Bill aims to define "essential" hospitals

Reps. Lori Trahan and David Valadao want to create an "essential health system" designation in federal law that would make it easier for safety net hospitals to obtain federal funding.

Why it matters: The Reinforcing Essential Health Systems for Communities Act seeks to create a standard definition of an essential hospital at a time when many facilities claim to be safety nets.

States already have discretion to steer extra funding to hospitals that treat more uninsured and low-income patients. But criteria vary, and funds don't always reach the right facilities.

How it works: A hospital would get the new designation either if it meets Medicaid's disproportionate share hospital requirements, if at least 35% of patients are Medicaid or low-income Medicare, or if its Medicare uncompensated care payment factor is 0.0005 or more.

Trahan and Valadao said the designation would cover more than 1,000 facilities nationwide.

America's Essential Hospitals, which backs the bill, said there is precedent for such special designations, pointing to critical access, sole community and other facilities that serve specific populations and regions.

What we're watching: The legislation comes at a time when many hospitals are seeing improved margins and shaking off the pandemic's financial effects — and as Congress is reevaluating how facilities are paid by federal health programs.