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Financial Concerns for Children's Hospitals

Jeffrey H. Silber, MD, PhD; Sean P. Gleeson, MD, MBA; Huaqing Zhao, MA

Arch Pediatr Adolesc Med. 1999;153:169-179.

Objectives  To estimate the resource utilization in hospitalizations for common pediatric conditions or procedures involving patients with chronic disease vs those with no chronic disease and to develop an economic model of hospital per-patient profit (or loss) when insurance contracts fail to account for the presence of chronic disease.

Setting and Design  A retrospective analysis of selected acute pediatric conditions found in the 1991 and 1992 MedisGroups National Comparative Data Base.

Patients  We studied 30,379 pediatric admissions for common acute conditions, including concussion, croup, pneumonia, appendicitis, gastroenteritis, fractures, cellulitis, urinary tract infection, and viral illness.

Main Outcome Measures  Hospital length of stay and total hospital charges.

Results  For patients without chronic disease, mean (geometric) length of stay was 2.53 vs 3.05 days (P<.001) for patients with at least 1 chronic disease. For patients without chronic disease, mean (arithmetic) total hospital charge was $2614 vs $3663 (P<.001) for patients with at least 1 chronic disease. Assuming 75% of patients with chronic disease are admitted to a children's hospital vs 25% to a general hospital, overall loss per patient at the children's hospital ranged between 1.5% and 2.9%, depending on assumptions regarding cost-to-charge ratios and the treatment of charge outliers. Pneumonia cases were associated with a 4.0% to 5.85% loss.

Conclusions  Length of stay and charges are higher for everyday pediatric conditions or procedures when patients also have a chronic disease. If insurance contracts fail to account for chronic disease, then children's hospitals will realize significant financial losses, and over time this will lead to a decline in their financial viability, a reduction in quality, or a change in their mission.

From the Department of Pediatrics (Drs Silber and Gleeson, Mr Zhao), Department of Anesthesia (Dr Silber), and Divisions of Epidemiology and Biostatistics (Dr Silber and Mr Zhao), Center for Outcomes Research, The Children's Hospital of Philadelphia; and the Leonard Davis Institute of Health Economics, University of Pennsylvania School of Medicine, Philadelphia (Dr Silber).

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