This study, authored by Gracie Himmelstein, M.A. and Kathryn EW Himmelstein, M.S.Ed., M.D. is in press at the International Journal of Health Services.
Racial inequities in health outcomes are widely acknowledged. This study seeks to determine whether hospitals serving people of color in the United States have lesser physical assets than other hospitals. With data on 4,476 Medicare-participating hospitals in the U.S., we defined those in the top decile of the share of Black and Hispanic Medicare inpatients, as “Black-serving” and “Hispanic-serving” respectively. Using 2017 Medicare cost reports and American Hospital Association data, we compared the capital assets (value of land, buildings and equipment), and the availability of capital-intensive services at these hospitals and other hospitals, adjusted for other hospital characteristics. Hospitals serving people of color had lower capital assets, e.g. $5,197/patient-day at Black-serving hospitals, $5,763 at Hispanic-serving hospitals, and $8,325 at other hospitals (p<.0001 for both comparisons). New asset purchases 2013-2017 averaged $1,242, $1,738, and $3,092/patient-day at Black-serving, Hispanic-serving and other hospitals respectively (p<.0001). In adjusted models, hospitals serving people of color had lower capital assets (-$215,121/bed, p<.0001) and recent purchases (-$83,608/bed, p<.0001). They were also less likely to offer 19 of 27 specific capital-intensive services. Our results show that hospitals that serve people of color are substantially poorer in assets than other hospitals, and suggest that equalizing investments in hospital facilities in the U.S. might attenuate racial inequities in care.
Racial inequities in health and health care have been extensively documented (1). However, the mechanisms generating these inequities are not fully understood. Evidence suggests that the differential quality of hospitals visited by white patients and patients of color, rather than differential care quality within a given hospital, accounts for a significant portion of inequities in the outcomes of inpatient care (2-4). Despite the official desegregation of hospitals required by Title VI of the 1964 Civil Rights Act (5), hospital segregation by race persists (6). In 2004, 5% of hospitals cared for 44% of Black Medicare patients (7), and in 2010-2011 three-quarters of all Black infants in the U.S. were born in just one-quarter of U.S. hospitals (8).
Studies have documented significant differences in hospitals’ quality metrics according to the racial composition of their patients. Facilities treating a higher proportion of non-white patients have lower nurse-to-census ratios (7), score worse on patient safety indicators (9) and indicators of quality of obstetric care (10), and have higher 30-day readmission rates following surgical procedures (11). Studies also suggest that hospitals serving people of color have higher mortality rates for several conditions (12-14). Differences in hospital quality persist after controlling for numerous potential explanatory variables, such as patient case-mix, hospital volume and geographic region.
One potential contributor to quality differences between hospitals serving people of color and other hospitals is inequity in the physical resources available for care, which may be quantified as the dollar value of hospitals’ investments in their plant and equipment, or “capital”. Some analyses suggest that the level of hospital capital investment is a significant determinant of hospital quality (15, 16), and that inequities in physical resources may contribute to racial inequities in health outcomes. For example, Hsia et al. found that that differences in emergency department overcrowding contribute to racial inequities in mortality following acute myocardial infarction (17). However, we could identify no comprehensive studies of racial inequities in hospitals’ physical resources. Using data on virtually all hospitals that care for Medicare patients, we assessed the relationship between hospitals’ service to inpatients of color and their physical assets as measured by capital investments.
We obtained data on the race and ethnicity of Medicare fee-for-service enrollees hospitalized at acute care hospitals in 2016. This data, compiled from Medicare Part A “100% files” and provided to us by Dr. Ashish Jha, is the most recent available, and is described elsewhere (7). We linked this data to three sources of information on hospital characteristics: Medicare Hospital Cost Reports for fiscal years 2013 through 2017 (the most recent year for which cost reports for most hospitals were available as of December 13, 2019), Medicare’s Case Mix files for 2017, and the American Hospital Association (AHA) Annual Survey Database for 2017. When similar data were available from Medicare cost reports and AHA survey, we used the source with the fewest missing observations.
Medicare Hospital Cost Reports, which hospitals must file annually with The Centers for Medicare and Medicaid Services (CMS), include data on hospitals’ teaching and ownership status, which we categorized as government, non-profit or for-profit; urban or rural location; and total discharges. Worksheet A-7, Part 1 of the Cost Reports provides data on the value of capital assets, defined by Medicare as: Land, Land Improvements, Buildings and Fixtures, Building Improvements, Fixed Equipment, Movable Equipment, and Health Information Technology Designated Assets, as well as a reconciled value for total capital assets. The cost reports include data on the value of each type of asset at the end of the fiscal year, as well as changes in assets during the fiscal year due to purchases, donations, and “disposals and retirements.”
