• Article
  • January 15, 2014

CEOs Top Challenges in Pediatric Health Care

Children's hospital CEOs say pediatric health care is facing major challenges. Here's a look at the issues causing them to lose sleep.

By Justine Varieur Cadet 

If you’re a leader in a children’s hospital, chances are you’ve had your fair share of sleepless nights. One of the things probably keeping you up is strategizing how you’ll lead your hospital through a period of major change. “Everything must change, so that everything can stay the same.” That’s how Steven Altschuler, M.D., president and CEO of The Children’s Hospital of Philadelphia (CHOP), summarized the state of pediatric health care, quoting from the 1963 movie, The Leopard. For children’s hospitals to continue to support their missions the way they always have, and to continue to advance pediatric health care, everything needs to change, including reimbursement and research funding models, and the education of new pediatric caregivers. Here’s what some children’s hospital CEOs and industry leaders, who gathered at Boston Children’s Hospital’s National Pediatric Innovation Summit + Awards in October, had to say about the top challenges in pediatric health care and delivery. 

Future workforce

A critically important component of providing care to children is accessibility to pediatric providers. Altschulter emphasized the importance of having an adequate workforce of new doctors and nurses to practice pediatric medicine in a safe, effective manner. “Not enough people are going into pediatric subspecialties, partly due to student loan burden, so too few caregivers are being trained to meet future needs,” he says. 

A 2012 Children’s Hospital Association survey of nearly 70 children’s hospitals across the country revealed ongoing vacancies of 12 months or longer among key pediatric specialties—such as neurology, general surgery and developmentalbehavioral medicine. These vacancies are affecting hospitals’ ability to provide timely medical care to kids. In fact, three out of four hospitals say the shortages have caused delayed appointments. By the time a child is able to get in for an appointment, he or she may be waiting up to seven times longer when compared to the ideal twoweek appointment wait time that hospitals desire. “There is a lot of uncertainty about where the next generation of pediatric investigators and clinicians are going to come from,” says Herman Gray, M.D., executive vice president, Pediatric Health Services, Detroit Medical Center and former president of Children’s Hospital of Michigan. 

Experts agree that without federal funding for critical child health care programs, children’s access to care could be jeopardized. The Children’s Hospitals Graduate Medical Education (CHGME), a national program solely devoted to helping children’s hospitals train pediatricians and pediatric specialists, supports the training and development of half of all pediatricians and pediatric specialists practicing in the United States. Maintaining stable federal support for CHGME is essential. Unfortunately, CHGME funding has been rolled back by more than $50 million since 2010, and it is far below the support needed to close the gap between demand for care and the supply of these specialized caregivers. While CHGME has been successful and has helped increase the number of pediatric providers trained annually, more is still needed. The good news is that the House and Senate each took action on CHGME reauthorization bills in 2013 and final passage could occur in early 2014. 

Lack of research funding

Compounding the gap in medical education, research funding from government sources, including the National Institutes of Health (NIH), is entering a cycle of dramatic decreases because of sequestration and federal budget cuts. “This decrease puts the pediatric academic research enterprise in peril,” Altschuler says. “You can’t support a system where the average number of research applicants who consistently receive grant funding is 7 percent.” To counteract this loss in funding, Altschuler recommends additional training for researchers in entrepreneurship because capital is king, and it doesn’t hurt to learn the language. Innovation hinges on investment, and connecting the dots between basic science, funding and profitability represents a tall order. “You have to create a model that would be attractive to industry by showing some type of commercial viability and sustainability,” says Alan Crane, general partner at venture capital firm Polaris Partners. “It’s a practical reality that this business model is a requirement in today’s setting, but this can be challenging with early-stage innovations.” 

As NIH and other traditional funding sources shrink, the imperative to tap other funding sources enters the equation. New players, including industry, are tiptoeing in. Johnson & Johnson (J&J), for instance, has opened innovation centers in Boston, London and California. “The economic reality and what health care will be expecting of products in the not-so-distant future was part of the driver in our formation of these centers,” says Robert Urban, Ph.D., head of the J&J Innovation Center in Boston. “In the past, it was reasonably sufficient for larger companies to sit back and wait to see where the next part of the health care food chain would lead.” 

There are drastically fewer dollars available for entrepreneurs, so it’s no longer appropriate for large companies to sit on the sidelines and wait for the trickle down of innovations. Yet there appears to be a language barrier between physicians and investors; most physicians don’t practice balance sheets and bottom lines. Joint MBA and M.D. programs, business fellowships and mentorship for physician innovators might help bridge the communications gap. 

