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Children's hospitals concerned over coverage cuts, bottom lines from AHCA warranted, Chartis Group study says

Study points to decreased funding for Medicaid as underlying reason; More than half of children's hospital's patients are insured by Medicaid.

Jeff Lagasse, Associate Editor

With the Senate now deciding whether to modify the House-passed American Health Care Act or begin new healthcare legislation from scratch, children's hospitals are saying the bill would result in deep cuts to children's coverage, as well as to their own bottom lines if passed.

Those claims are backed up by a new study from The Chartis Group, which points to decreased funding for Medicaid as the underlying reason. In March, the Congressional Budget Office estimated that about 14 million Americans on Medicaid would lose coverage by 2026 under the AHCA, with the federal government reducing outlays to states for Medicaid by $880 billion over the next decade.

While the CBO has not yet released figures on the revised bill passed by the House on May 4, it still includes a significant overhaul of Medicaid.

[Also: Parents managing serious illness, medical conditions in children fret AHCA loophole on pre-existing conditions]

That's problematic for children and the hospitals that serve them. More than half of children's hospital's patients are insured by Medicaid, a number that's been steadily increasing for about a decade. And children's hospitals have become increasingly dependent on Medicaid as their primary payer. As of February, 35.9 million of the 75.4 million Medicaid and CHIP enrollees were children.

There are a couple of options for children's hospitals outlined by the Chartis Group. One is to change the payer mix by seeking more volume -- and hence more revenue -- from commercially insured children. That could be a challenge, though, as many children's hospitals are already optimizing their commercial market share. Plus, children's hospitals will be challenged to raise commercial rates to compensate for Medicaid reductions because many hospital and health plan leaders believe reimbursement rates are already pushing up against a ceiling. Rationing care for Medicaid-insured children might be considered if rate reductions are severe, but that would be a last resort.

The second option would be to change their model of care. Hospitals could potentially cut costs by eliminating unnecessary care or shifting care to lower-cost settings, perhaps leaning on options such as virtual care.

[Also: Children's medications prove tricky for production, profitable for drug companies]

Care models that address social determinants of health would also be viable, and could be accomplished by partnering with schools or housing and other social services. Children with asthma, for instance, could be provided with education as well as a second inhaler, to be kept at the school by a nurse who's aware of the child's condition. Pair that with a home that's mold-free and void of pests, and the child could reduce his/her emergency visits and hospitalizations.

Children's hospitals may also consider global budget payment models that reward population health management, which would require the hospitals to work with payers to transition to new payment models.

Twitter: @JELagasse

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