Children's hospitals: Billion-dollar businesses with CEOs to match | Arkansas Blog

Monday, September 26, 2011

Children's hospitals: Billion-dollar businesses with CEOs to match

Posted By on Mon, Sep 26, 2011 at 10:51 AM

CHILDRENS HOSPITAL: Half-billion operation with $42 million profit.
  • CHILDREN'S HOSPITAL: Half-billion operation with $42 million profit.

Kaiser Health News has begun a series of articles that will be of interest here.

It's about

... the transformation of children’s hospitals from small, struggling charities to huge, often profitable businesses. From their humble origins more than a century ago, many of the nation’s biggest and best known children’s hospitals today are health care juggernauts with sprawling medical centers and suburban satellites, extensive real estate holdings and thousands of well-paid employees and millionaire CEOs.

The billions of dollars flowing through children’s hospitals every year pay for care for tens of thousands of kids, many of them extremely sick or suffering from chronic conditions requiring a lifetime of treatment. Hospital officials say costs are high because the care is complicated and the technology expensive. In addition, the hospitals help fund research into the causes and treatment of diseases.

But the surge in spending is also helping to fuel a multibillion-dollar building boom as hospitals add towers and beds. That in turn is spurring more spending on staff and technology, even as Washington, the states and employers grapple with budget-busting increases in health care spending. While children’s hospitals represent a small slice of the nation’s health care bill, they offer a case study of the expansive ambitions of hospital leaders and the faltering efforts of government to control spiraling costs.

The government heavily subsidizes the care of children from low-income families with Medicaid and the Children’s Health Insurance Program, and also provides nonprofit children’s hospitals with significant tax breaks that help them fund their growth. Private employers and their workers pay most of the rest of the bill for kids’ care through health insurance. When a new hospital like Nemours is built or another expands, taxpayers and private insurance policyholders pick up the tab down the road.

Arkansas Children's Hospital is one of the big hospitals studied in the series. Its revenue of more than $513 million in the most recent reporting year was a little below average for the group, but its profit of $42.8 million was above average.

The article notes the unique place children's hospitals enjoy in their community, perhaps a reason that soaring costs and profits — amid some questions about effectiveness — haven't always drawn sharp scrutiny. Some of the hospitals (ACH is not on this list) provide scant free care.

Future articles will look at competitive children's hospitals, what cuts in Medicaid will mean to the institutions and executive pay (Wednesday).

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