Providing care in the most appropriate setting-home versus hospital versus outpatient-is a widely hailed approach for improving quality and reducing costs. However, as Children's Hospital Boston can attest, the payment system is still catching up with this reform tactic.

Children's Hospital Boston has found a way to dramatically improve the lives of children with asthma-and significantly reduce the total costs of care for these patients. The results say it all: a 64 percent reduction in emergency department (ED) visits, a 79 percent reduction in hospitalizations, and a 41 percent reduction in missed school days.

The hospital's approach does not involve a new state-of-the-art treatment for pediatric asthma-which, ironically, might be covered by government and private payers under the current fee-for-service system.

Instead, the centerpiece of the hospital's Community Asthma Initiative (CAI), which primarily enrolls inner-city children, is a comprehensive asthma education and case management program that includes home visits by a nurse case manager or community health worker.

See related article: Children's Hospital Boston Cuts Asthma ED Visits by 64 Percent  

Some CAI approaches-such as increasing patients' access to asthma specialists-are billable to payers. But many CAI interventions do not fall on the list of "covered services" traditionally paid for by Medicaid and private insurers.

For instance, CAI staff often give families HEPA vacuum cleaners, bedding encasements, and other products to help rid homes of pests, mold, and other asthma triggers. None of those products are covered by payers. In addition, only one of Massachusetts' five Medicaid plans covers home visits delivered by community health workers; yet, about 78 percent of CAI patients are on Medicaid.

This means that Children's Hospital Boston has had to rely on a combination of fundraising expertise, financial wisdom, and sheer persistence to pay for the program. Since the CAI program launched in 2005, the hospital has used grants and its own dollars to cover costs, while simultaneously pushing for bundled payment funding via Medicaid.

"I think Children's Hospital has very strategically and consciously said we need to figure out where kids should be cared for and how best to do that in a cost-effective manner," says Joshua Greenberg, vice president of government relations. "In the long term, doing the right thing for kids and advancing the knowledge of clinical care delivery is how we're going to succeed in our business."

Today's Reality: Grants and Community-Benefit Write-Offs

The CAI clinical budget is roughly $443,000 per year, according to Marc Proto, director of financial management. Roughly 81 percent is currently funded via grants from the Centers for Disease Control and Prevention (CDC; $317,000) and the Healthy Tomorrows Partnership for Children Program ($42,000).

Children's Hospital Boston invests the remaining money-roughly $84,000 of its own revenue-in the CAI program, says Proto. In the early days of the program-before landing the CDC grant-the hospital investment was much higher. When the CDC grant expires in September 2012, the hospital may once again be footing a larger bill. While the hospital will pursue other potential grant opportunities, few may be as large as the CDC grant.

Although the CAI investment is charitably focused, the monies also help the not-for-profit Children's Hospital demonstrate that it is meeting community health needs-which is an Internal Revenue Service (IRS) requirement for tax-exempt status. As required under the Affordable Care Act, not-for-profit hospitals must prove they provide a true social and financial benefit to their communities. The IRS now requires not-for-profit hospitals to conduct a needs assessment every three years to identify specific health needs in their communities-and then pinpoint strategies to meet those needs.

These new federal requirements actually reflect voluntary community benefit guidelines that Massachusetts put in place about 17 years ago. Children's Hospital has been assessing community health needs and pinpointing strategies to meet those needs for many years.

On its website, the hospital posts a detailed accounting of its financial benefit to the community. After charity care, the hospital points to a $7.3 million investment in community health improvement in FY09-which includes the money the hospital puts toward the asthma program. Childhood asthma was a high-priority health need among those identified in Children's Hospital's 2003, 2006, and 2009 community needs assessments.

"In the pediatrics space, childhood asthma will always emerge as a very significant chronic disease that requires a population health-based approach," says Greenberg. "So community-based asthma programs are a natural fit with IRS community benefit requirements. Most medical providers should be able to readily track service utilization and expenditures for asthma-related care and the impact of developing programs like the CAI on clinical and quality-of-life outcomes."

Tracking clinical outcomes and costs are also crucial to obtaining grant funding for programs like this, adds Greenberg. It is particularly important in pediatric programs for which there's a dearth of reliable outcomes measures and tracking, says Proto.

