Do Safety Net Hospitals Need A Safety Net?

 

 

This is about the current financial crisis at Hennepin County Medical Center (HCMC).  It is one of the flagship medical centers in the State of Minnesota.  It provides unique care that is not available anywhere else. It was the first place I interviewed at for a residency position out of medical school back in 1981. The first person I talked with was (the now late) Mark Mahowald, MD.  Dr. Mahowald was a world-famous sleep researcher and long-time head of the Hennepin Healthcare Sleep Disorder Center.  He has over a hundred publications on sleep and its implications.  He and his colleagues also trained physicians from several other disciplines in sleep medicine in their fellowship program.  That clinic is being shut down because of budgetary problems at the hospital.

After getting selected into the program at the University of Minnesota – half of my residency class (n=8) went to St. Paul-Ramey Medical Center (SPRMC) and the other half went to HCMC for the rotating internship year.  In those days both were designated as county hospitals.  That meant they were subsidized to some extent by the counties where they were located and mandated to treat anybody that showed up at their door whether they had health insurance or not.  When you have that kind of mandate you develop services that nobody else has, because you are the provider of last resort. You also develop expertise in treating people with the most severe problems largely because that is a group defined by social determinants including whether they have healthcare insurance.

Both hospitals are Level 1 Trauma Centers.  Both hospitals have burn units.  Both hospitals have extensive Emergency Medicine services closely aligned with paramedics.  Behavioral emergencies are most likely brought to these hospitals adding to the psychiatric training. Both hospitals treat the most people who require involuntary psychiatric treatment in the state.  The specialist physicians in both places are excellent clinicians and teachers.

After I completed my training – I went back and became staff at SPRMC.  I enjoyed working at a county hospital.  Reimbursement was not great, but I liked seeing people with the most severe problems.  I liked close relationship with consultants in every department and the fact that we had a certain esprit de corps.  We were all squarely focused on providing the best possible care to people whether they could afford it.

SPRMC and HCMC were on parallel courses until the 1990s.  At that point the physician group affiliated with SPRMC decided to cede control of the hospital to HealthPartners – a managed care company in 1993. Prior to that the facility had been public since its 1872 founding as the City and County Hospital, later becoming Ancker Hospital (1923) and St. Paul-Ramsey (1965).  The rationale for the merger was that SPRMC was in a market saturated with hospital beds and it assured access to an increased number of patients needing hospital beds.  It also provided access to the specialty physicians of Ramsey Clinic the associated medical group.

In the meantime, Hennepin County Medical Center remained a county hospital.  The county owns the land, physical plant, and assets.  In August 2025, the Hennepin County Board took control of the hospital from a volunteer board – The Hennepin Healthcare System that had managed the hospital since 2007.

In February 2026, the county board warned that the hospital could close as soon as May of 2026 if solutions to a funding crisis could not be found.  Repurposing a 0.15% sales tax was proposed as well as staff and programming cuts.  The tax was originally in place to pay off financing for Target Field and that should happen in the next year.  Increasing the sales tax to 1% at that point will provide $280-$341M in annual funding.  Since 40% of HCMC patients come from outside of Hennepin County this was thought to be fairer than increasing the property taxes for residents of the county.

In researching this article, I found a document on a Minnesota State web site entitled Minnesota Hospital Uncompensated Care and Its Components, 2013 to 2023. The range of uncompensated care for HCMC during that time frame was $37.5M in 2013 to $64.2M in 2023.  The highest years in the range were $81.5M in 2022 in and $65.3M in 2021.  Total uncompensated care for the entire time was $453M.  There are estimates in various documents that the uncompensated care could reach as high as $200M/year.

