The Role of Local Governments in financing Safety Net Hospitals: Houston, Oakland, and Miami

An Urban InstituteProgram to AssessChanging Social PoliciesThe Roleof LocalGovernmentsin FinancingSafety NetHospitals:Houston,Oakland,and MiamiThe Roleof LocalGovernmentsin FinancingSafety NetHospitals:Houston,Oakland,and MiamiJack A. MeyerMark W. LegniniEmily K. FatulaEconomic and Social Research InstituteLarry S. StepnickThe Severyn Group, Inc.Occasional Paper Number 25Assessingthe NewFederalism An Urban InstituteProgram to AssessChanging Social PoliciesThe Roleof LocalGovernmentsin FinancingSafety NetHospitals:Houston,Oakland,and MiamiJack A. MeyerMark W. LegniniEmily K. FatulaEconomic and Social Research InstituteLarry S. StepnickThe Severyn Group, Inc.Assessingthe NewFederalismOccasional Paper Number 25The UrbanInstitute2100 M Street, N.W.Washington, D.C. 20037Phone: 202.833.7200Fax: 202.429.0687E-Mail: paffairs@ui.urban.orghttp://www.urban.org Copyright qJune 1999. The Urban Institute. All rights reserved. Except for short quotes, no part of this book may bereproduced in any form or utilized in any form by any means, electronic or mechanical, including photocopying,recording, or by information storage or retrieval system, without written permission from the Urban Institute.This report is part of the Urban Institute’s Assessing the New Federalism project, a multiyear effort to monitor andassess the devolution of social programs from the federal to the state and local levels. Alan Weil is the project direc-tor. The project analyzes changes in income support, social services, and health programs and their effects. In col-laboration with Child Trends, the project studies child and family well-being.The project has received funding from The Annie E. Casey Foundation, the W.K. Kellogg Foundation, The RobertWood Johnson Foundation, The Henry J. Kaiser Family Foundation, The Ford Foundation, The John D. and CatherineT. MacArthur Foundation, the Charles Stewart Mott Foundation, The David and Lucile Packard Foundation, TheMcKnight Foundation, The Commonwealth Fund, the Stuart Foundation, the Weingart Foundation, The Fund forNew Jersey, The Lynde and Harry Bradley Foundation, the Joyce Foundation, and The Rockefeller Foundation.The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public considera-tion. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, orits funders. The authors would like to thank John Holahan and Susie Wallin for their helpful comments and suggested revisions.We also thank Ron Ruppel, Clifford Bottoms, Judge Robert Eckels and his staff, Peter Praetz, and David Keers for theirassistance. The authors take full responsibility for any remaining errors. Assessing the New FederalismAssessing the New Federalism is a multiyear Urban Institute projectdesigned to analyze the devolution of responsibility for social pro-grams from the federal government to the states, focusing primarilyon health care, income security, employment and training programs,and social services. Researchers monitor program changes and fiscal develop-ments. In collaboration with Child Trends, the project studies changes in fam-ily well-being. The project aims to provide timely, nonpartisan information toinform public debate and to help state and local decisionmakers carry out theirnew responsibilities more effectively.Key components of the project include a household survey, studies of poli-cies in 13 states, and a database with information on all states and the Districtof Columbia, available at the Urban Institute’s Web site. This paper is one in aseries of occasional papers analyzing information from these and other sources. ContentsThe Role of Local Governments in Financing Safety Net Hospitals: Houston,Oakland, and Miami 1Background 1Study Methodology 3Key Findings 3Conclusion 13Harris County, Texas 15Introduction 15Financial Situation of Harris County Hospital District 16Forces Underlying the Reversal of Fortune 19Discussion 24Alameda County, California 29Introduction 29Funding Overview 30Financial Situation of Highland Hospital 32Discussion 34Miami-Dade County, Florida 39Introduction 39Financial Situation of Jackson Memorial 40Discussion 45Conclusion 49References 53Notes 55About the Economic and Social Research Institute 57About the Authors 59 The Role of Local Governments inFinancing Safety Net Hospitals: Houston, Oakland, and MiamiBackgroundPublic hospitals that provide a substantial amount of care to the indigentusually collect patient revenues that fall short of their operating costs. The gapbetween internally generated—or operating—revenues and expenses has forcedsafety net public hospitals to rely on federal, state, and local subsidies to remainviable. Because the existence of these hospitals is considered critical to ensur-ing access to health care for uninsured and underinsured populations, it isimportant to learn how sizable and secure thes