Children's hospitals object to proposed funding reductions

The nation's children's hospitals are lobbying Congress to alter a provision within the pending healthcare legislation that industry leaders say will reduce their federal funding up to $876 million.

Hospital groups in July decided to a $155 billion decrease in federal payments over Ten years, part of a broader effort to reduce medical costs. But those cuts might have a lopsided impact on children's hospitals, the industry's trade group says, and may cause deep reductions in services.

"It's likely to have a huge impact," said Jim Kaufman from the National Association of Children's Hospitals. "You're leaving children's hospitals holding an economic bag."

Dennis Smith, a senior fellow in the conservative Heritage Foundation, countered that children's hospitals are very well compensated by other federal programs. The proposed cuts, he explained, amount to a drop in "extra revenue — not to mention, they don't wish to give that up."

At issue are proposed reductions in federal "disproportionate share hospital" payments that reimburse hospitals for care they offer to the uninsured and people enrolled in Medicaid, a federal medical health insurance program for low-income Americans.

General hospitals intend to offset the cuts by having an expected rise in patients who does have insurance underneath the legislation. The Congressional Budget Office predicts 36 million Americans who does not otherwise have insurance will gain coverage underneath the House of Representatives' healthcare bill.

Q&A: Abortion and also the health bill
BILL CLINTON: Ex-president weighs in
ON POLITICS: GOP looks to profit from health care

But children's hospitals serve a higher share of patients on Medicaid, which pays hospitals under private insurance. And, due to past government efforts to insure children, many of them already have coverage — meaning children's hospitals a rise in the number of individuals with insurance.

About 90% of kids had medical health insurance in 2008, in contrast to 80% of people ages 18-64, based on the Census Bureau. That leaves 7 million children under 18 without coverage.

"Keep in your mind that children's hospitals do not have that much of the margin to begin with," said Jim Dahling, CEO from the Children's Hospital from the King's Daughters in Norfolk, Va.

In an argument, House Energy and Commerce Committee Chairman Henry Waxman, D-Calif., said many lawmakers "were very worried about the potential negative impact of reducing … payments to safety-net hospitals." He explained the cuts, if approved, wouldn't take effect until 2017. "This can give the Congress time for you to re-evaluate and make a midcourse correction" if required.

Legislation approved by the Senate Finance Committee would reduce funding to children's hospitals by $876 million, the trade group estimates. The home bill would trim it by $395 million.

The children's hospital association and 31 from the nation's largest children's hospitals spent a lot more than $4 million on lobbying this season, according to disclosure forms filed using the Senate.

Smith said children's hospitals would survive the cuts simply because they receive adequate payments from Medicaid. Randall O'Donnell, CEO of Children's Mercy Hospitals and Clinics in Might, Mo., said Medicaid covers 76% of the hospital's costs. He explained the number falls to 67% when the subsidies are cut.

Seven Republican and 22 Democratic lawmakers signed instructions to House Speaker Nancy Pelosi asking her to reconsider the cuts. Although the reductions will be years if approved, Rep. Glenn Nye, a Virginia Democrat who crafted the letter, said, "I don't wish to leave this to chance."