The AHA database includes survey-derived data on each hospital’s average daily census, licensed beds, bed size category, state (which we categorized into the four regions defined by the U.S. Census Bureau – Northeast, South, Midwest and West), several specific services and technologies available at the hospital, and the gross square footage of the physical plant. The AHA data also includes figures for the total value of hospital assets. These correlated closely (r=.96) with the Medicare figures, which had fewer missing observations and were hence used for analyses.
The Centers for Medicare and Medicaid Services (CMS) compiles Medicare’s Case Mix file from claims for each patient’s Diagnosis Related Group (DRG) that hospitals submit in order to receive payment. DRG’s are specifically designed to estimate the resource use necessary for care of the average patient with a given DRG.
For each hospital, we used the racial/ethnic categories provided in the Medicare data to calculate Black and Hispanic patients’ share of all Medicare inpatients in 2016, which we use as a proxy for the racial composition of each hospital’s total inpatient population. (No nationwide data is available on patient race for non-Medicare inpatients). Although many scholars now prefer the term “Latinx” to refer to individuals with ancestors from Central/South America or the Spanish-speaking Caribbean, we use the term “Hispanic” to be consistent with the terminology in the source data. Few Medicare patients were discharged from pediatric hospitals, which were excluded from all analyses.
As is standard in the literature on hospital segregation, we categorized the 10% of hospitals with the highest share of Black patients (over 22.5%) as Black-serving, and the 10% of hospitals with the highest share of Hispanic patients (over 4.4%) as Hispanic-serving (9, 13). We defined a hospital as “serving people of color” if it met our definition for either Black-serving or Hispanic-serving. To assess whether the results were sensitive to the definitions of Black- and Hispanic-serving hospitals, we repeated the main analyses using the 95th percentile (34.4% for Black patients and 9.0% for Hispanic patients) and 75th percentile (9.3% for Black patients and 1.1% for Hispanic patients) of the proportion of Black and Hispanic patients as cut points for designating hospitals serving people of color.
Because hospitals sometimes file part-year or amended annual Medicare Cost Reports, we deleted duplicate reports (retaining the most recent) and those reporting less than 340 days of data. For each hospital, we determined hospital characteristics, and the gross square footage and capital assets available per-licensed bed, per-discharge and per-patient (inpatient) day in 2017.
For our principal analyses of total capital assets we summed the values of assets at the start of the fiscal year, purchases and donations during the year, and fully depreciated assets still in use, then subtracted asset disposals and retirements during the year. We also performed sensitivity analyses using two alternative measures of total capital assets: one that excluded fully depreciated assets still in use; and one that included fully depreciated assets still in use but excluded the value of land, which might be influenced by local land values.
Because new asset acquisition may vary greatly from year-to-year, we analyzed new asset purchases and donations over the five-year period 2013-2017 to provide a more stable assessment of new capital acquisition. We assumed that hospitals reporting no new capital purchases had non-missing zero dollars of new capital investments.
For all analyses of the ratios of capital asset values and square footage to discharges, patient days and beds, we excluded the top and bottom 1% of observations to eliminate implausible outliers (e.g. hospitals reporting negative capital values).
We used two-sided t-tests for bivariate comparisons of Black- and Hispanic-serving hospitals to other hospitals. We used multivariate linear models to assess whether inequities in capital assets between hospitals serving people of color and other hospitals are attributable to other hospital characteristics. Our main models estimated the relationship between serving people of color and capital assets and square footage after controlling for region, teaching status, urban/rural location, ownership (for-profit, public or non-profit) and bed size (categorized by the AHA as 6-24, 25-49, 50-99, 100-199, 200-299, 300-399, 400-499 or 500+ beds). We considered p values < .05 significant.
We also performed two sensitivity analyses, one that included an additional control for the percentage of Medicaid discharges amongst total facility discharges, and another that included an additional control for Medicare Case Mix Index. Additionally, because our data on hospitals’ racial/ethnic mix of patients were for 2016, while the data we used to assess capital assets covered fiscal year 2017 (which includes data for parts of calendar 2016 and 2017), we repeated all analyses using 2016 Medicare cost reports. These analyses yielded virtually identical results and are not reported further.
