It didn’t take long for the shock to set in when Chicago’s Westlake Hospital announced its impending closure. The hospital, which serves predominantly low-income communities in Melrose Park and Maywood, first signaled its intent to close in the spring; by fall, it had filed for bankruptcy, citing crushing financial circumstances. When news of the closure broke, many in the community expressed their shock and concern about what the sudden lack of care would do for the community. Some even filed legal action, worried that the closure would have a severe impact on its patient population. 


To Marianna Woosley, a nurse who had worked at Westlake for three decades and served as the director of medical, surgical, and telemetry patients, the news was deeply concerning. “These people deserve health care that no one else will give them,” she told the Chicago Tribune


But why was Westlake so crucial to the surrounding communities? As Woosley alludes, the hospital served a large population of low-income, minority patients — many of whom were un- or underinsured and would struggle to obtain care elsewhere. 


Westlake — and other “safety net” hospitals like it — provide an invaluable service to underserved communities. Their facilities “catch” those who lack insurance and provide care to those who might otherwise not have had the means to pay for it. Such organizations are desperately necessary, especially given the current sky-high costs that uninsured patients often face when seeking care. 


The situation is even more pressing when one considers the rising rate of uninsurance. According to recent Census data, the number of people who lacked insurance coverage topped 27.5 million in 2018 — a 1.9 million uptick from the year before. Even more people are underinsured — facing out-of-pocket costs or deductibles comparable to 5-10% of their income. Roughly 44 million people were underinsured in 2018. 


The un- and under-insured rely on safety-net hospitals for inpatient and emergency services. In many communities, a safety net hospital is the only provider of such care. Patients trust that these hospitals will accept patients that pose a high financial risk and write off a portion of the costs. These facilities are invaluable — and at risk. 


Like Westlake, hospitals that take on significant financial risk are closing down as the result of mounting financial pressures. It’s not hard to see why; one study found that one network of safety-net hospitals averaged a 0% operating margin, rather than the 6.4% average operating gain for hospitals in the U.S. According to figures provided by Health Affairs, hospitals collectively provided $38.3 billion in uncompensated care in 2016 alone. To make matters worse, some reports indicated that government funder offset just 65% of such losses. 


The financial crunch is poised to become even more pressing in upcoming years. Funding to Medicaid-disproportionate share hospitals (DSH) is scheduled to drop by a full third in FY20. For some, the lack of funds may prove devastating. 


In a recent article, St. Bernard CEO Charles Holland told reporters for the Chicago Tribune, that his safety-net hospital couldn’t afford to lose even a dollar of funding. “In fact,” he went on, “I need more money to keep the hospital viable for the future.”


If nothing changes, many hospitals like Westlake and St. Bernard will likely close, even as demand remains and increased pressure falls on remaining local hospitals. Care costs for un- and under-insured patients will grow untenable — likely to the point that patients will begin avoiding care. 


So, what is the solution? Some hospitals are pursuing creative approaches by integrating lower-cost telemedicine into their service offerings and finding ways to intervene early enough that patients do not develop costly conditions. Other organizations are considering more drastic action. 


In Chicago, Third Horizon CEO David Smith has posited safety-net hospital consolidation and creative budget cuts as the necessary solution. 


“We need to be able to create a financially self-sustaining system,” Smith told reporters for Modern Healthcare, “We need to integrate.”


The proposed integration, he admits, is a dramatic step. However, he argues that such full-scale change and model reinvention is necessary, given the advancing closure risk. 


One point is clear: drastic or not, safety-net hospitals need to seek change. If they don’t, our most at-risk communities may lose access to affordable care.