Changing reimbursement models

Research funding is just one of the financial concerns worrying hospital CEOs. Most agree the current fee-for-service reimbursement model will be changing soon because of the demand to contain costs. Altschuler predicts this change may cause some physicians to retire, and it will force children’s hospitals to find new revenue sources focused on disease prevention. He points to examples such as new vaccinations and in utero procedures to prevent or minimize disease. 

Changes in pediatric medicine may accelerate the changes brought by reimbursement models. “The pediatric patients who are in the hospital today are dramatically different than those who will be in the hospital in 20 years because of recent innovations,” says Jim Mandell, M.D., who retired from his role as CEO of Boston Children’s Hospital in 2013. Currently, there is no revenue model that reimburses for preventive approaches, so it becomes difficult for children’s hospitals to use a clinical enterprise to support their missions. Hospitals will have to tackle these issues head-on to resolve the disparity. 

Changing reimbursement models is just one of many big issues keeping hospital leaders up at night. “Finances are our number one challenge,” Gray says. “Where will the resources come from? What’s the appropriate reimbursement model? How will the Affordable Care Act change our landscape?” For example, 70 percent of Children’s Hospital of Michigan patients are on Medicaid, so understanding how reimbursement will change if they’re covered by a health insurance exchange plan is crucial. 

Partnerships and data sharing

The children’s hospital community is at a tipping point, but partnerships can offer innovative opportunities. Mandell says pediatric caregivers and the standalone hospitals cannot live in a vacuum. “We need to foster partnerships—with each other and with industry,” he says. For example, nearly 40 Children’s Hospital Association member hospitals have combined forces in a common group purchasing organization (GPO) to reduce costs and also connect purchasing information with pediatric evidence-based operational and clinical data. GPO participants access an integrated database that uses administrative data for benchmarking and performance improvements across the continuum-of-care. 

Sharing of non-financial resources, including internal review boards, biorepository labs and data, is another means to cut overhead and possibly improve care. Other solutions have presented themselves through industry ventures for genomics, such as CHOP’s partnership with the Beijing Genomics Institute and Boston Children’s partnership with Claritas Genomics. Global partnerships can also lead to creative sources of revenue. Of CHOP’s $2.2 billion annual revenue, approximately $100 million comes from international efforts. The hospital is also exploring ventures with large pharmaceutical manufacturers. 

Mandell says partnerships should work to get the right people in hospitals the right information at the right time. “We need to collaboratively ensure that data gets collected, analyzed and disseminated appropriately,” he says. “Our commitment to this could counteract some of the negative forces impacting pediatric care.” 

Competition, collaboration, consolidation

Children’s hospitals often see their biggest competition as each other. There’s competition to win business from patients and referrals from physicians. For some safety-net hospitals, a decline in insured patients can represent an economic challenge. But competition can spur innovation, new ways of doing things, and it has the potential to raise the bar for the care and services available to sick kids. However, if children’s hospitals compete with each other to the point of putting others out of business, it could limit access to care. “The thing that will stop innovation is if we use data to compete with each other,” Mandell says. Instead of competing, consider for example, what would happen if multiple children’s hospitals within the same market pooled resources or data and formed a nonprofit research entity. All of the hospitals involved, and their patients, would benefit. 

Gray says competition among children’s hospitals isn’t always a bad thing. “Children’s hospitals are one-of-a-kind resources with the ability to propel each other forward,” he says. Collaboration— among providers, patient advocacy organizations, industry and other stakeholders—can fuel innovation. Jeffrey Leiden, M.D., Ph.D., CEO of Vertex Pharmaceuticals, described such a partnership between the Cystic Fibrosis Foundation, academic investigators and industry, formed in the 1980s. The philanthropic organization funneled capital into research and development, including genotyping all children with cystic fibrosis. That model accelerated progress, leading to approved and pipeline treatments that could help 90 percent of children with cystic fibrosis. 

While children’s hospital CEOs may have qualms about competing or collaborating with each other, another industry issue is consolidation. Bigger is typically better when it comes to health care systems, and the surge in hospital consolidation is here to stay. Size matters, especially as health care reform leads to reimbursement cuts, and it pressures hospitals to coordinate care. To remain viable, some children’s hospitals may look to adult hospitals. “If you start to see children’s hospitals merge with adult facilities for sustainability,” Altschuler says, “those types of partnerships could be at the peril of care provided.” 

Moving forward

Despite some negative external forces and big challenges, the future of pediatric care is bright. It’s one of the few professions that will continue to offer a meaningful career to those who choose it. Excellent pediatric care comes down to its caregivers. It’s important for those already in the ranks to keep the next generations of residents and physicians excited about the future of pediatric medicine. “We still have to help them feel the wonder of what they do,” Gray says. So get some shut-eye, you’ve got work to do. 

Justine Varieur Cadet is a content manager at Boston Children’s Hospital

Send questions or comments to magazine@childrenshospitals.org.