Finally, to assess the clinical implications of differences in capital assets we analyzed differences between hospitals serving people of color and other hospitals in the availability of 27 capital-intensive services included in the AHA data: eleven diagnostic imaging technologies (diagnostic radioisotope facility, electron beam computed tomography, full field digital mammography, magnetic resonance imaging [MRI], intra-operative MRI, magnetoencephalography, multi-slice computed tomography [CT] of less than 64 slices, multi-slice CT of 64 slices or greater, positron emission tomography [PET], PET-CT, and single proton emission CT [SPECT]); four radiation therapy modalities (image-guided radiation therapy, intensity modulated radiation therapy, proton beam therapy and a shaped beam radiation system); three surgical technologies (stereotactic radiosurgery, robotic surgery and computer-assisted orthopedic surgery); four cardiac technologies (adult diagnostic cardiac catheterization, adult interventional cardiac catheterization, adult cardiac electrophysiology, and adult cardiac surgery); and five other services (cardiac rehabilitation, endoscopic lithotripsy, bariatric weight control, trauma center and hemodialysis). For each service, we assessed the availability in hospitals serving people of color vs. other hospitals using logistic regression models adjusted for region, teaching status, urban/rural location, ownership and bed size category.
Table 1 displays the characteristics of Black-serving (n=448), Hispanic-serving (n=447) and all hospitals (n=4,476) included in our analyses; 63 hospitals were both Black-serving and Hispanic-serving. Hospitals serving people of color were larger, more often teaching hospitals, more commonly located in urban areas, and more frequently owned by government or for-profit entities (and less often by non-profits). They also had a higher share of Medicaid discharges. Black-serving hospitals were disproportionately located in the South, while a majority of Hispanic-serving hospitals were in the West.
Table 2 presents indicators of the assets available for patient care at Black-serving, Hispanic-serving, and other hospitals. Hospitals serving people of color had markedly lower capital assets and square footage whether measured per bed, per patient-day, or per discharge. For instance, the total value of capital assets per patient day was $5,197 at Black-serving hospitals and $5,763 at Hispanic-serving hospitals. In contrast, total capital assets at other hospitals averaged $8,325 (p<.0001 compared to both Black- and Hispanic-serving hospitals), 60.2% higher than at Black-serving hospitals and 44.4% higher than at Hispanic-serving hospitals. Similarly, new asset purchases between 2013 and 2017 averaged $1,242 and $1,7381 per patient day at Black-serving and Hispanic-serving hospitals respectively, vs. $3,092 (p<.0001) at other hospitals.
Sensitivity analyses using two alternative definitions of total capital (i.e. excluding fully depreciated assets, and excluding the value of land) yielded similar results and are shown in Supplement Table S1. Sensitivity analyses using alternative cutoffs to designate Black- and Hispanic-serving hospitals yielded similar results (data not shown).
In multivariate models adjusted for multiple hospital characteristics, hospitals serving people of color had significantly lower capital assets and purchases, but not square footage (Table 3). For instance, total capital assets per bed were $215,121 (p<.0001) lower at hospitals serving people of color than at other hospitals. Sensitivity analyses that included controls for Medicaid patients’ share of total discharges or for the Medicare Case Mix Index yielded similar results, although in the Medicaid-adjusted analyses p values were higher for a few comparisons (Supplement Tables S2 and S3).
Our logistic regression models indicate that hospitals serving people of color were less likely to offer 19 of the 27 specific capital-intensive services (Table 4). The odds ratios for the availability of these 19 services at hospitals serving people of color vs. other hospitals ranged from 0.37 (95% CI 0.29-0.46) for cardiac rehabilitation to 0.74 (95% CI 0.56-0.96) for diagnostic radioisotope facility. The availability of six services did not differ, while two, hemodialysis (OR 1.68, 95% CI 1.32-2.14) and intra-operative MRI (OR 1.47, 95% CI 1.03-2.11), was more likely to be available in hospitals serving people of color.
The physical resources available for care at Black- and Hispanic-serving hospitals in the U.S. are sparse relative to other hospitals. The total value of plant and equipment per patient-day is about one-third less at hospitals serving people of color than other hospitals. Moreover, we found similarly large inequities in investment in new capital assets, which suggests that the gap in assets between hospitals serving people of color and other hospitals will persist, or even widen. Unsurprisingly in view of these large inequities, hospitals serving people of color are much less likely to offer many capital-intensive medical technologies and services.
