Hospitals That Serve Many Black Patients Have Lower Revenues and Profits: Structural Racism in Hospital Financing

Background: Care for Black patients is concentrated at a relatively small proportion of all US hospitals. Some previous studies have documented quality deficits at Black-serving hospitals, which may be due to inequities in financial resources for care.

Objective: To assess disparities in funding between hospitals associated with the proportion of Black patients that they serve.

Participants: All Medicare-participating hospitals, 2016–2018.

Main Measures: Patient care revenues and profits per patient day at Black-serving hospitals (the top 10% of hospitals ranked by the share of Black patients among all Medicare inpatients) and at other hospitals, unadjusted and adjusted for differences in case mix and hospital characteristics.

Key Results: Among the 574 Black-serving hospitals, an average of 43.7% of Medicare inpatients were Black, vs. 5.2% at the 5,166 other hospitals. Black-serving hospitals were slightly larger, and were more often urban, teaching, and for-profit or government (vs. non-profit) owned. Patient care revenues and profits averaged $1,736 and $−17 per patient day respectively at Black-serving hospitals vs. $2,213 and $126 per patient day at other hospitals (p<.001 for both comparisons). Adjusted for patient case mix and hospital characteristics, mean revenues were $283 lower/patient day (p<.001) and mean profits were $111/patient day lower (p<.001) at Black-serving hospitals. Equalizing reimbursement levels would have required $14 billion in additional payments to Black-serving hospitals in 2018, a mean of approximately $26 million per Black-serving hospital.

Conclusions: US hospital financing effectively assigns a lower dollar value to the care of Black patients. To reduce disparities in care, health financing reforms should eliminate the underpayment of hospitals serving a large share of Black patients.