Report: Children’s hospitals face financial losses treating children on Medicaid

September 11, 2016

A report in JAMA Pediatrics found children's hospitals lose more money than other facilities treating children covered by Medicaid. It also found they may be under pressure in 2018 when federal payments compensating for this loss are lowered. According to the study, Medicaid often pays less than actual hospital costs for services, adding hospitals lost $14.4 billion in 2014 from Medicaid underpayment. According to the authors, while over a third of children are insured by Medicaid they are surprised by how much money children's hospitals lose in the process of that care, noting half the institutions lose over $40 million annually. The study found freestanding children's hospitals took the biggest financial loss at over $9 million per hospital from March to Sept. of 2015. Teaching hospitals and non-teaching hospitals lost $200,000 and $28,000 over the same period. DSH payments made up for about half of Medicaid losses for freestanding children's hospitals. The researchers point out most children's hospitals try to serve children in need of medical care regardless of insurance coverage, but their ability to absorb the losses often depends on outside sources such as commercial contracts, philanthropy and state or federal subsidies.
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