The uncompensated care figures can be put into perspective in several ways.  First – these numbers are the largest of any hospital in Minnesota including some with a larger bed capacity.   Second – they have become progressively larger over the years compared to many of the other 131 hospitals that have relatively flat uncompensated care totals.  Relative to the 2025 HCMC operating budget of $1.57B, the uncompensated health care for that year was is estimated at over $100M or about 6%.  There are estimates this figure will stay at $100M/year and an addition loss of $1.7B in Medicaid Revenue over the next decade.

In the short term, significant cost cutting measures have been put in place. They include shutting down 100 beds (461 to 361).  There have been staff layoffs with 100 positions eliminated.  Several programs including Sleep Medicine, acupuncture, and chiropractic care have been eliminated.  The geriatrics program has been incorporated into primary care.  Retirement fund contributions for employees have been frozen. 

But the real crisis at HCMC is that they are not being compensated for the services they provide.  It is a crisis of the American healthcare system rather than of just one hospital.  It is continually misunderstood and mismanaged at the political and business level. There is a general lack of awareness over the past 40 years that American healthcare has been taken over by business entities.  The disappearance of county hospitals like SPRMC was one of the first signs. As a physician, the other signs included the disappearance of staff who assisted with all the paperwork and a new billing and coding system that depended on that paperwork.  In my case that was three fulltime people.  The billing system was relative value units or RVUs that could be assigned a conversion factor to determine what reimbursement might be.  RVUs were tied to the billing document that was structured to contain a certain number of bullet points necessary to qualify for that RVU.  It was an easy formula to ration reimbursement – just reduce the multiplier or deny the care all together.

All that sounds boring and technical.  It was based on trying to quantify a purely subjective system.  To cite one example, from my experience in 2 successive years of billing and coding audits I went from the top ranked physician (a dubious honor) to the lowest rank without making any changes in how I recorded the notes. The only thing that changed was the judgment of the people doing the ratings. To make matters much worse, physicians learned that we were now legally responsible for any errors and that in the worst case we could be held liable for wire fraud under RICO statutes if an erroneous bill went out in the mail.  Before 911 - there were FBI raids of physician offices looking for these errors. 

When I look at the independent auditors’ data available for HCMC for 2024 – it seems like there is a straightforward loss of $40M (net operating revenue – net operating expense).  At the same time care patterns (average length of stay and average daily census) were flat.  Case mix acuity was slightly higher and the auditors’ comment that there are often no good discharge scenarios for the patients.  Discharges were higher (17,090 compared with 16, 502 the previous year).  Work RVUs (WRVUs) were 5.2 % higher.   These WRVUs are reflected in a gross patient charge figure of $3.66B.  From that figure there is a $2.1B deduction based on rate discounts with various providers and a slight add back for government subsidies that leaves a net patient service revenue of $1.337B.  Patient services are discounted by about 60% due to the way governments and insurance companies operate. 

If it seems like that is a steep discount for quality services – it is. And that discount is not evenly distributed across services. The best example is the mental health (or behavioral health) carve out.  That means that a managed care company manages mental health problems through separate system that typically reduces reimbursement to physicians by an additional 20% relative to medical surgical providers.  Medicaid carve outs typically pay 20-30% less than Medicare. The managed care system can also simply deny care (and payment) to anyone admitted to a hospital based on their subjective review of the hospital record.  In any individual patient the range for discounting services can be anywhere from 60 to 100%. 

How did the USA arrive at such an irrationally financed system of health care?  The short answer is that it was a government facilitated transfer to for-profit businesses.  When I say government facilitated – I mean all the regulations I have talked about so far and more make it easy for health care companies to make huge profits.  They have taken very locally managed businesses focused on service and quality and built large networks focused on profit and shareholder wealth.  In the political landscape this has been facilitated by a party that uses the physician-patient relationship to leverage an underlying agenda of dictating and in some cases criminalizing healthcare available to women and accusing people with no healthcare of being lazy. The problem they say is that people are not working even though most workers can not afford health care premiums especially due to the current administration. 

