Christopher Dawes: The number has not increased very much. About 42% of the patients we see are covered by Medi-Cal. The big issue for us and other children's hospitals in California is that, according to a recent Kaiser Family Foundation report, providers treating Medi-Cal patients are only paid about 53% of Medicare rates. California ranks 48th among the states in terms of what it pays for Medi-Cal recipients. So our challenge is that we're not paid by the state the full cost of providing care to these children. We have a significant deficit on that population, and we have to make up that deficit through our commercial patients, which represent about 55% of our patients.
This is a very big issue in California because over the next few years, they're estimating that about 50% of kids will be covered by Medi-Cal, and access becomes an increasing issue. We accept anybody regardless of their ability to pay, but that's not true across the whole state.
MH: Has your organization had problems with narrow-network health plans excluding your children's hospital?
Dawes: The trouble with narrow networks is that they're basically built around price and a limited number of providers. For routine adult care, that may or may not work. But when you're looking at kids with cancers and prematurity and so forth, it's a huge issue. If we simply have networks defined by low price and a thin cohort of providers, virtually nobody will have access to pediatric specialty care.
MH: Have there been any networks that Stanford has been excluded from?
Dawes: We have not been excluded yet. We have been put in different tiers. We negotiate pretty hard with payers to ensure that we're always in tier 1. That hasn't always happened. What that means is that kids whose parents are covered by a particular insurance product may be denied access to us. We follow up on those vigorously. But as of today, there hasn't been a narrow network created that we've been excluded from. Still, we're anticipating that to be the case over the next few months or years, because narrow networks are picking up some popularity.
We're kind of in a unique spot because we're in Silicon Valley, and the high-tech firms are trying to attract and retain a limited resource of engineers. So they have a tendency to offer more robust benefit packages than you would find in other industries. They are very interested in offering benefit plans that include us. If you look at other children's hospitals in California and other states, it's become a much bigger issue for them.
Dawes: The California Children's Hospital Association has legislation pending, both at the state level and federal level, to create geographically based networks of care for kids with complex and chronic illnesses. The children's hospital would be a key component of that, but in addition, you'd have rehab and other services that these kids with special needs require. The networks would go at risk for managing a population of kids with special-care needs. We would have within that network all the resources required to care for these kids. On the federal level, we would accept a rate of increase on an annual basis that will be lower than the current rate of increase for Medicaid. So the government would save money, the kids would be better served, and the providers would have assurance that they would receive a sufficient revenue stream to support the needs of these kids.
MH: Have you noticed any pickup in high-deductible plans?
Dawes: We're seeing a lot more benefit plans that have much higher deductibles. It's making the consumer much more aware of costs. From a macro perspective, I think that's a good thing. A lot of the population we serve is fairly sophisticated, and many of the companies are providing tools to their employees to help them determine quality and cost for various providers.
We're seeing consumers get a lot more sophisticated in making their choices. They're getting a lot pickier, they're asking more questions, and that is definitely impacting us, and we're responding. We're looking carefully at our prices, particularly for ancillary services, so we can be more competitive.
One of the issues is we're an academic medical center, and we price our services based on our cost structure, which is quite extensive given that we're doing training and research and delivering services to very complex patients.