Meeting the Needs of Medically Complex Children: How the ACE Kids Act Can Help

As children’s hospitals face increasing pressure to cut costs, many administrators are trying to identify the highest utilizers of hospital services and then streamline their care. Medically complex children are typically at the top of the list. Although they account for only 6% of Medicaid’s pediatric patients, they generate as much as 40% of total pediatric Medicaid costs¹ due to the extensive and ongoing specialty care they require and their high volume of hospital-based stays.

This problem is bigger than any one hospital, with the population growing at a rate of about 5% a year — faster than the birth rate in the United States.²

In recognition of the scope of the problem, the Children’s Hospital Association has championed H.R. 546/S.298, the Advancing Care for Exceptional (ACE) Kids Act, which attempts to apply a solution at the population level. The ACE Kids Act is currently in front of both chambers of Congress for review. Given its strong bipartisan support, many believe the bill will pass this session or early in the next session, making now the ideal time for children’s hospitals to study its proposed functions and impact.

Understanding the Legislation

The Act would establish designated networks for medically complex children enrolled in a state Medicaid or CHIP (Children’s Health Insurance Program) program and put children’s hospitals, with their special expertise in caring for this vulnerable population, at the helm. As leaders of the networks, children’s hospitals would be responsible for coordinating all aspects of the delivery of care for enrollees—from inpatient care to home and post-acute care.

State Medicaid programs would handle the administrative aspects of the networks, arranging enrollment, payment rates, and benefits. They would make payments to the new networks, initially under a fee-for-service model and eventually transitioning to a risk-based payment model. Patients would have the right to opt out of their network and be admitted into another network based on previously established relationships with hospitals or specialists.

The legislation would also give patients greater access to much-needed outpatient services and link families with community-based support services to further reduce their burden and improve quality of life for children with medical complexity.

With a national framework that goes beyond any state Medicaid program, the ACE Kids Act is the first measure of any kind with the true potential to improve care coordination, generate efficiencies, and drive positive quality outcomes at the population level. The Act could save Medicaid as much as $13 billion over its first 10 years, primarily by reducing hospitalizations and emergency room visits.³ Children’s hospitals could also realize significant savings from the Act. One organization that created a similar individual care coordination program to the proposed designated networks saved $1,200 per patient per month in the first year of the program.⁴

Next Steps for Children’s Hospitals

If passed as expected, the Act will formalize existing relationships between children’s hospitals and regional pediatric providers, and states and children’s hospitals will be able to start forming new networks almost immediately. In anticipation, pediatric providers should be evaluating their current networks, identifying potential new partners, and determining the best path forward for improving care for medically complex children in their region.

Published December 8, 2016