Paying for Neonatal ICU Saves, but Not the Followup Care

Today’s Managing Health Care Costs Indicator is 69%

I highly recommend a narrative article in this month’s Health Affairs about a pediatric hospital’s decision a decade ago to expand its neonatal intensive care unit capacity – while it refused to subsidize post-NICU services for the sick premature babies that continued to have chronic illness long after their hospital discharge. Harvard Link

John Lantos, who was the chief of general pediatrics, was unwilling to take financial responsibility for the money-losing followup care. He felt the outpatient clinic should continue to be subsidized by the uninterested NICU department (which represented 4% of total hospital system revenue, but was responsible for remarkable 69% of total hospital system profit).   The hospital, seeking to expand the money-making NICU unit as part of a hospital building campaign, wouldn’t subsidize the clinic – and nixed locating these services at a neighboring hospital that was willing to offer a subsidy.   A private company stepped up and offered to sponsor the post-NICU clinic, but soon declared bankruptcy and was unable to fulfill its pledge.

The hospital built its new building, expanded its capacity, and now must have higher revenues to pay off its bondholders.  Other nearby hospitals also recognized that NICUs had high margins, and also expanded their capacity. 

In the words of the author  

Each of the new hospitals costs more to run than the older ones did. Pressure to increase profit margins at each has increased. As a result, all are less likely to care for poor patients with complex diseases than they were before.

Amidst the riches of our system, we continue to make large investments in high technology high margin medicine to rescue the sickest of newborns.  But we can't figure out how to pay for the continuing care to be sure that the 'graduates' of the high-tech NICU get the ongoing care they need.