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Poor People and Poor Hospitals: Implications for Public Policy

In 1980, while most hospitals were in reasonably good financial health, hospitals heavily involved in serving the poor ran a considerable risk of financial trouble. Fewer than 9 percent of the nation's hospitals accounted for 40 percent of the nation's total care to the poor. These hospitals, almost half of which were in the 100 largest cities, not only devoted more of their care to the poor than other hospitals, they also served substantially smaller proportions of privately-insured patients. The result was that one-third of these hospitals—by themselves accounting for over 15 percent of all care to the poor—ran deficits in 1980. Using data from a 1980 survey of nonfederal, nonprofit hospitals, this paper examines the fiscal situation of hospitals heavily involved in serving the poor. The analysis shows that it is insufficient revenues, not inefficiency or underuse, that creates these hospitals' financial problems. The article concludes with an assessment of several policies that could be adopted to alleviate this financial pressure and sustain care to the poor.

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