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Health & Science

Children’s Hospitals In Texas Face Cuts After Lawsuit Fails

Texas Children’s Hospital lost a lawsuit it filed on behalf of itself and other pediatric hospitals in Texas.


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Texas Childrens Hospital
Texas Children’s Hospital in the Texas Medical Center [Image credit: flickr/imelda]

Texas Children’s Hospital lost a lawsuit it filed on behalf of itself and other pediatric hospitals in Texas. The hospital claimed the Medicaid program was unfairly cutting its reimbursements because of a recent rule change. The fight over payments is fierce because Medicaid covers 55 percent of the children treated at Texas Children’s.

Alec King, the hospital’s senior vice president for finance and government affairs, called the payment situation “unfair math.”

“And, really, the government agencies (are) overstepping and interfering with the private contractual relationship between the patients, the insurance companies and their providers.”

The hospital filed the suit because Medicaid — the insurance program for the poor — changed its rules on how much to reimburse Texas Children’s and other pediatric hospitals in Texas.

The new rule says the hospitals will get a lower reimbursement from a key Medicaid calculation. The calculation concerns hospitalized children who could qualify for Medicaid — but actually have private insurance.

The children’s private insurance coverage pays all of their hospital bills, King said, but Medicaid still counts those patients when it calculates how much the hospitals get in supplementary payments every year. The more children in that situation, the lower the reimbursement for Texas Children’s, a practice King calls “double-dipping.”

King estimates the recalculations have already cost the hospital at least $27 million, and the hospital could have to pay tens of millions back to the government from two previous years, if the issue is not resolved in its favor.

“Effectively what they’re doing is taking some of those premiums, those hospital payments paid by commercial insurance companies and saying ‘Really, those are Medicaid dollars and we’re going to reduce our obligation by that much,’” King said.

A judge rejected the hospital’s lawsuit on Saturday. Texas Children’s may appeal, or take the matter to the federal courts. King says they’re still deciding what to do. (Medicaid officials declined to comment on the lawsuit.)

King says the overarching problem is that compared to adult hospitals, children’s hospitals depend so much more on Medicaid payments. And Medicaid simply doesn’t cover medical costs, compared to private insurance or even Medicare.

King says a decade ago 40 percent of the hospital’s patients were on Medicaid, now 55 percent of them are. Experts at the Center for Public Policy Priorities, a left-leaning think tank in Austin, note that more children receive Medicaid because child poverty in Texas has increased since the recession, and because outreach workers are doing a better job signing them up for the coverage.

“As the math shifts towards more Medicaid cases, the challenge just gets more and more difficult,” King said.

In adult acute-care hospitals in Texas, maybe 5 to 10 percent of patients are on Medicaid, according to King.


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