In the American healthcare system, “safety-net” providers such as free clinics, community health centers, and public and not-for-profit hospitals provide care to all patients regardless of their ability to pay. These organizations play a key role during normal times, let alone during an economic recession where more and more people are losing their jobs, their health insurance coverage and their ability to pay for healthcare services.

Since safety-net providers rely heavily on government support and donations to achieve their mission, it is important to assess the impact of the economic recession on them. A new report has some good news: at least initially, the impact has been mixed and less severe that expected. The report is based on data collected in five communities between July 2008 and July 2009: Cleveland; Greenville, S.C.; northern New Jersey; Phoenix; and Seattle.

The current economic recession which technically started in December 2007 has been labeled the worst economic downturn since the Great Depression of the 1930s. In many American cities, substantive layoffs have taken place causing unemployment to reach 10% or higher. This in turn, has resulted in a massive loss of employer-based health insurance and has left many people uninsured or Medicaid-bound. At the same time, significant gaps in state and local government budgets have occurred because of reduced tax revenues. Despite recent reports of modest economic growth, high levels of unemployment are expected to continue in the near future.

In this environment of doom and gloom, it was expected that safety-net providers would be among the first casualties. However, the report suggests that “the impact of higher demand on safety net providers was not as great as might be expected in the five communities. To some extent, this reflects that safety net providers were experiencing increasing demand for care before the recession in the face of declining employer-sponsored coverage and other providers’ growing reluctance to treat uninsured and Medicaid patients.”

One of the many programs that have greatly helped safety-net providers weather the storm is the federal stimulus package (American Recovery and Reinvestment Act -ARRA) enacted in February 2009. The package included “higher matching funds for state Medicaid programs, increased funding to support hospitals serving disproportionate numbers of low-income, uninsured and Medicaid patients, and additional grants to federally qualified health centers (FQHCs).” (FQHCs are community health centers, public housing centers, outpatient health programs funded by the Indian Health Service, and programs serving migrants and the homeless.)

The report warns, however, that safety-net providers are still not out of the woods. It notes that “although safety net providers in the five communities so far have weathered the economic recession, the downturn has placed additional strain on already-limited capacity and tenuous financial situations” and therefore many believe that  the full impact of the recession may yet to be seen.