• Issue Brief
  • January 3, 2011

Pediatric Accountable Care Organizations Principles

On March 23, 2010, President Barack Obama signed the Patient Protection and Affordable Care Act (PPACA, or the Act).  Section 2706 allows for the creation of Pediatric Accountable Care Organization (ACO) Demonstration Projects.  This section of the Act is separate from Section 3022, which relates to Medicare Shared Savings Programs, including ACOs for adults.  In developing pediatric ACOs, the unique needs of children must be addressed. That is, concepts developed under the Medicare policy development process cannot be assumed to apply to children. We believe there needs to be a specific focus, separate from the Medicare policy development process, on how ACOs could work for children under the Medicaid program.

The Association has developed a set of Principles for Pediatric Accountable Care Organizations that highlights the issues that the Centers for Medicare and Medicaid Services should consider to ensure that ACOs meet children’s unique health care needs. The following fact sheet demonstrates the main reasons why these principles must be addressed:

Children Have Unique Needs

Many adult chronic conditions have their root in childhood. Most children are generally healthy and require only routine medical care and preventive services to avoid the expensive conditions of adulthood. Population health management for children is about chronic disease avoidance.  If a population of children can be effectively managed into adulthood without behaviors that lead to chronic disease (diabetes, heart disease, etc) that will bend the long-term cost for the country. In addition, better management of care for children with chronic illness, the group of children that accounts for the most utilization, can improve outcomes and reduce health care costs.  

Children utilize care at different rates in different settings and for different conditions than do adults.  For example:

  • While the highest rates of hospitalization for children are in the first year of life, for adults they occur at the end of life. Adults 65-84 are hospitalized at a rate 15 times that of children 1-17 years old. Infants younger than 1 year of age experience the highest rates of hospitalization because nearly all births occur in hospitals.
  • Children are hospitalized for different reasons than adults. In 2008, the most frequent principal diagnoses for hospital stays for ages 1 to 17 were for pneumonia, asthma, mood disorders, appendicitis, and infections. For ages 65 and above, the most frequent were congestive heart failure, osteoarthritis, pneumonia, coronary atherosclerosis, and cardiac dysrhythmias.
  • The majority of physician office visits in the first year of life are for well child and preventive care, while slightly over 10% of visits by persons 65 years and over were for preventive care in 2007. Physician visits for adults 65 years and older were more than 7 times the rate of visits by children 5-14 years. The cost savings of prevention may occur far in the future.
  • The needs and associated utilization and costs vary widely among children. While a majority of children are healthy and/or experience only episodic acute illnesses, it is estimated that children with special health care needs (CSHCN) account for approximately 16.2 percent of children and a disproportionate amount of health care expenditures. The group of CSHCN is a diverse one, ranging from children with single chronic conditions (e.g., asthma) to children with multiple chronic conditions and diseases or syndromes involving multiple organs and requiring assistive technology. Children with disabilities had more than four times the number of hospitalizations, eight times the number of hospital days, twice the number of emergency department visits, more than twice as many physician and more than five times the number of nonphysician visits, three times the number of prescribed medications and substantially more home health provider days as compared to other children in a recent study. Moreover, the prevalence of “medically complex children” is increasing (Cohen, et al., 2006).  As compared to children without special health care needs, CSHCN needs are almost four times more likely to have doctors or parents report that they need to see a specialist. 
  • While most adults receive outpatient care in doctors’ offices, children often receive care in non-traditional settings, such as schools, day care and community centers.
  • Additionally, measures of outcomes are different for children as compared to adults. For example, mortality, although important, is less useful as an outcome for children since mortality is relatively rare. Other outcomes, such as school readiness, are unique to children. Unfortunately, children are more likely to be living in poverty (or near-poor) than working age or older adults, and poor or near-poor individuals experience worse health than higher-income individuals. Poverty status bears a strong connection to inadequate nutrition, substandard housing, exposure to environmental hazards, unhealthy lifestyles and decreased access to and use of health care services. Children in the poorest communities had a 19% higher rate of hospitalization in 2008 than those residing in all other communities, compared to no difference for patients 65 years and older. Since many health risk factors originate in childhood – such as smoking, obesity – pediatric ACOs offer the opportunity to intervene early and impact a lifetime of healthcare costs. Pediatric ACOs should encourage the development of strong relationships with community resources and schools to achieve the best health outcomes for children.
  • In contrast to the situation for adults, children face challenges in accessing specialty services due to a shortage in pediatric specialists. A recent survey of children’s hospitals (which house the greatest concentration of pediatric specialists) shows tremendous delays in scheduling visits, which results in delayed care and increased emergency room use. For example, hospitals reported lengthy waits for the following pediatric specialty appointments compared to the two week benchmark:
    • 68 percent experience difficulty scheduling endocrinology visits; the average wait time is more than 10 weeks
    • 61 percent report difficulty scheduling neurology visits; the average wait time is nine weeks
    • 50 percent report difficulty scheduling developmental pediatrics visits; one of the subspecialties with the longest wait times, averaging more than 13 weeks

