St. Christopher’s Hospital for Children received $76M from a program to boost Medicaid funding
The large cash infusion from the Philadelphia Hospital Assessment could help change the financial trajectory of the North Philadelphia safety-net provider.
St. Christopher’s Hospital for Children has received a $76 million boost this year from a revised program that taxes Philadelphia hospitals and uses the money to increase the government’s Medicaid funding for facilities that disproportionately care for low-income patients.
That cash infusion has helped put St. Chris “in its strongest financial position in years,” the nonprofit said in a statement. The North Philadelphia institution is celebrating its 150th anniversary this year, and has received millions in financial support from local health institutions after a 2019 bankruptcy and steep losses during the pandemic.
The $76 million funding boost from the Philadelphia Hospital Assessment program was first disclosed in St. Chris’ audited financial statements for fiscal 2024. The Pennsylvania Department of Human Services confirmed the amount, which is expected to continue annually for five years, St. Chris said.
About 85% of St. Christopher’s patients are insured by Medicaid. That is the highest percentage of Medicaid patients served by any children’s hospital in the nation, according to St. Chris.
That money makes a huge difference for St. Chris, said Larry Kaiser, CEO of the College of Physicians of Philadelphia and former CEO of Temple University Health System.
“That’s the difference between survival and not,” said Kaiser, an expert in hospital finance who is not involved in St. Chris’ operations.
But threatening St. Chris’ otherwise brightening future is the push in Washington to trim $880 billion from federal Medicaid spending over a decade. Congress has targeted the taxing maneuver that benefited St. Chris, because eliminating it would save an estimated $600 billion in that timeframe.
St. Chris did not make anyone available for an interview and did not respond to a request for comment about the threat from Washington. Drexel University and Tower Health own St. Chris in a 50-50 joint venture.
A reset for St. Chris
The inclusion of St. Chris in the Philadelphia Hospital Assessment program — under a law Mayor Cherelle L. Parker signed last summer — adds to the millions in support St. Chris has received in recent years from other Philadelphia health-care organizations.
In 2022, Children’s Hospital of Philadelphia, Thomas Jefferson University, Temple Health, Philadelphia College of Osteopathic Medicine (PCOM), Independence Health Group, and private donors announced $50 million in funding over two years.
That money provided short-term financial stability for St. Chris, following its $97 million operating loss in fiscal 2021 and an $18 million loss in fiscal 2022. The next year, St. Chris had a narrow $500,000 operating profit thanks to the support.
A similar group of donors in October announced $30 million in support over two years. That money is coming from Jefferson Health, Philadelphia College of Osteopathic Medicine, Temple Health, and Children’s Hospital of Philadelphia.
How the assessment works
The $76 million from the hospital assessment is effectively another form of citywide support, because all city hospitals must pay the tax. St. Chris is getting more than half of the $149.6 million increase in Medicaid for the entire city.
Last year’s amended city ordinance for the hospital assessment included children’s hospitals and cancer hospitals for the first time since the program started in 2009.
The benefit to other newcomers paled in comparison to St. Chris. Children’s Hospital of Philadelphia had a net gain of $8.9 million. American Oncologic Hospital, part of Fox Chase Cancer Center, got $1.7 million. For Shriners Children’s Philadelphia, the gain was $77,624.
The program works by funneling the $264 million in assessments paid by the hospitals through a joint state and federal Medicaid funding system in a way that increases the amount of federal money that comes to the state.
The method for distributing the money to hospitals is complicated and hard to calculate from publicly available data, but a major factor is the proportion of patients with Medicaid insurance at the hospitals.
In addition to the Philadelphia assessment, St. Chris is benefiting for the first time from three other Medicaid supplemental payment programs with more than $15 million in anticipated benefits.
The hospital, however, is losing a $6.9 million contribution from the city, as well as the $4.9 million federal match that generated, according to its audited statement posted online at the end of March.
Last year’s cash crunch
Last year, St. Chris’ financial struggles continued. It had a $31.6 million operating loss on $313.5 million in revenue in the year that ended June 30. That was a reversal from a $500,000 profit the year before.
Then cash got tight.
St. Chris borrowed a total of $15 million from Drexel in August and January. That money was supposed to be paid back within five days of when St. Chris received the assessment funds. Drexel confirmed that it got the money back.
In November, St. Chris received $10 million in insurance advances, but declined to identify the insurer. That money was paid back as well, St. Chris said, but that couldn’t be verified. For the fiscal year ending in June, St. Chris expects to have an operating profit.
Now, the substantial influx of financial support from Medicaid supplements could give St. Chris a chance to strengthen clinical programs and continue to play a vital role in medical education for the medical schools at Drexel, Temple, and Philadelphia College of Osteopathic Medicine.
Critical investments could help rebuild neurosurgery, cardiac surgery, neurosurgery, and orthopedics, Kaiser said. “You can’t make a go of it just treating nonoperative pediatric patients,” he said.