There are obvious solutions that American politics ignores.  Here is one that is truly cost saving, covers everybody, and provides at least the same level of high-tech healthcare as the current system while saving a trillion dollars a year.  But don’t expect it anytime soon.  Despite all the talk abut the high cost of healthcare – the real rationale behind this system is shifting money to the people at the top – businesses, CEOs, and investment funds.   The people operating this system have no interest in universal coverage or quality care.  They see a large pool of premiums and government subsidies and are focused on how to get as much of it as possible.  There is not an easier path than denying care to patients and steep discounts to hospitals and physicians.

That is the real crisis for HCMC.  They are the safety-net hospital for all those people that commercial and government insurers will not cover. They take more government discounted payers than anybody else and even then, have difficulty enrolling the uninsured in those programs.  They provide a massive level of high-quality service to these folks.  They have 239 trainees in 20 different disciplines including 29 residents in psychiatry.  Time to stop pretending that this crisis is not the result of an irrational system and start funding HCMC like it would be funded in a rational system of care.  

Like Switzerland for example…

 

George Dawson, MD, DFAPA

 

References:

1:  Hennepin Healthcare Financial Reports (2022, 2023, 2024):  https://hennepinhealthcare.org/about-hennepin-healthcare/financial-reports

2:  Hennepin County 2025 Operating Budget:  https://www.hennepincounty.gov/-/media/hennepinus/your-government/budget-finance/documents/2025-operating-budget-book.pdf

Supplementary 1:  The Swiss have roughly three times the number of psychiatric beds per 100K compared to the US.  Just another sign that the US system is rationed to make money for the people at the top (see bar graph):  https://real-psychiatry.blogspot.com/2018/07/governments-and-psychiatric-beds.html

Supplementary 2:  I tried to make the above essay as focused as possible on the root cause of this financial crisis.  There are a lot of complicating factors including the demoralization and anxiety of the staff.  It is very common for example to scapegoat the staff for financial crises.  It sems like the most common administrative approach used in healthcare.  It reads like this in staff meetings: “We are in a crisis because you are not productive enough.”  And by productive they mean not generating enough RVUs through patient contacts.

Let me describe a hypothetical scenario of what happens to a typical medical staff.  Staff meetings occurred at the time of the changeover to RVUs.  Prior to this change every physician had assigned jobs and was busy seeing patients all day long and doing the associated work.  Suddenly RVUs are calculated and there is a suggestion that not everyone is pulling their weight (not everyone is producing the same number of RVUs).  The administration decides there will be a 10% holdback of everyone’s salary until all staff have met their minimum RVU quota.  Before that announcement everyone was quite happy with their world and colleagues, but suddenly there is a competitive factor that has been artificially introduced.

It becomes clear that everyone has met their minimum RVU quota.  At a new meeting each clinician now finds that they have been billed for any assistance they get from administration as well as the lease of the old building they are working in.  They have to pay for that bill in RVUs.  At another meeting the RVUs are recalculated after a staff person points out the administrators were using the wrong calculations.  In individual reviews with the head administrators, physicians find that research and teaching do not count toward reimbursement – only RVUs though direct patient contact. Some staff are reluctant to teach due to the administrative burden and the lack of reimbursement or even good will.  Some staff find themselves travelling to distant clinics just to get enough RVUs.  Some staff quit and move to a non-RVU based system. Some staff reduce the time spent with patients to increase their RVUs and salary. 

The bottom line for this post should be that no matter how many RVUs that are compiled – if you do not get paid for most of that work – it is a losing and demoralizing proposition that is not the fault of an overworked and conscientious staff.  The staffs that I worked with in the above scenarios were all hard working and focused on doing the right thing.  In many cases they spent too much of their time and energy trying to compensate for administrative blunders and an inadequate reimbursement structure because they had the market cornered in poorly compensated or uncompensated care.     

