Adjusting Hospital Reimbursement to Account for Social Influences on Health

The strength of the social safety net matters most when the risk to individuals is highest. Acute illnesses and injuries requiring hospital-level care are some of the greatest health risks that children and adults face. In the United States, 2 of the oldest social safety net programs are Medicare and Medicaid, which together now constitute 37% of national health expenditures compared with 34% for private health insurance.1 Medicare and Medicaid have endured for more than 50 years, despite political efforts to constrain growth in government spending, in large part because they cover the costs of hospital care that can be economically catastrophic for individuals and families. Medicare and Medicaid also function as a safety net for hospitals by reimbursing institutions for the expenses of hospitalizations not paid by patients themselves. In the case of children’s hospitals that provide care to large numbers of patients with Medicaid coverage, such reimbursement often falls short of covering the hospitals’ care-delivery costs.2 This shortfall is the rationale for the Medicaid Disproportionate Share Hospital (DSH) payment policy, which enables states to work with the federal government to provide payments to hospitals to offset the costs of uncompensated and undercompensated inpatient care. Even accounting for DSH payments, the costs of providing inpatient care for children on Medicaid often exceed reimbursement, creating a chronic strain for hospitals with a mission to care for the underserved.3 Moreover, hospitals are increasingly aware that children who rely on Medicaid also often experience a myriad of socioeconomic challenges that compound their health care needs. Youth with unstable housing, food insecurity, and/or poor access to timely primary care may present with more severe acute illnesses than patients with more resources and better access to care. Inpatients whose home circumstances are fragile may also require more time and support for their care teams to make postdischarge arrangements, such as home nurse visits, to assure a smooth transition to home. Differences in socioenvironmental circumstances and their effects on inpatient care are the focus of the study by Michel et al.4 The investigators analyzed administrative data from hospitals across France for children aged 28 days to 17 years during a 3-year period (2012-2014).4 They characterized each hospitalized child according to the social disadvantage they experienced in their neighborhoods, using an indicator based on the 4 following factors: median household income, unemployment rate, proportion of blue-collar workers in the employed population, and proportion of high school graduates 15 years or older in the population.5 Among the more than 4.1 million hospitalizations in the study, children who lived in areas with the greatest socioeconomic disadvantage were significantly more likely to have conditions characterized as intermediate or severe, and their lengths of stay were significantly longer.4 Controlling for patient factors, illness characteristics (including severity), and hospital characteristics, overall length of stay was 3% longer for children from the most disadvantaged quintile.4 Michel et al4 also found that hospitals that had a patient mix with 20% to 60% of patients from the 2 most disadvantaged quintiles were more likely to have a negative financial balance compared with hospitals that served smaller proportions of children from the most disadvantaged quintiles. These findings, and similar results in analyses of hospitalizations for disadvantaged children receiving Medicaid in the United States,2 raise fundamental questions about how better to address the broader social needs of children who require hospitalization. Literature is rapidly emerging about how to address social determinants of health for children through a wide variety of clinical + Related article