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September 21, 2016

Study: Children's hospitals take financial hit for pediatric Medicaid care

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    Children's hospitals suffer greater Medicaid reimbursement losses than other hospitals when providing care for children with Medicaid, according to a study published last week in JAMA Pediatrics.

    Medicaid reimbursements and DSH payments

    Medicaid reimbursements typically are less than the cost of providing care, according to the study, which said that U.S. hospitals lost $14.1 billion in 2014 from Medicaid underpayment.

    Federal Disproportionate Share Hospital (DSH) payments are supposed to make up for uncompensated care costs for Medicaid beneficiaries or uninsured patients. However, those payments starting in 2018 will decrease by $2 billion annually under a provision in the Affordable Care Act. The cuts correspond with projected coverage gains under the health reform law.

    Study findings

    For the new study, researchers looked at hospital discharges in 23 states for Medicaid beneficiaries up to 20 years old. The researchers looked at inpatient care costs for those individuals at children's hospitals within larger hospitals, freestanding children's hospitals, teaching hospitals, and nonteaching hospitals.

    According to the study, more than one-third of children in the United States have health coverage through Medicaid.

    The median number of pediatric Medicaid-insured discharges was highest at freestanding children's hospitals. The study found pediatric Medicaid-insured discharges totaled:

    • 4,082 at freestanding children's hospitals;
    • 2,379 at children's hospitals within larger hospitals;
    • 674 at teaching hospitals; and
    • 161 at nonteaching hospitals.

    The researchers said that freestanding children's hospitals saw the greatest financial loss, losing more than $9 million per hospital between March and September 2015. In comparison, teaching hospitals and nonteaching hospitals lost about $200,000 and $28,000, respectively, over the same period.

    According to the researchers, DSH payments compensated for about 50 percent of freestanding children's hospitals Medicaid losses.


    Lead study author Jeffrey Colvin of Children's Mercy Hospitals and Clinics at the University of Missouri said, "It's a bit surprising how much money children's hospitals lose from caring for children with Medicaid."

    Colvin said that Medicaid is severely underfunded, adding, "Just as Medicare is central to supporting healthcare of seniors, Medicaid is central to supporting the health care of children."

    In an accompanying editorial, Matthew Davis of the Feinberg School of Medicine at Northwestern University in Chicago wrote, "The findings ... suggest the need for policy remedies to help address the shortfalls faced by children's hospitals. Straightforward increases in reimbursement are one possibility and have a recent precedent."

    For example, he wrote that policymakers could mitigate the effects by delaying DHS cuts or prioritizing DSH payments for hospitals that care for the most children (Doyle, Reuters, 9/12; Colvin et al., JAMA Pediatrics, 9/12; Davis, JAMA Pediatrics, 9/12).

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