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All Children's Hospital fears major cut under state Senate plan

Published Apr. 23, 2013

ST. PETERSBURG — All Children's Hospital cares for a lot of children who are very sick and who rely on Medicaid, the government insurance program for the poor. Those facts have helped make it a beloved institution. But now they're also helping to make it a potential target for a major cut in state funding.

All Children's Hospital would be the second biggest loser under a Florida Senate plan to change how hospitals are reimbursed for Medicaid care, according to a new analysis by the Safety Net Hospital Alliance of Florida. Only Miami's Jackson Memorial stands to lose more than All Children's $18 million cut. Tampa General would lose $6.6 million, counting another trim created by a plan to reallocate a separate pot of federal money (See related information, 7B).

All Children's is rallying supporters to advocate against the Senate plan, which calls for a much larger cut than the House plan. Legislative leaders may debate the issues this weekend. But even if a compromise is reached, All Children's and other not-for-profit hospitals expect significant cuts so that for-profit hospitals will get higher Medicaid payments than in the past.

Proponents of the plan say the for-profits have been treated unfairly by a reimbursement plan that rewards inefficiency. Hospitals like All Children's say changing the system so rapidly will harm patients.

The Safety Net Alliance estimates the Senate plan would provide for-profit hospitals with an additional $95.8 million while taking $112.7 million from hospitals committed to providing a high percentage of care to the poor and uninsured.

Some say a change in Medicaid funding is long overdue. Alan Levine, senior vice president of for-profit Health Management Associates, which now runs Bayfront Medical Center in St. Petersburg, said the state had long softened the impact of Medicaid cuts on safety-net hospitals, particularly the children's hospitals. He said his hospital system was cut about 20 percent in Medicaid funding over the last four years.

"We're so much further from our cost than they are," he said. "Even with a cut, they're still getting more."

Under the Senate payment proposal, HMA's Bayfront, would gain $1.6 million, according to a Senate staff analysis.

All Children's president, Dr. Jonathan Ellen, said the Senate plan doesn't adequately consider institutions like his that have a high proportion of Medicaid patients who have medically complex conditions.

Medicaid reimbursements are far lower than either Medicare or private insurance, and hospitals traditionally have covered Medicaid losses with higher fees for other patients. That's not possible when 70 percent of your patients are on Medicaid, as at All Children's. Most adult hospitals, by comparison, rely most heavily on Medicare.

"We took this mission of taking every child and deliberately scaling ourselves up to take care of the sickest," said Ellen. "So we put ourselves in this position, but it's the position society has for us."

All Children's, which runs on a lean 2 percent operating margin, is in the midst of initiatives aimed at raising its profile as a research and education institution since partnering with Johns Hopkins Medicine. Next year, the first Hopkins residents arrive; the hospital pays about a third of the residency costs.

Ellen said he could not identify where the hospital would make large cuts that, in the Senate plan, would represent 15 percent of its Medicaid funding.

"Eighteen million dollars means our mission gets affected," said Ellen. "If our mission is to take care of all children, to find cures, to teach great people to take care of great patients, all those things will somehow be affected."

The new Medicaid payment model stems from an attempt to control costs and "change Medicaid's patchwork of inequitable, individually determined hospital rates," state Sen. Denise Grimsley, R-Sebring, wrote senators earlier this month.

Currently, hospitals are paid based on actual costs. Last year legislators decided to move toward a model that pays hospitals flat fees based on patients' diagnoses.

This "diagnosis-related group" or DRG model is similar to how the federal government reimburses providers under Medicare.

Other states have taken years to put such a system in place, but Florida is moving rapidly. Another reason the cuts could feel especially sharp this year is because in past sessions, the state's two standalone children's hospitals, All Children's and Miami Children's, have been exempted from some cuts, noted Keri Eisenbeis, director of government relations at not-for-profit BayCare. BayCare's hospitals include a safety net institution, St. Joseph's in Tampa.

But there are good reasons to treat standalone children's hospitals differently, Ellen said. When it comes to the diagnosis-based system, children don't fit as well into the payment model as adults do. For instance, the average hospital stay for an adult who had open heart surgery is about four days, he said. A child who has had heart surgery could be there for weeks or even months because of complicated congenital defects.

"I don't think they intended to hurt the children's hospitals the way they did," he said. "They started messing with formulas that are very complex."

This story has been updated to reflect the following clarification:

All Children's and Miami Children's hospitals, Florida's two standalone children's hospitals, have been shielded from some state Medicaid cuts that affected children's facilities licensed within adult hospitals. An article Saturday on proposed cuts to All Children's was unclear on that point.

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