidence of “cherry-picking” of healthier patients by non-safety net hospitals. We also consider changes in preventable admissions and find that trends in preventable admissions were similar to trends in overall admissions, with increases for Medicaid patients and decreases for the uninsured. However, preventable admissions for uninsured patients decreased to a greater extent at safety net compared to non-safety net hospitals, which might reflect efforts by the major safety net systems in California to increase access to and use of primary care.

This study is among the first to systematically examine the effects of ACA-related insurance coverage expansion on utilization of safety net hospitals. Our findings have potential implications for examining the impact of the ACA on hospital utilization nationally. The trends for the comparison states in this study – which showed a worsening payer mix in the absence of any public coverage expansions – suggest that safety net hospitals in states that did not expand Medicaid will be especially vulnerable to reductions in public subsidies, such as Medicaid DSH funding starting in 2018.  Further, even in Medicaid expansion states, our finding that acuity of Medicaid patients increased more at safety net hospitals raises the concern that safety net providers will encounter a more medically complex and costly case-mix that increases the vulnerability of safety net hospitals to low Medicaid payment, especially in light of pending cuts in public subsidies.