Supplementary 3:  Length-of-stay (LOS) is a huge factor in rationing.  Diagnosis Related Groups (DRGs) are estimated lengths of stay based on diagnosis and reimbursement is based on where the LOS is relative to the DRG.  If the LOS days < DRG days there is profit.  If LOS days > DRG days there are varying degrees of loss.  In some cases of complex care the allotted DRG days be exceeded by months leading to negligible reimbursement until a large outlier figure is reached.  In those cases, additional compensation is possible.  Probate court involvement for civil commitment, court ordered medications, or guardianship and conservatorship can add weeks to the discharge date.

Reimbursement at SPRMC and HCMC is based on APR-DRG (All Patient Refined Diagnosis Related Groups).  Per diem does not apply and there is a fixed payment whether the stay is 3 days or 15 days. An exception is made if the stay exceeds 180 days.  Days 0 – 180 are still covered by the single payment but at 181 days reimbursement occurs as a cost-to charge ratio.  Although I have not found any specific breakdowns – single payment systems for complex problems especially in the absence of adequate discharge resources can rapidly decrease compensation to hospital systems and precipitate financial crises.      

Graphics Credit:

Hennepin County Medical Center - Minneapolis, MN taken on 25 August 2013.

Author:  Gabriel Vanslette

License:  CC BY 3.0 Attribution 3.0 Unported

Is AHRQ's National Guideline Clearinghouse disappearing for good tomorrow?

The AHRQ was started 30 years ago in 1999 when it was renamed from the Agency for Health Care Policy and Research (AHCPR) to the Agency for Healthcare Research and Quality (AHRQ) by legislative action.  I have referenced their guidelines on this blog for ADHD and depression.  The post on the depression guideline illustrated that AHCPR guidelines were generally of higher quality than the current managed care guidelines and screening guidelines.

Even looking at the web site today before it is taken down illustrates the depth of research and recommendation on the site.  A search for psychiatry yields 600 references including research and policy recommendations.  Interesting the guidelines at guidelines.gov has 74 psychiatric guidelines ranging from depression in children and adolescents to a guideline for CYP2D6 and CYP2C19 genotypes and dosing of tricyclic antidepressants.  A wide number of physician and nonphysician organizations have produced the guidelines.  These are unique sites with few comparable sites in the world.  Only the National Institute for Health and Care Excellence (NICE) in the UK seems similar.  The NICE guidelines are produced by a more uniform methodology rather than disparate organizations.

When the current administration announced it was defunding AHRQ guidelines, there was some hope that someone else would take it over - at least the existing databases.  Some physician professional organizations were suggested.  Given the government's shaky history of ancient information technology and dubious failed upgrades, I am speculating that would be the reason why nobody else would want to take that on.  Clearly nobody in the administration is interested in a smooth transition.  The smoothest transition I can think of would be to make the data available through the National Library of Medicine and their collection of databases.  But as I type this there are about 8 hours to make that transition.

There are several serious questions for the Trump administration.  Some are speculative, but when people question how doctors are influenced by a slice of pizza, I think it is reasonable to ask about health care corporations that are influenced by tens to hundreds of billions of dollars and how they influence politicians.

1.  How does it make sense to take this data and these initiatives offline when the costs are trivial compared to other government projects?

Cost analyses have been done showing not much of a price increase corrected for inflation.  Various analyses have been suggested such as this one pointed out the agency's role in reducing hospital infections resulting in 124,000 fewer fatalities per year a cost saving of about $28 billion.


2.  And possibly even more important - what are the conflicts of interest involved?

The most significant one that I can see is that industry guidelines and standards go unchecked.  There are any number of groups that are primarily comprised of health care executives that are producing standards of care that have nothing to do with medical practice or standards.  Review practices by pharmaceutical benefit managers come under the same category.  These physician intimidation strategies have nothing to do the scientific evidence or quality of care. In this regard the wholesale suspension of guidelines that counter industry practices are suddenly gone.  It is far easier to do than reverse Environmental Protection Agency (EPA) regulations - but the zeitgeist is the same.

