The American Hospital Association (AHA) is advocating for the creation of a new hospital designation for certain urban safety net hospitals. In a report released in mid-October 2022, as well as in an accompanying fact sheet and letter sent to congressional leaders, the AHA defines these so-called Metropolitan Anchor Hospitals (MAHs), outlines their importance to the communities they serve, and explains why MAHs deserve supplemental financial support from the government.

At a high level, the AHA describes MAHs as “safety net hospitals…that serve large numbers of urban, low-income and historically marginalized individuals.”¹ Specifically, MAHs are defined as hospitals:

1. “Located in an urban area;
2. With a Medicaid Inpatient Utilization Rate (MIUR) greater than the statewide average, and
3. With either:

1. A disproportionate patient percentage (DPP) greater than 70%, or;
2. A DPP greater than 34.5% combined with a ratio of uncompensated care costs (UCC)-to-beds of $35,000 or more.”²

AHA identified 465 hospitals across 162 metropolitan statistical areas that fall within this definition, i.e., one in eight urban hospitals.³

Compared to other hospitals, MAHs:

1. “are typically larger, accounting for 33% of market-wide beds and an estimated 34% of market-wide inpatient revenue”;
2. “[a]re major teaching hospitals”;
3. “[a]re more likely to provide essential services…[and p]rovide a greater number of these essential services, such as burn care, neonatal intensive care, inpatient psychiatric care, substance use disorder services, HIV care”;
4. “provide a disproportionately high amount of care to historically marginalized populations, accounting for about 48% of market-wide Medicaid inpatient days and 49% of market-wide uncompensated care costs”;
5. have an “average Medicaid Inpatient Utilization Rate (MIUR) of…nearly 37%, compared to 17% in other hospitals”; and
6. “[a]re larger employers in their catchment areas.”⁴

Because MAHs provide vital services in their communities, AHA is urging congressional leaders to create a “special statutory designation for MAHs.”⁵ Such a designation would pave the way for enhanced federal funding for those hospitals, which AHA argues is necessary because MAHs operate under low margins, due to treating more Medicaid patients and having above-average uncompensated care costs. These issues were highlighted by the COVID-19 pandemic, which stressed all hospitals, but was particularly devastating to those hospitals that serve in a safety net role (due not just to their already-low margins, but also to the sizable increase in the Medicaid population).⁶ Those financial challenges are not yet over – a September 2022 report by healthcare consulting firm Kaufman Hall found that hospitals are on track for their worst financial year in decades.⁷

On October 24, 2022, AHA sent a letter to congressional leaders requesting that as leaders determine the legislative branch’s end-of-year agenda, they consider additional priorities important to the trade association’s member hospitals and health systems, including addressing workforce shortages and providing targeted relief to hospitals.⁸ Further, the AHA letter specifically requested Congress to create an MAH designation.

If AHA’s initiative is pursued by the federal government, it will be the second new hospital designation established in 2022. The Consolidated Appropriations Act of 2021 established the Rural Emergency Hospital (REH) designation.⁹ Beginning January 1, 2023, facilities that are a rural hospital or a critical access hospital (CAH); have fewer than 50 beds; and do not provide acute care inpatient services (except for skilled nursing facility services in a distinct unit), can convert to an REH and receive an additional 5% on top of the Outpatient Prospective Payment System (OPPS) payment rate for each service, as well as a monthly facility payment.¹⁰ The MAH initiative is a shift in focus for AHA, which has been advocating heavily for rural hospitals over the past few years. Since 2005, 183 rural hospitals and CAHs have either closed or eliminated inpatient services, and one-fourth of the remaining rural hospitals are vulnerable to closure.¹¹ With hospitals across the U.S. undergoing a third straight year of unprecedented challenges, driven by the COVID-19 pandemic, labor shortages and supply-chain disruptions, and the highest inflation rates in four decades – and soon to be further tested by a possible “tripledemic”¹² – finding creative ways for hospitals to receive enhanced funding may be necessary to save the U.S. healthcare delivery system from collapse.