SAN DIEGO (FRONTLINE MEDICAL NEWS) – Freestanding children’s hospitals take a far larger financial hit in serving Medicaid pediatric inpatients than do hospitals of other types, Dr. Jeffrey D. Colvin reported at the annual meeting of the Pediatric Academic Societies.

“Increasing Medicaid reimbursement for hospitals serving large volumes of pediatric inpatients covered by Medicaid should be considered,” asserted Dr. Colvin of Children’s Mercy Hospital in Kansas City, Mo.

He presented a cross-sectional study of the Kids’ Inpatient Database (KID) sponsored by the Agency for Healthcare Research and Quality. The analysis encompassed 843,725 discharges from 1,485 U.S. hospitals. The KID database contains total charges for every discharge. The purpose of the study was to determine the median inpatient net revenue from Medicaid by hospital type.

Hospitals of all types experienced a net financial loss for inpatient care of Medicaid-insured pediatric patients, but the size of the losses varied enormously. Freestanding children’s hospitals had a median annual loss of $9.7 million, compared with $1.8 million per year for children’s hospitals located within a general hospital, $204,100 for non-children’s teaching hospitals, and a median loss of just $28,300 per year for non-children’s non-teaching hospitals.

The rate of uninsured pediatric discharges at children’s hospitals was very low: 1.5% at the freestanding ones and 3.5% at those located within a general hospital.

“For all children’s hospitals, the reduction of uninsured patients under the Affordable Care Act is unlikely to offset the continuing losses from Medicaid,” Dr. Colvin observed.

The children’s hospitals provided a disproportionate amount of Medicaid-insured pediatric inpatient care. Freestanding children’s hospitals accounted for 0.8% of hospitals in the KID database, yet they were responsible for 6% of the discharges. And children’s hospitals within a general hospital composed 3.1% of all hospitals while handling 14% of all Medicaid discharges. In contrast, non-children’s non-teaching hospitals made up 75% of the hospital universe, but were responsible for 41.7% of discharges.

Forty-three percent of Medicaid discharges from freestanding children’s hospitals involved children with what is classified as a complex chronic condition. This was the case for 31% of discharges from children’s hospitals within a general hospital, 16.6% of Medicaid pediatric discharges from non-children’s teaching hospitals, and 8.8% of discharges from non-children’s non-teaching hospitals.

Dr. Colvin predicted that the financial burden on children’s hospitals is likely to worsen, given that under the Affordable Care Act, the Disproportionate Share Hospital Payments program that is part of Medicaid is scheduled to be greatly reduced if not eliminated.

The relationship between hospital charges and costs is convoluted. No single source exists for determining hospital-specific Medicaid revenue-to-cost ratios. Dr. Colvin and coinvestigators determined each hospital’s net Medicaid revenue by first figuring the hospital’s total cost, derived by multiplying total Medicaid inpatient charges by the Agency for Healthcare Research and Quality’s hospital-specific ratio of costs-to-charges. Total costs were then multiplied by the hospital’s ratio of revenue-to-costs as determined from the American Hospital Association and Centers for Medicare & Medicaid Services data. This figure, representing the hospital’s gross revenue from Medicaid, was subtracted from the costs to arrive at net revenue.

“This is really important information to give to policy makers, who seem to think that things will sort of level out under the Affordable Care Act,” said Dr. Megan M. Tschudy of Johns Hopkins University, Baltimore. Dr. Tschudy was session cochair.

Dr. Colvin concurred. “I would very much hope that this information has some kind of policy impact,” he said.

Dr. Colvin reported having no financial conflicts regarding this study, which was conducted without commercial support.