Taking down AHRQ means there is one less place in government healthcare sites with the word quality.  I don't think that is an accident either.  Today's healthcare industry would rather advertise how they are the best without using the quality word or any scientifically valid metrics.

3.  As a corollary to the above - what about the professional guidelines that are collated and listed on the site?

I don't have the time to follow other physician professional organizations but the American Psychiatric Association has fallen off greatly over the years.  Critical issues have not been addressed in some cases for decades.  The commonest cause for this problem is cited as the expense it takes to collect all of the experts and data, but in the information age it would seem to be easier than ever.  I speculate the the real reason is that these guidelines are just ignored.  Why produce a hundred page guideline on all the aspects of the treatment of depression when the dominant managed care standard is a 2 minute screening exam and an antidepressant prescription?  Why produce that document when it affects only 5% of the work force for mental disorders?  Why produce that document when the psychiatrists involved have so little political leverage against the industry and the government that they can never use it. 

AHRQ at least provided a broader forum for discussion.

4.  Why the minimal notification and lack of feedback?  

There are so many guidelines and so much information available on this site, it is impossible to know who is using it all and for what purpose.  Unilaterally taking down a resource like this with 4 months notice has to be considered nothing more than a political decision at this point.  If the number of people and organizations accessing this site was published somewhere - I have never seen it.

5.  What about the Centers for Medicare and Medicaid services, the CMS web site?

Since CMS is essentially the billing and regulatory web site for Medicare - I don't think it is any danger of being shut down.  But it does promote and spread a lot of unscientific information that is biased toward running the business side of health care at the expense of the medical side.  It is a massive bureaucracy that is responsible for the bulk of physicians paperwork burden every day. Some clear evidence for the lack of science is psychiatric diagnosis related groups and how they don't accurately reflect diagnoses or the expected course of treatment for hospitalized psychiatric patients.  The most recent post on this blog looks at the rationing of inpatient psychiatric services and how a lot of that has resulted from CMS regulation.  Just a few years ago, I wrote a blog piece about a 55 page CMS document about what psychiatrists would have to do to document the diagnosis and treatment of depression.  That was subsequently taken down.     

6.  Finally what does this imply for other federally funded information programs?

My biggest concern in this era of massive profits for publishers is the National Library of Medicine (NLM) - commonly used by physicians offices on a daily basis.  It is a major resource for researchers, but it is also becoming a competitor for profitable online publishers.  If research is publicly funded - a copy is accessible without charge on the PubMed web site.  Will the day come when for profit medical publishers have enough leverage to put the NLM out of business?  Stranger things have happened.  

It is easy to blame that President Trump.  He is heading the first blatantly anti-science and pro-business administration that I can recall in my decades of existence.  But the reality is that the American healthcare system has been designed by an endless stream of bad decisions for the past 30 years all occurring in the confluence of special interest politics and massive special interest money with a little medical science (and a few doctors) sprinkled in. The press seems to focus on the influence of pharmaceutical companies, but the bulk of those bad decisions have been rationing decisions by the managed care industry.

George Dawson, MD, DFAPA

References:

1:  Heslin KC (AHRQ), Weiss AJ (Truven Health Analytics). Hospital Readmissions Involving Psychiatric Disorders, 2012. HCUP Statistical Brief #189. May 2015. Agency for Healthcare Research and Quality, Rockville, MD. http://www.hcup-us.ahrq.gov/reports/statbriefs/sb189-Hospital-Readmissions-Psychiatric-Disorders-2012.pdf.

Supplementary:

I pulled the following figures on lengths of stay for mood disorders and schizophrenia out of the above article.  If the site goes down at midnight this may be the only place that you can find it and any paper referencing it may lead to a dead end.

Updates:

07/16/2018: 3:30 PM  AHRQ.gov web site is up and running at this point but guidelines.gov is not found.