Shutdowns in obstetrical services at rural hospitals throughout Virginia are making headlines. Years of spiraling malpractice rates and shrinking Medicaid payments are breaking the budgets at small hospitals across the state.
These same inflexible market forces are also punishing Virginia pediatricians, who generally have far less ability than hospitals to shift costs and absorb losses. Increased Medicaid caseloads with below-cost reimbursements threaten pediatric practices, and some pediatricians are turning away Medicaid-eligible children because they cannot afford to treat them. A practice in which more than 15 percent of the patients are on Medicaid threatens to be financially unsustainable.
Virginia Medicaid, jointly funded by state and federal dollars, pays doctors 31 percent less for pediatric care than the amount Medicare reimburses for comparable care for the elderly. Both programs pay less than commercial insurers, who also aggressively negotiate the lowest rates possible.
More than half of the children in some rural areas of the commonwealth rely on Medicaid. In a typical year, Medicaid pays for 35 percent to 40 percent of the cost of all births in Virginia. That works out to about 30,000 babies a year. When those newborns go home, they continue to need pediatric care during their critical formative years.
The average overhead for a pediatric office, without including any payment to the physician, is $48 to $50 a patient visit, according to the Virginia chapter of the American Academy of Pediatrics. That cost includes the usual expenses of any small business -- office space, electricity, water, telephone -- plus a whole lot more.
Physicians must purchase special equipment. They must hire nurses, and nursing shortages have raised nurses' salaries. Insurance forms and government paperwork require a billing clerk. Further, government inaction on tort reform has helped produce wildly escalating malpractice insurance costs, with annual increases ranging from 20 percent to 40 percent. Yet for 12 years Medicaid has paid pediatricians just $36 for each routine sick visit.
Unlike other small business owners, doctors cannot raise prices to cover increased costs. Reimbursement rates for medical services are largely set by government and private insurers, with pediatricians swallowing the losses produced by rising expenses.
The heart of the story is the human cost of miserly government reimbursements -- the lost access to medical services for families with limited options. Medicaid mothers who are turned away from local pediatric offices often have transportation issues that make it difficult to reach a more distant pediatrician.
"What do you say to a mom with three kids who cleans houses all day and has a car held together with wire and duct tape?" says Barbara Kahler, a pediatrician in Mechanicsville whose practice stopped accepting new Medicaid patients when its Medicaid caseload reached 20 percent -- a decision driven by sheer necessity.
Even though malpractice insurance and almost all other costs have risen steadily and sometimes dramatically in the past decade, Virginia Medicaid rates have remained stagnant since 1992. The lone exception occurred on Sept. 1, when emergency funding took effect that increases Medicaid payments for obstetrical care by 34 percent. Gov. Mark R. Warner ordered the increase following urgent recommendations from his administration's Working Group on Rural Obstetrical Care.
While this increase is laudable, it is a temporary fix. In addition, it applies only to obstetrical services. The economic threat to pediatricians and their young patients will be addressed in the final report of the working group, but any recommendations the group makes must be approved by the governor and the General Assembly.
Children in rural areas, where Medicaid caseloads tend to be especially high, are at the greatest disadvantage. Clinics have closed, and pediatricians have had to relocate. And when pediatricians shutter their offices, it's not just the poor who must scramble for medical care. All patients must find another doctor and usually must travel greater distances to do so.
This diminished access eventually creates greater long-term costs to the state. Children who miss important preventive care are more likely to end up in hospital emergency departments, which charge four to 10 times more for treatment than a doctor usually charges for an office visit.
Care for the poor is a duty of all citizens, and it is unfair for the state to ask children's doctors to subsidize a society-wide responsibility. A critical safety net for children is in tatters. The 2005 General Assembly must find ways to close the gap, and meet its obligations to Virginia's smallest and most vulnerable citizens.
-- Leslie C. Ellwood
a Fairfax pediatrician, is president of
the Virginia chapter of the American
Academy of Pediatrics.