• Hospital safety net;
  • uncompensated care

Objective. To examine how the financial pressures resulting from the Balanced Budget Act (BBA) of 1997 interacted with private sector pressures to affect indigent care provision.

Data Sources/Study Setting. American Hospital Association Annual Survey, Area Resource File, InterStudy Health Maintenance Organization files, Current Population Survey, and Bureau of Primary Health Care data.

Study Design. We distinguished core and voluntary safety net hospitals in our analysis. Core safety net hospitals provide a large share of uncompensated care in their markets and have large indigent care patient mix.

Voluntary safety net hospitals provide substantial indigent care but less so than core hospitals. We examined the effect of financial pressure in the initial year of the 1997 BBA on uncompensated care for three hospital groups. Data for 1996–2000 were analyzed using approaches that control for hospital and market heterogeneity.

Data Collection/Extraction Methods. All urban U.S. general acute care hospitals with complete data for at least 2 years between 1996 and 2000, which totaled 1,693 institutions.

Principal Findings. Core safety net hospitals reduced their uncompensated care in response to Medicaid financial pressure. Voluntary safety net hospitals also responded in this way but only when faced with the combined forces of Medicaid and private sector payment pressures. Nonsafety net hospitals did not exhibit similar responses.

Conclusions. Our results are consistent with theories of hospital behavior when institutions face reductions in payment. They raise concern given continuing state budget crises plus the focus of recent federal deficit reduction legislation intended to cut Medicaid expenditures.