• Article
  • October 19, 2018

Stabilizing the Cost of Care for Children with Medical Complexity

Children's hospitals share insights on how focusing at the local level helped build relationships with payers.


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The Coordinating All Resources Effectively (CARE) Award is a landmark national study aimed at improving quality outcomes and reducing the cost of care for children with medical complexity (CMC) enrolled in Medicaid. Funded by the Center for Medicare & Medicaid Innovation, CARE is designed to test the concept of a new care delivery system supported by new payment models specific to CMC.

Under the CARE Award, the Children's Hospital Association partnered with 10 of the nation's leading children's hospitals, eight state Medicaid programs and Medicaid managed care organizations (MCOs), more than 40 primary care practice sites and more than 8,000 children and their families.

Leaders from Oishei Children's Hospital in Buffalo, New York; Lucile Packard Children's Hospital Stanford in Palo Alto, California; and Children's Mercy in Kansas City, Missouri, gathered to discuss findings related to stabilizing the cost of care for children with medical complexities.

Among the primary aims of the CARE Award project is to find a better way to pay for the special needs of this patient population. The participating hospitals focused their efforts on the development of alternative payment models through analysis of the utilization and spend associated with the delivery of complex services.

The goal, according to Dennis Kuo, M.D., M.H.S., chief of general pediatrics at Oishei Children's Hospital and a CARE Award faculty member, is to demonstrate "that both delivery system and payment reform for CMC are possible and beneficial to both the system and families."

However, Kuo adds there's no one-size-fits-all solution. "All payment systems—much like all politics—are local," Kuo says. "It is important to begin building these capabilities with the payer relationships, understand the opportunities that are available to us and take advantage of those opportunities."

Understanding local factors is key

For Lucile Packard Children's, finding improvement opportunities meant understanding the unusual local factors affecting its cost of care:

  • The county, and not health plans, are responsible for most mental health care, as well as occupational, physical and speech therapy care for this population; gains in these areas would be minimal
  • Similarly, home health service expenditures at Lucile Packard Children's are typically low because a limited number of pediatric home health nurses can afford to live in the San Francisco Bay Area
  • During the Award period, the state of California changed its payment method from per diem to APR DRGs (all patients refined diagnosis related groups); payment rates are higher under APR DRGs, thus skewing some gains that would be made under the Award

Communication is the "holy grail"

The primary focus for Lucile Packard Children's—and the area where it experienced the greatest decreases in spend during the Award period—was with hospital inpatient admissions. According to Michael-Anne Browne, the hospital saw a 45 percent decrease in spend on admissions thanks to its extensive patient communications structure.

"Some of us assumed that we would see an increase in outpatient visits in order to decrease the need for inpatient hospitalizations," says Browne, M.D., associate chief medical officer for accountable care at Lucile Packard Children's. "But we found we actually decreased office visits because we were able to handle our communications in between office visits. If there is such a thing as a holy grail in this work, it's communication."

Tip: Choose the path of least resistance

At Children's Mercy, Bob Finuf and his team saw the first step to building a payment model for the future was to embrace their past experiences. "It was important for us going into CARE to figure out what assets we already had and how we could leverage those, including our platform for population health management," says Finuf, vice president and executive director of Children's Mercy Integrated Care Solutions (ICS.) "We wanted to find the path of least resistance to get us started, and we have found that approach to be good in general when working with MCOs and Medicaid agencies."

Mercy established ICS in 2012 as the platform to facilitate the hospital's value-based and population health management strategy. Mercy was also able to leverage its existing health home care coordination program with the state of Missouri, but not without challenges.

The Missouri Health Home population, while complex, didn't exactly align with CARE Award eligibility requirements. Ultimately, building on its CARE Award experience, Children's Mercy was able to negotiate new capitated agreements, including a population of 30,000 medically complex children in 2017.

Major strides in hospital, ED usage

Although early numbers indicate a slight increase in total spend over the course of the CARE Award, Finuf says Children's Mercy continues to analyze all spend factors, and he expects to ultimately see an overall decrease. Importantly, Children's Mercy made significant strides in two crucial categories over the course of the CARE Award:

  • Inpatient days per thousand decreased 50 percent
  • ED discharges per thousand decreased 21 percent

"As we look at the results for the nearly 400 enrollees," Finuf says, "we saw what we hoped aspirationally to see."

Want more information on the CARE Award?

Get more information about the CARE Award, including lessons learned by participating hospitals, preliminary findings from the project and CARE Award success stories.

Access the webinar, "The CARE Award: Stabilizing the Cost of Care," in its entirety.

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This publication was made possible by Award Number 1C1CMS331335 from the Department of Health and Human Services, Centers for Medicare & Medicaid Services. The contents of this publication are solely the responsibility of the authors and do not necessarily represent the official views of the U.S. Department of Health and Human Services or any of its agencies. The research presented here was conducted by the awardee. Findings might or might not be consistent with or confirmed by the findings of the independent evaluation contractor.