There are multiple payers that fund the services that hospitals
provide to patients. In California, the four main types of
payers are: private (ex. employer-based), Medicare, Medi-Cal
(California’s state Medicaid program), or uninsured (no payer).
Depending on how their patients are insured, hospitals are
reimbursed differently. Private payers typically cover the costs
of care most effectively. Medicare – which covers seniors and
some persons with disabilities – typically reimburses hospitals
close to the cost of providing the care. Medicaid, on the other
hand, does not adequately reimburse hospitals.
In fact, California has one of the lowest Medicaid reimbursement
rates in the nation, ranking 47th out of all states.1
As a result, California hospitals are unable to recoup most of
the basic costs of providing care to Medi-Cal patients.
Unfortunately, treating uninsured individuals is especially
costly for hospitals, because they receive almost no revenue to
cover costs.
What makes children’s hospitals unique?
The distribution of funds that hospitals receive from various
sources is referred to as payer mix. Children’s hospitals
have unique payer mixes compared to typical hospitals.
Fortunately, all children in California are insured under current
law. Therefore, children’s hospitals typically do not treat
uninsured patients. Also, because they do not treat seniors,
children’s hospitals do not receive reimbursements from Medicare.
Consequently, children’s hospitals are heavily reliant on
Medi-Cal for funding. This can lead to challenges to long-term
financial sustainability because the children’s hospitals patient
populations average about 62% on Medi-Cal.
For more information on Medi-Cal, please click here.
