Massachusetts Hospital Loses Money Treating Out-of-State Medicaid Children:

The cost of treating chronically ill out-of-state Medicaid pediatric beneficiaries contributed to a $28 million operating loss for Boston-based Children's Hospital in 2000, prompting hospital administrators to focus "intensely" on gaining higher Medicaid reimbursement rates from other states, the Boston Globe reports. Last year, Children's treated 965 out-of-state Medicaid beneficiaries, many of whom are among "the sickest and most expensive" patients to care for. For Children's, treating in-state patients costs an average of $9,998 per patient, while treating out-of-state patients costs the hospital an average of $24,000 per patient, the Globe reports. From New Hampshire alone, Children's cared for 359 Medicaid beneficiaries last year at a cost of $2.6 million. On average, New Hampshire reimburses Massachusetts hospitals for about 60% of their costs for Medicaid care, the Globe reports.

Case in Point
To illustrate this issue, the Globe profiles New Hampshire resident Lacey Suter, who was born with CHARGE, a "complicated collection" of birth defects. Because New Hampshire hospitals are not equipped to handle her condition, Suter went to Children's Hospital. Thus far, Suter's treatment has cost the hospital $171,000, and of that, New Hampshire's Medicaid program has covered $80,000. Children's administrators say the difference between cost and reimbursement is because New Hampshire determines reimbursement rates based on Medicare diagnosis figures. Those figures do not consider the "extra expense" associated with care in pediatric medical centers.

Compensating for the Shortfall
To make up the difference between care cost and reimbursement, Children's has used interest earnings from a $345 million unrestricted endowment. But hospital trustees say the facility cannot continue to "divert" that funding from research and teaching. As a result, Children's executives are gathering evidence to win higher reimbursements for out-of-state patients from the patients' home states, but "more dramatic measures" may be a "last resort" if the rates are not increased, the Globe reports. Children's CEO Dr. James Mandell said, "You can say we're simply not going to treat these patients. Or you can say we're going to limit the number of kids we take. These are tough decisions we face going forward." But he added, "There are kids who come in here who everyone else has given up on. How do you apply business principles to those kids?" (Kowalczyk, Boston Globe, 3/4).