Beyond binary measures: introducing a safety net hospital index

Safety net hospitals (SNHs) disproportionately serve uninsured, Medicaid, and low-income Medicare patients, yet no universally accepted SNH definition exists. Existing binary measures frequently identify divergent hospital sets, creating research inconsistency and risking misaligned policy protections, concerns heightened by recent federal Medicaid cuts and site-neutral payment reforms.

Using Medicare cost report data for community hospitals, we introduce and validate a continuous, multidimensional SNH Index constructed as a composite of Medicaid revenue share, uncompensated care burden, and low-income Medicare share.

Hospitals in the highest SNH Index quartile had substantially lower operating margins (-2.0% vs 3.1% in the lowest quartile), fewer days cash on hand (91 vs 158 days), and higher rates of financial distress (36% vs 21%). The SNH Index showed stronger correlations with financial performance than 5 binary SNH definitions and a proxy for MACPAC's Medicare SNH Index. Within each quartile, system-affiliated hospitals significantly outperformed independent hospitals financially.

These findings suggest that policies protecting SNHs should incorporate composite, burden-based measures, and account for system-level financial resources rather than relying on binary classifications alone.