Financial Loss for Inpatient Care of Medicaid-Insured Children

Importance: Medicaid payments tend to be less than the cost of care. Federal Disproportionate Share Hospital (DSH) payments help hospitals recover such uncompensated costs of Medicaid-insured and uninsured patients. The Patient Protection and Affordable Care Act reduces DSH payments in anticipation of fewer uninsured patients and therefore decreased uncompensated care. However, unlike adults, few hospitalized children are uninsured, while many have Medicaid coverage. Therefore, DSH payment reductions may expose extensive Medicaid financial losses for hospitals serving large absolute numbers of children. Objectives: To identify types of hospitals with the highest Medicaid losses from pediatric inpatient care and to estimate the proportion of losses recovered through DSH payments. Design, Setting, and Participants: This retrospective cross-sectional analysis evaluated Medicaid-insured hospital discharges of patients 20 years and younger from 23 states in the 2009 Kids' Inpatient Database. The dates of the analysis were March to September 2015. Hospitals were categorized as freestanding children's hospitals (FSCHs), children's hospitals within general hospitals, non-children's hospital teaching hospitals, and non-children's hospital nonteaching hospitals. Financial records of FSCHs in the data set were used to estimate the proportion of Medicaid losses recovered through DSH payments. Main Outcomes and Measures: Hospital financial losses from inpatient care of Medicaid-insured children (defined as the reimbursement minus the cost of care) were compared across hospital types. For our subsample of FSCHs, Medicaid-insured inpatient financial losses were calculated with and without each hospital's DSH payment. Results: The 2009 Kids' Inpatient Database study population included 1485 hospitals and 843 725 Medicaid-insured discharges. Freestanding children's hospitals had a higher median number of Medicaid-insured discharges (4082; interquartile range IQR, 3524-5213) vs non-children's hospital teaching hospitals (674; IQR, 258-1414) and non-children's hospital nonteaching hospitals (161; IQR, 41-420). Freestanding children's hospitals had the largest median Medicaid losses from pediatric inpatient care (-9 722 367; IQR, -16 248 369 to -2 137 902). Smaller losses were experienced by non-children's hospital teaching hospitals (-204 100; IQR, -1 014 100 to 14 700]) and non-children's hospital nonteaching hospitals (-28 310; IQR, -152 370 to 9040]). Disproportionate Share Hospital payments to FSCHs reduced their Medicaid losses by almost half. Conclusions and Relevance: Estimated financial losses from pediatric inpatients covered by Medicaid were much larger for FSCHs than for other hospital types. For children's hospitals, small anticipated increases in insured children are unlikely to offset the reductions in DSH payments.