At the Same Time: Making Up for Lost Utilization

Asthma is the No. 1 admitting diagnosis at Children's Hospital and makes up roughly 3.8 percent of the hospital's total admissions. Theoretically, the CAI-which reduced repeat hospitalizations among CAI patients by 79 percent-could put an unwanted dent in volumes and revenues.

Fortunately, as a tertiary care and teaching facility, Children's Hospital has been able to skirt this potential financial loss, and is finding a strategic benefit in having more beds available. "Children's Hospital Boston serves a broad group of patients, including regional, national, and international patients," says Proto. "As our utilization among less acute asthma cases decreases, we are backfilling that care with higher acuity-type cases."

The hospital's census has been high and the case mix is increasing. "The higher acuity business that flows in from around the region and nation is what we really want to keep at the Longwood hospital site in Boston," he adds. "We are able to do that by moving asthma care to the outpatient and community setting."

Future Goal: A Medicaid Bundled Payment Pilot

After years of community advocacy and political lobbying, Children's Hospital and other Massachusetts providers and advocates are claiming a large victory for asthma patients: The state's Medicaid program, MassHealth, is preparing to roll out a bundled payment program for high-risk pediatric asthma patients.

Providers from across the state-hospitals, community clinics, pediatric practices-that participate in the Medicaid pilot will be encouraged to use a community-based asthma approach modeled on Children's Hospital's CAI program. The bundled-or lump sum-payment is expected to cover some of the cost of caring for asthmatic children on Medicaid, including home visits and asthma education. In contrast, Medicaid typically reimburses on a fee-for-service basis for specific services, such as physician visits.

"We've got enough positive results from the CAI program to help guide how asthma care should be delivered statewide," says Greenberg. "But we need to figure out how to do this in multiple different kinds of settings in the most cost-effective way. We are a big teaching hospital, and it may well be the case that we're not as cost effective as, say, a community health center would be. There are things that we can learn by taking this to scale. For example, there may be a way to share the home visit responsibilities collectively across a number of different organizations within a geographic area, rather than a hospital owning it all."

MassHealth is expected to post a request for proposal (RFP) on its website in the near future, which will provide specifics for providers that want to participate in the bundled payment pilot, says Greenberg. Phase 1 of the project is currently scheduled for early 2012.

The state convened a workgroup to help inform the development of the RFP for pilot sites to implement the program, says Greenberg. "It is anticipated that patients in the pilot program will be selected based on the fact that their asthma is poorly controlled-for example, they have been seen in the ED or have been hospitalized as a result of an asthma attack-and that funding will be available to flexibly cover all of the components of the CAI protocol," he says. "RFP applicants will be primary care settings that will work to integrate CAI-type services."

The pilot will, hopefully, help shed light on how to handle bundled payment approaches for chronic diseases like asthma-as well as how to cost-effectively deliver quality asthma care to children. "One issue is to figure out how to pay for things that Medicaid doesn't normally pay for, such as home visits, asthma education outside the physician's office, and environmental mitigations like HEPA vacuums and integrated pest management," says Greenberg.

Other questions include how the bundled payment will be appropriately divided among the various providers that care for a defined population of pediatric asthmatics on Medicaid-from physicians and hospitals to community clinics and integrated pest management experts.

Proving the ROI

Children's Hospital Boston is optimistic that providers that do the right thing for patients-whatever the setting-will soon be financially rewarded by payers. "I think that health reform is increasingly going to push us to deliver the right care in the right setting," says Greenberg. "How long are payers going to tolerate having preventable admissions flowing into hospitals when there are increasingly well-understood ways to prevent these admissions?"

In addition to pushing for the Medicaid bundled payment pilot, Children's Hospital Boston is arranging pay-for-performance payment contracts for asthma and other patient populations with Blue Cross Blue Shield of Massachusetts and other private payers. CAI's robust evaluation framework-which has demonstrated positive clinical and financial results over a multiyear period-has helped Children's Hospital at the negotiating table with private payers and in lobbying efforts with the state legislature.

The hospital also worked with other Massachusetts providers and groups to create an asthma business case.

"Our asthma initiative has reduced hospitalizations and ED visits, and that's a cost savings to society," says Proto. "It proves the program works, and this approach can be applied to other diseases and other diagnoses."

Interviewed for this article:

Joshua Greenberg is vice president of government relations, Children's Hospital Boston (

Marc Proto is director of financial management, Children's Hospital Boston, and a member of HFMA's Massachusetts-Rhode Island Chapter (

Publication Date: Tuesday, September 20, 2011