What lies behind these differences? Until the Great Depression two main sources provided capital to build hospitals – federal, state, and local government funded the building of public hospitals, while private philanthropic donors funded the construction of private hospitals (18). The 1946 Hill-Burton Act (subsequently rolled into the Public Health Service Act) served to greatly expand the government’s role in hospital capital provision, offering grants and loans to build and modernize health care facilities (19). More recently, hospitals have funded most capital investments from their accumulated profits (which are called surpluses in non-profit hospitals), or from loans or bonds that must be paid back from future profits (20). For-profit hospitals can also raise capital from investors. In order to access any of these sources of capital, a hospital must be profitable or expect to garner profits in the future.
Several factors contribute to hospitals’ profitability, and hence access to capital. Payer mix, which is strongly linked to patients’ race, plays a key role. Hospitals have historically collected low payments for the care of uninsured and Medicaid patients (who are disproportionately Black and Latinx), while patients with private coverage are most lucrative. Furthermore, elective admissions are generally more profitable than emergencies (21), and non-white patients have a lower proportion of elective admissions than do white patients for a variety of conditions (22-24).
Additionally, regionally-dominant hospitals can often command higher prices from private insurers (25), while orthopedic and cardiac services are often particularly profitable because of their high reimbursement rates. Because hospitals have high fixed costs, low occupancy rates are associated with poor profitability. Finally, skillful management and effective governance can improve profitability by boosting revenues or decreasing expenses. However, it is unclear what (if any) relationship these factors have to the racial composition of a hospital’s patients.
Although studies linking hospital capital investment and health outcomes are scant, and mostly dated, they suggest a positive relationship between investment in hospital capital and improved patient care (15,16). Thus, the gaps in capitalization that we found may contribute to ongoing racial inequities in the quality of hospital facilities, and thus health outcomes.
This study has several limitations. We lacked data on service mix, and measures of efficiency, precluding full assessment of why hospitals serving people of color have less capital stock. However, adding controls for Medicare Case Mix to our multivariate models did not change our findings. We could not gauge historical differences in funding that might underlie the patterns we observed. We used the racial/ethnic composition of Medicare enrollees as a proxy for the composition of all hospital inpatients because no reliable data for other patients is available. This proxy measure may be especially imprecise for Latinx people, a relatively young population group of whom few have Medicare coverage. Unfortunately, we have no data on Asian or Native American patients.
We were unable to distinguish between capital used to enhance luxury amenities, and assets which improve patient care. However, the line between these two is often blurred. For example, single-occupancy patient rooms and natural light may be considered amenities tangential to patient care, but have been shown to improve patient outcomes (26).
Adequate physical resources are only one component necessary to provide high quality care, and the dedication of personnel in many institutions serving people of color is an immense, if intangible asset. However, hospital capital can have spillover effects on other determinants of quality. A dilapidated physical plant and lack of capital-intensive medical technology may impede recruitment of medical providers and demoralize staff and patients.
Hospitals’ capital investments “literally set in concrete the future physical configuration of the health care system” (27). The inequities we document reflect generations of deficient investment in the health care of communities of color. The term “structural racism” – the perpetuation of racial inequities by cultural, economic and political systems that are often inherited from the past and reproduced in the present – seems peculiarly apropos as a description of these stark inequities.
Table 1: Characteristics of Black-serving, Hispanic-serving, and all U.S. acute care hospitals, 2017
* p <.0001 for comparison between black-serving and other hospitals or Hispanic-serving and other hospitals
** p = .0005 for comparison between black-serving and other hospitals
Table 2: Assets of Black-serving, Hispanic-serving and other U.S. acute care hospitals, 2017
Table 3: Adjusted differences in capital assets between hospitals serving people of color and other hospitals, 2017
Table 4: Differences in odds of offering capital-intensive services, hospitals serving people of color vs. other hospitals, 2017
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Contributors: We thank Dr. Ashish Jha for providing the data used to define hospitals serving people of color, and Dr. Steffie Woolhandler for assistance with analysis of Medicare Cost Reports.
Funders: Ms. G Himmelstein’s work was supported by The Eunice Kennedy Shriver National Institute of Child Health & Human Development of the National Institutes of Health under Award Number P2CHD047879. The content is solely the responsibility of the authors and does not necessarily represent the official views of the National Institutes of Health.
Gracie Himmelstein is an MD candidate at the Icahn School of Medicine at Mount Sinai, and a PhD candidate in Demography and Social Policy at the Office of Population Research at Princeton University. She received her MA in Demography from Princeton in 2019.
Kathryn EW Himmelstein is a resident physician in Internal Medicine at Massachusetts General Hospital. She received her MD degree from the Perelman School of Medicine at the University of Pennsylvania in 2018.