Repeated Cuts to Medicaid Reimbursements Have Led to Negative Operating Margins

MINNEAPOLIS/ST. PAUL, August 25, 2010 – With the down economy forcing more and more children to rely on Medicaid for health coverage, cuts to Medicaid funding have taken a serious toll on pediatric healthcare in Minnesota. As a result, Children’s Hospitals and Clinics of Minnesota has announced to employees plans to undertake cost reductions, including the consolidation of some programs and a reduction of between 200 and 250 full-time positions. The workforce reduction will be achieved through a combination of not filling open positions, early retirement and some layoffs.

In recent years, the economic downturn and state budget deficits have combined to significantly impact Children’s financial stability. As the largest pediatric care provider in Minnesota, Children’s sees all patients, regardless of their insurance status or ability to pay. Medicaid is the single largest insurer of children in Minnesota. In just the past year, Children’s Medicaid population has grown from 38 percent to 44 percent.

As the Medicaid population has grown, Medicaid funding has repeatedly been cut and those reductions have disproportionately impacted Children’s. Forty-four percent of Children’s health care revenue comes from Medicaid. For most adult hospitals Medicaid accounts for around 10 percent of revenue. That means cuts to Medicaid have impacted Children’s more than four times harder than other hospitals. Between 2003 and 2009, Children’s sustained cumulative legislative cuts to Medicaid totaling $76.4 million which puts the total amount of cuts over a ten year period in excess of $100 million.

In addition, because Medicaid only pays providers about 80 percent of their costs, Children’s lost $43 million treating Medicaid patients last year alone.

“The repeated cuts to Medicaid in Minnesota are more than a budget issue, they are a moral issue about investing in the health of our children,” said Alan L. Goldbloom, M.D., president and CEO of Children’s of Minnesota. “This is a problem that impacts all families in the state. The next Governor and our elected officials need to demonstrate leadership in finding solutions to preserve the high quality of pediatric health care we have come to expect in Minnesota.”

The details of the cost reductions are still being finalized. Announcements about workforce reductions will be made by mid-November.

About Children's Hospitals and Clinics of Minnesota
Serving as Minnesota's children's hospital since 1924, Children's Hospitals and Clinics of Minnesota is the seventh-largest pediatric health care organization in the United States, with 332 staffed beds at its two hospitals in St. Paul and Minneapolis. An independent, not-for-profit health care system, Children's of Minnesota provides care through more than 14,000 inpatient visits and more than 200,000 emergency room and other outpatient visits every year. Children's is the only Minnesota hospital system to provide comprehensive care exclusively to children.

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