‘Safety Net’ Hospitals That Often Treat Chicago’s Most Vulnerable Communities Face Dire Financial Strain

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In December, protesters gathered outside Loyola University Health Center to object to the closing of Mercy Hospital. Manuel Martinez / WBEZ
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In December, protesters gathered outside Loyola University Health Center to object to the closing of Mercy Hospital. Manuel Martinez / WBEZ

‘Safety Net’ Hospitals That Often Treat Chicago’s Most Vulnerable Communities Face Dire Financial Strain

A new report underscores just how much small hospitals on Chicago’s South and West sides struggle financially, and what can be done to prevent them from closing.

These small so-called “safety net” hospitals tend to be staples in their communities. They typically treat low-income and elderly Black and Latino patients, and often don’t have enough money flowing in to make ends meet.

A new study commissioned by the Health Care Council of Chicago estimates that by 2024, a dozen of these hospitals could lose at least $1.8 billion combined. And that doesn’t even account for money hospitals lost during the COVID-19 pandemic, as they suspended money-generating surgeries and shifted patients to video and phone visits to help slow the spread of the coronavirus.

“We cannot do this for another three or four years and expect that we are not going to see the threat of more hospital closures, more job loss, while health does not get better,” said David Smith, CEO of Third Horizon Strategies and lead author of the paper. “This does not have to be our future.”

The report comes as one safety net, Mercy Hospital in Bronzeville on the Near South Side, recently filed for bankruptcy protection and has been preparing to close this spring.

Here are four takeaways from the report about the future of health care for Chicago’s most vulnerable populations.

What’s behind that eye-popping projected financial loss

Analysts used financial records and modeling to forecast the nearly $2 billion losses. They focused on seven South Side safety nets and five on the West Side. The bottom line: Safety nets spend far more money than they make. That’s due to a variety of factors.

For one, they’re stuck with low reimbursement rates from the government and insurance companies. How much hospitals get paid for a medical procedure, for example, doesn’t cover how much it costs to perform it.

Then there’s the years-long issue of many private Medicaid insurers in Illinois that don’t pay hospitals on time – or at all.

And because safety nets struggle to generate money, they often can’t afford to invest in their aging facilities or hire more specialists that would keep patients from heading to bigger hospitals, Smith said.

“[There’s] this notion of people driving past the facility to go to another facility,” Smith said. “We’re not making the capital improvements to make the facilities welcome or inviting or feel safe.”

That’s partly led to safety nets treating fewer patients over the years. There are other reasons behind that, too. Many patients have more choices for where they can get medical care that can be more convenient and cheaper than a hospital, such as getting surgery at an outpatient center or stitches at an urgent care clinic.

“Alarming access gaps”

Chicagoans who live on the South and West Sides have “the most scarce access” to medical services compared to the rest of the city, the paper underscored, such as pharmacies and mental health services.

Yet these residents have higher rates of several chronic medical conditions – from heart disease to obesity – than the rest of Chicago. What’s more, there aren’t enough physicians to help treat them, the paper found.

On the South Side, there are “particularly alarming access gaps, with almost every category used for this analysis showing significant disparity with the rest of the city,” according to the paper. Access to specialists, such as obstetricians who deliver babies, to endocrinologists who manage diabetes, is “completely imbalanced” with the rest of Chicago.

On the South Side, there are 1,015 residents for every one specialist, compared to 353 residents for every one specialist on the North Side.

When it comes to psychiatrists, there are just six for every 100,000 residents on the South Side, compared to 23 for every 100,000 residents throughout the entire city.

Hospitals are huge employers

The study also highlights how important hospitals are to the economies of their surrounding neighborhoods.

In neighborhoods with double-digit unemployment rates, the safety nets employed more than 10,000 people, from physicians to custodians.

This underscores how a hospital cutting services or shutting down entirely has a ripple effect beyond patients. It also potentially leaves many local residents without jobs.

“We need a new playbook”

As hospitals like Mercy consider closing down, there’s been a scramble from politicians, hospital employees and community organizers to try and find ways to keep them afloat. But government funding isn’t going to be enough to help safety nets stay afloat, the paper said.

“We are running out of time,” the authors wrote. “We need a new playbook.”

Hospitals need to collaborate more and focus on what’s needed most in their communities, Smith told WBEZ. For example, more safety nets could specialize in certain areas of medicine, such as behavioral health, addiction treatment and cardiology. They could create new types of jobs, and use technology that would connect doctors across the city.

These options might not be popular – or affordable – among safety net CEOs, since they compete for patients.

But otherwise, Smith points out, the stakes are high.

“A hospital closing in a community is an incredibly traumatic thing,” Smith said. “It is a signal to a community that this pillar of jobs and commerce is no longer able to be viable in the community, and hence that’s some referendum on the community itself. It’s awful.”

Kristen Schorsch covers public health on WBEZ’s government and politics desk. Follow her @kschorsch.