Chronically ill children like 7-year-old Maggie Overholt of Wilmette aren’t allowed to keep hermit crabs in hospital rooms, which is why the rambunctious 1st grader is thrilled to be treated at home.
There, her pet “Moonstar” shares bedside space with her tracheal suction machine, her pulse oximeter that monitors oxygen in her blood and her kangaroo feeding pump, which helps her liquid meals drip though a shunt in her stomach.
After spending nearly a third of her first four years at Children’s Memorial Hospital in Chicago, Maggie is now treated more on an outpatient than inpatient basis despite a host of chronic congenital problems.
But even though outpatient care is generally considered the best and cheapest route in medicine today–allowing patients to lead more normal lives at home– cases such as Maggie’s are draining money from Children’s Memorial and other hospitals statewide, officials there claim.
They say that because of an almost decade-old formula governing how Medicaid reimburses children’s hospitals, such facilities throughout Illinois are losing millions of dollars on outpatient care, forcing them to tap other funds to recover the costs of treatment.
But while they are complaining loudly to state legislators this spring, none of these hospitals is in financial trouble or in danger of closing. Indeed, their own reimbursement decisions nearly 10 years ago helped them land in the spot they are in today.
Still, the problem is growing as these specialized hospitals treat an increasing number of children with chronic medical needs who have been forced to go on Medicaid, such as Maggie. She had to go on the government program in 1995 after her parents’ private insurance company dropped her.
Now, as part of lobbying efforts to the General Assembly for a short-term bailout and a long-term solution, Maggie and her mother, Tish Overholt, plan to testify Thursday in Springfield before a House Committee on Appropriations that the state needs to change its priorities on reimbursing hospitals providing expanded outpatient care to Medicaid patients.
“Not only does Maggie now spend a major portion of her day being basically a relatively normal kid and doing the things that normal kids do . . . even when she’s sick, she’s just happier and more comfortable than she is when she’s ill to the same degree in the hospital,” said her pediatrician, Dr. Bennett Kaye, one
of 11 specialists who care for Maggie’s multiple ailments, ranging from lung disease to a pre-cancerous condition of the
esophagus.
Hospitals such as Children’s Memorial, which handle most of the state’s pediatric Medicaid cases, are reimbursed on average only 35 cents for each dollar spent on outpatient care, compared to nearly 80 cents on the dollar for inpatient care, according to Patrick Magoon, president and chief executive officer of Children’s Memorial.
Eight years ago, Illinois children’s hospitals opted to be reimbursed by Medicaid on a flat $1,500-per-day basis for inpatients, rather than being paid different amounts for different treatments. At the time, they thought this option was the most financially advantageous.
Most hospitals that treat general patient populations chose instead to be reimbursed by particular diagnosis, meaning the state would pay a certain amount for heart surgery, another amount for an appendectomy.
The fee schedule is based on experience with older Medicare patients, so children’s hospitals worried it would apply less well to them.
But then treatment philosophies changed, and as hospital stays shortened and budget-minded state bureaucrats froze the reimbursement rates for outpatient treatments, children’s hospitals started feeling the money pinch.
None of them is ready to go under. In fact, most are still running overall profits, including Children’s Memorial and the University of Chicago Children’s Hospital.
“Yeah, they’re whining too much,” said George Hovanec, Medicaid administrator for the state Department of Public Aid. “They’re good advocates for their cause and I think they have a legitimate cause, but we’ve seen a lot worse situations than this.”
Magoon said the hospital last year lost $23 million in Medicaid outpatient operating costs, mostly because of the state’s reimbursement methods.
Take Maggie, for instance. Last year she racked up $20,674 in inpatient and outpatient costs. Medicaid reimbursed Children’s Memorial $6,269.
Children’s Memorial and the U. of C. Children’s Hospital, like others, make up the difference with money from privately insured patients and proceeds from investments and charitable contributions.
As head of a coalition of five similarly situated children’s hospitals, Magoon is asking the state for an extra $20 million in next year’s budget to cover outpatient losses. He says it is only a “short-term fix.”
The longer-term budget quirks–the fact that there is still more of a financial incentive for pediatric hospitals to provide inpatient rather than outpatient care–have even Gov. Jim Edgar, who last year put together a task force to study the problem, thinking that some kind of adjustment is needed.
“The governor would agree those reimbursement rates are out of whack,” said his spokesman, Thomas Hardy. Edgar, he said, promised legislators he would put $45 million in his budget toward outpatient reimbursement for all 250 hospitals across the state, but only if lawmakers come up with a way to replace the $120 million lost in out-of-state insurance tax that recently was struck down by the courts.
But getting legislators in an election year to come up with $120 million in new money, presumably by imposing a new tax, seems like an unlikely prospect to hospital advocates.
In the end, the issue will be thrown into the swirl of competing demands on the state’s finite pot of money, on which lawmakers have no agreement thus far.
“There isn’t a consensus that of all of the tough funding decisions that the state has made, this is the most important,” Hovanec said. “They’re competing against children and family services, mental health care, services to adult disabled, people in nursing homes. The question is, if you do for one, you don’t have enough money to do for all.”
When she returns from her Springfield lobbying campaign, Maggie will continue attending Brownie meetings and swinging with abandon on tires during school recess with her best friend Hillary and second-best friend Rachel, as she did Wednesday.
She said it doesn’t bother her that while her pals scamper off to the library, she often has to stop first at the nurse’s station to get her tracheal tube suctioned, her chest pounded and new medication–as long as she is close to home.