Medicaid and Medicare

The Medicaid and Medicare programs are very different.  Since one out of three children are covered by Medicaid, the pediatric ACO demonstrations need to be cognizant of the existing Medicaid program.  The following important differences need to be considered as the pediatric ACO demonstration program is developed. 

  • Beyond the obvious differences in the programs – one is a fully federal program and one is a federal-state program, and the difference in populations – the existing structures are not alike.  For example, less than 25 percent of Medicare beneficiaries are enrolled in managed care, whereas most children on Medicaid (about 71 percent) are enrolled in managed care. Medicare will likely institute voluntary enrollment into an ACO. For a state that has already enrolled children in mandatory managed care, this may not be appropriate. 
  • Medicare has a national set of well-developed and tested quality measures, while the Medicaid program does not. Federal investment in children’s healthcare measures has lagged behind investment in adult measures. As a result, nationally-endorsed measures are not available to capture important aspects of quality to be addressed by accountable care organizations focused on children. Additionally, measures are lacking in both adult and pediatric settings with regard to critical potential benefits of ACO’s, including care coordination.
  • Medicaid is a significantly underfunded program relative to Medicare. On average. Medicaid reimburses children’s hospitals only 76 percent of the cost of care provided, even with disproportionate share hospital payments included in the calculation.  Pediatricians, who provide the majority of office-based preventive services for children, receive only 71 percent of what Medicare pays adult oriented physicians for the same service.  Pediatric ACOs may present an opportunity to work to improve access for children by addressing the inequitable reimbursement rates. 

Role of Children’s Hospitals

Children’s hospitals are committed to the goals of the delivery system reforms in PPACA, including the pediatric ACO demonstration program, to improve the health care of our nation’s children.  Children’s hospitals are eligible in the statute to be designated a pediatric ACO and are poised to be leaders in integrated care for children. From school-based care to intensive care, children’s hospitals are committed to serving all children. Through community clinics, partnerships and innovative care models, children’s hospitals reach children who might not otherwise have access to care when they need it, where they need it. Although they account for only 3.5% of hospitals in the United States, children’s hospitals care for 45% of all children admitted to a hospital, including 47% of pediatric Medicaid admissions.

Children’s hospitals are regional centers for children’s health, providing care across greater geographic areas and often serving children across state lines. They provide physician practice support and often employ physicians to ensure availability of necessary pediatric specialties in their communities. Children’s hospitals provide transitional care to young adults with chronic conditions.

In addition to being a trusted partner in their communities promoting the health, wellness and safety of all children, children’s hospitals are the foundation of pediatric training and research. The average children’s teaching hospital trains twice as many residents per bed as the average adult teaching hospital, and independent children’s hospitals train almost 40% of all pediatricians and nearly half of all pediatric specialists. Children’s hospitals and their affiliated pediatric departments conduct about 38% of all pediatric research sponsored by the National Institutes of Health.

Association Contact: Liz Parry, (202) 753-5392