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 multiplier 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

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

Killing Us Slowly…..

 

I became aware today of a Brown University study that estimates the current Trump tax cut bill will close about 580 nursing homes. Since the average nursing home has about 109 beds that means 63,220 people will be out on the street or worse.  Where do politicians (more specifically the Republican party and their constituents) think these people will go?  And why don’t they seem to care?

Over the course of my career – I have probably been in at least 50 different nursing homes in Wisconsin and Minnesota.  The care I have observed in most of those places is managed to be adequate to barely adequate.  By that I mean like all businesses they are managed to make money.  Unless they are privately financed by a foundation or high paying patients, that typically means there is minimal staffing and the most qualified people are typically RNs who spend most of their shift managing medications and medical problems.  That can mean long waits for medicines or care.  It can also mean that behavioral problems like agitation or overt aggression are allowed to escalate to a dangerous point.

When I first started doing assessments in nursing homes it was 1986.  In those days, there were very few diagnoses of Alzheimer’s Disease (AD) or vascular dementia (VaD) since the NINCDS-ADRDA criteria were not widely known.  Most of the people I was seeing had diagnoses of arteriosclerotic dementia, arteriosclerosis, or hardening of the arteries. At some point very early in this timeline, there was an initiative to make sure that old people with psychiatric diagnoses did not get admitted to nursing homes.  But like all political initiatives it was not always an either-or situation.  I would frequently see people with schizophrenia and bipolar disorder who had developed AD, VaD, Parkinson’s plus syndromes, or tardive syndromes in addition to the primary psychiatric disorder.  In many of those situations a subsequent rule about tapering antipsychotic medications to prevent oversedation and associated morbidities became a problem because of the need for maintenance medication.

Psychiatric services are needed in nursing homes for all of those reasons but they are rare.  The reason they are rare is funding – specifically rationing psychiatric services by both Medicare and Medicaid. I ran a Geriatric Psychiatry and Memory Disorders Clinic for a decade and we eventually closed because we could not maintain an adequate work quality and get adequate reimbursement. For a time, my clinic nurse and I decided to go out into nursing homes and see patients there to make it more convenient for patients, families and staff and see if it made a difference. We were reimbursed at an even lower rate for those efforts.  My speculation is that most of the psychiatric care and treatment in nursing homes is done by nonpsychiatrists and probably nonphysicians.  This in part is an additional reason for low quality care in most nursing homes.

Let’s consider the impact of all of these nursing home closures. First, it will greatly add to the current burden of emergency department (ED) congestion.  There is always a steady influx of nursing home patients to the ED with new diagnoses (pneumonia, urinary tract infections, cellulitis, etc). With further reductions in staffing, it may be more difficult to get them back.  I can recall one of my social work colleagues calling 22 different nursing homes one day to discharge one of our stable patients.  None of them would accept that patient. We were under intense pressure from the hospital at the time to discharge that patient because we needed to admit patients from the ED.  That whole chain of events will get worse – not the least due to the fact that far fewer nursing homes will accept people who have been admitted to an acute care psychiatric unit. There will be backups all around – on inpatient units and in the ED.  The same chain of events will occur on medical and surgical units who often put pressure on psychiatry to take their “stable” nursing home patients who may have a psychiatric disorder.

There will also be a steady-state of patients bouncing in and out of the ED-inpatient psychiatry or medicine-discharge sequence.  This is a familiar pattern in many hospital subpopulations that usually occurs because of a lack of adequate housing.  Expect to see more elderly nursing patients captured by this cycle.

Will there be excessive mortality and morbidity?  Of course there will be.  In the course of my career, I had to discharge patient to nursing homes where I knew they could not get the level of care they got on my inpatient unit.   I worked with highly skilled RNs – 4 on the day shift, 3 on the evening shift, and one on nights with 3, 2, and 2 nursing assistants respectively covering 20 beds. We cared for patients with complex medical problems that required frequent monitoring and intervention.  I knew there was no nursing home that I could discharge them to where they would get the same level of care and that would be a problem for them.

I have also walked in to a nursing home and seen the results with my own eyes. I recall visiting a 92 yr old woman with congestive heart failure and hypertension.  She was obtunded, cyanotic, and barely responsive.  When I asked the staff to check her oximetry and start oxygen they produced a nursing supervisor instead for a discussion.  When the oximetry was finally done it was 60% and she regained a normal conscious state with oxygen.  The assessment I made only required knowing this patient’s baseline state and asking what had happened given her chronic conditions.  Is that too much to ask in the case of nursing home staff?

In another more recent case – a 92 yr old man had C. difficile colitis following extended antibiotic therapies for post COVID-19 pneumonia.   During that time his body weight went from 130 to 87 lbs (he was 5’11” tall).  He was weak and barely able to ambulate. Despite the C. difficile diagnosis there were no infection control precautions and he shared a bathroom with 3 roommates.  Despite his clinical status (barely able to walk unassisted, not able to eat, BMI of 12.1) the insurance company paying for his care insisted that he be discharged home under the care of his family where he died the next day.  

Both of these cases are examples of low-quality care.  Rationing care is the most likely reason.  In one case the rationing is implicit (low staffing based on the need for profits from reimbursement) and explicit (inappropriate utilization review decision).   It all comes back to reimbursement.

A final consideration is that the funding cuts go far beyond nursing home care.  The most conservative estimate I have found is that the cuts would increase the number of uninsured by 7.8 million people and reduce Medicaid enrollment for 10.3 million.  Hospitals are legally obligated to treat all people with acute care conditions whether they have insurance or not. That means that many of these people will be in the ED-inpatient-discharge steady state cycle taking up beds.  They will also more likely be acutely ill and spend more time in the hospital.  All of that care is unreimbursed.  That means higher health care costs and premiums for everyone.  One projection is a doubling of premiums.  This is essentially another tax on the average American who is just trying to break even.  All of that is to provide tax cuts for billionaires and businesses while still incurring a 3-5 trillion dollar deficient.

It also means less access to hospital beds when you need it.  I have illustrated on this blog what can happen when you don’t have timely hospital bed access for what is considered a routine condition.

In the final analysis, nursing home care in the United States is seriously rationed care. Although there are some high-end nursing homes that require additional reimbursement and provide more supportive environments - most are not operating at that level.  They provide the basic function of providing care on a 24/7 basis to a severely disabled person that the family cannot care for.  Even that is a recent concept in American society.  As an example, one of my elderly ancestors had a closed head injury as a result of blast injury. He lived at a time when there were no nursing homes in his area only a poor farm, that cared for the indigent and poor elderly.  He had a problem with severe aggression and would routinely wreck all of the furniture in the house. I never learned how they were able to contain this behavior, but the modern question is whether this is an acceptable standard for families.  Can family members be expected to contain severe aggression from a family member with dementia and keep everyone safe?  I don’t see how.      

Severe rationing of health care in the bill being debated hurts us all…

 

George Dawson, MD, DFAPA

Photo Credit:  Thanks to Rick Ziegler for the thunderstorm photo.