Children's Hospitals: Essential, but Challenged

Lawrence A. McAndrews
April 16, 2000

Right now, there's a general feeling that this is a good time to be a child in America. And by many measures, it is. The economy is humming; family size is growing. Children are by far the healthiest group of Americans, and their health care costs are the lowest—nine times less than those of the elderly.

But the gleam of this new era of prosperity is obscuring the frayed condition of the safety net that protects the health of our citizens, especially children.

 A recent report by the Institute of Medicine (IOM) of the National Academies outlines the precarious position of the nation's "core safety net providers" of health care—public hospitals, publicly financed community health centers, local health departments—as the last resort for poor and uninsured sick people.

The problem is this: Even in a growing economy, there is a sharp increase in the number of uninsured Americans. At the same time, there has been a decrease in federal and state support for the safety net providers, who by their very nature are less able to compete in a cutthroat managed care market. Both presidential candidates have now spoken about the problem, and voters who put children high on the list of national resources ought to be pressing both of them further about solutions.

The IOM report focuses on public safety net providers, but it recognizes there is a much larger "invisible safety net" made up of private institutions such as children's hospitals and other teaching hospitals.

What Children's Hospitals Do
Most people can readily identify a safety net hospital. It usually is the big inner-city public hospital or the walk-in clinic in the poor sections of town or in economically depressed rural areas. But there is another piece of the safety net that every parent is familiar with: the children's hospital.

Happy-face art adorns their walls, doctors and nurses are a little gentler and kinder than elsewhere, and miracles happen daily. Fewer than 200 institutions—independent children's teaching hospitals and pediatric programs of larger teaching hospitals—care for millions of kids with conditions ranging from an earache, to cystic fibrosis to leukemia; often they are kids with multiple chronic conditions that require specialized expertise and expensive treatment. Independent children's teaching hospitals train at least one-third of all the nation's pediatricians and half of the nation's pediatric specialists. They represent only about 6 percent of all hospitals but train virtually the entire national pediatric workforce.

Children are healthy in the aggregate. Precisely because they are, it takes a large volume of sick kids to make a children's hospital financially able to treat them, to train the nation's next generation of pediatricians and to do the research that benefits every child, no matter how rich or poor, no matter what circumstances put them in the emergency room.

Pedro Marino, a 12-year-old boy, was visiting family in Detroit when an abnormally fast heart rhythm landed him in the emergency room of Children's Hospital of Michigan. With Pedro in a life-threatening situation, no one asked about his insurance status or his family's ability to pay. Instead, Dr. Peter P. Karpawich performed a relatively new procedure to cure Pedro of a rare congenital heart defect. Because the Marino family could not afford the $14,000 procedure, the hospital absorbed the cost, and Dr. Karpawich waived his fee.

Health care policy can be a terribly complicated issue. But it becomes very simple when your child is sick. You, as a parent, need a place you know has the expertise to treat your child; a place that will comfort your child while performing a routine tonsillectomy or seeking a cure for the rarest of diseases; a place that understands how to take care of the entire family when illness strikes. That is what a children's hospital is to all parents.

But to families without means and to the community at large, the children's hospital is a vital part of the safety net. As such, it stands with public hospitals, urban and rural walk-in clinics, health clinics in schools and specialized care centers that the Institute of Medicine says are in financial peril.

Because nearly one of every five Americans and one in seven children has no health insurance and is unable to pay for medical care, growing numbers are turning to these core safety net providers. At the same time, these institutions are struggling financially, in large part due to changes in federal policies that cut the amount of aid that has always been given in recognition of their special role in treating the poor.

As a result, the IOM is recommending that Congress establish competitive grants for the safety net providers to use to offset growing operating losses. It also wants to establish a government oversight panel to monitor safety net providers and to review the shifting state and federal policies that affect these institutions.

What Children's Hospitals Need
Children's hospitals support these recommendations, but there is much more that policy makers need to do to sustain essential services for kids in this time of plenty.

Independent children's teaching hospitals which are also pediatric research centers represent only 1 percent of all hospitals, and by virtue of their location in major metropolitan areas, they are essential providers of care to children of low-income families. Yet more than half of them are experiencing financial losses on their patient care.

On average, children's hospitals devote almost half of their care to children of low-income families. The federal and state governments do recognize the unique financial burdens of being a safety net provider, but recognition does not always mean a fair share of money. Medicaid, the biggest insurance program for children, pays children's hospitals, on average, 78 cents for every dollar spent to care for a child. Even with the additional federal allowance for hospitals that treat disproportionate numbers of the poor, children's hospitals still get reimbursed only 86 cents on the dollar on average. And that special allowance has been cut by more than $10 billion during the four-year period ending in 2002.

For these reasons, there are several steps that Congress should take:


  • Restore federal Medicaid "disproportionate share" funds that otherwise would be cut in the next two years


  • Improve the outreach and enrollment of uninsured children who are eligible for Medicaid or the State Children's Health Insurance Program


  • Provide full equitable funding for children's hospitals to pay for the cost of training new doctors


  • Increase the investment in pediatric biomedical research


  • Increase the investment in targeted prevention programs such as poison control centers and asthma education.

More Than Just a Safety Net
Children's hospitals are more than just a safety net. They serve all children. When the polio vaccine was developed in 1955, it was at a children's hospital serving mostly the very sick. Five years later, a measles vaccine was developed at another children's hospital. The discoveries occurring today in asthma, cystic fibrosis, pediatric AIDS, childhood cancer and emergency medicine help everyone—not just the frail and the poor.

At bottom, the continuing long-term health of America's children, who arrive in this world innocent and voiceless, depends on wise public policy. And it is we—parents, grandparents, and caring adults—who can and must give voice to their needs.



Lawrence A. McAndrews is president and CEO of the National Association of Children's Hospitals and Related Institutions NACHRI.