State to scrutinize Children’s Mercy costs after KanCare boost

A provision in the budget signed by Kansas Gov. Sam Brownback on Sunday is expected to boost Children’s Mercy Hospital’s Medicaid reimbursements by about $5 million a year by filling in cuts made in 2015.

But a state spokeswoman says Kansas wants to scrutinize the hospital’s costs after Children’s Mercy officials requested much more.

Rep. Dan Hawkins, a Wichita Republican who chairs the House Health and Human Services Committee, said the budget change came after negotiations between Children’s Mercy and the Brownback administration over payments for children on KanCare, which is Kansas’ privatized version of Medicaid.

“We really needed to do something, because Children’s Mercy was really getting hammered,” Hawkins said. “Their reimbursement rates were so low, it was not a good deal for them.”

Angela de Rocha, a spokeswoman for state agencies including the Kansas Department of Health and Environment, said via email that the agency that administers KanCare was not in negotiations with Children’s Mercy. Rather, she said, legislators added the budget provision after the state denied a request from hospital officials for a rate change that would have increased the state’s costs by about $30 million.

“The hospital demanded a higher reimbursement rate and the state said no,” de Rocha said.

In a presentation at a Discover Children’s Mercy event earlier this year, hospital leaders said KanCare reimbursement rates covered only about 57 percent of the cost of care provided, while the Missouri Medicaid program, MO HealthNet, covered 86 percent.

The average for all state Medicaid program reimbursements was 75 percent of costs, a financial concern for the hospital given that 48.5 percent of its patients are on Medicaid.

De Rocha said the Department of Health and Environment can’t confirm Children’s Mercy’s numbers.

“The hospital claims to be losing money on KanCare, but the State of Kansas has been unable to validate that claim,” de Rocha said. “Children’s Mercy is one of the highest paid hospitals in the KanCare program. They have leverage on their rates because they are the only children’s hospital available to KanCare members.”

De Rocha said the state plans to audit Children’s Mercy in the coming fiscal year “to validate their true costs.”

“That, of course, will depend on Children’s Mercy cooperating with the audit, putting the ball in their court,” De Rocha said.

“Children’s Mercy welcomes, and absolutely supports, an independent study to review reimbursement for the care of children enrolled in KanCare,” a Children’s Mercy spokesperson said via email, after the hospital initially declined to comment on the budget provision.

The Kansas Legislative Research Department estimated that the budget provision will send about $2.2 million more a year from the state general fund to Children’s Mercy through KanCare. After federal matching funds are added, they estimated it would mean about $5 million more in total.

The hospital’s total budget was about $1.5 billion last year.

Hawkins said the Legislature’s action “didn’t fix the situation but certainly made it better.”

“They’re still not reimbursed at what they think they should be, but they’re in better shape with this language than what they were before,” Hawkins said.

The budget provision that passed replaced a more costly draft version that would have instructed the three KanCare insurance companies to reimburse Children’s Mercy at a percentage of its cost equal to the average of all Kansas hospitals.

Hawkins said Children’s Mercy is paid at lower rates because it is headquartered in Missouri, even though it has a satellite hospital in Overland Park and takes patients from throughout Kansas because it’s the only children’s hospital between St. Louis and Denver.

Hawkins said Children’s Mercy probably should actually get higher reimbursement rates than the average Kansas hospital because of the type of patients that have to go there.

“They get the kids that are in the worst shape, and you know the costs have got to be high on those kids,” Hawkins said.

This story was originally published June 27, 2017 at 3:37 PM with the headline "State to scrutinize Children’s Mercy costs after KanCare boost."