Connecticut’s only children’s hospital expands its footprint in Hartford amid funding challenges

CT Insider – Sunday, November 3, 2024
By Liese Klein

The fetal operating rooms in the Connecticut Children’s Medical Center new clinical tower in Hartford will be two-thirds larger than standard ORs, designed to house the multiple specialists needed to care for both mother and child during increasingly complex surgeries.

But those bigger operating rooms — 600 square feet compared to the standard 400 square feet — come with higher costs and bigger payrolls, even as more surgeries are performed on ever-younger fetuses with ailments like heart and spine malformations as the procedures improve.

“The demand continues to increase, and we’re getting a lot of referrals from the region and all over Connecticut,” said James Shmerling, president and CEO of Connecticut Children’s Medical Center. “We want to be as accessible to children as we can.”

Trying to balance demand, innovation and rising costs has become a prime concern at Connecticut Children’s, which is on track to open the $326 million clinical tower on its Hartford campus next year. Hospital officials celebrated a “topping off” of the steel skeleton of the eight-story tower in May and the first operating rooms are expected to be ready for surgery by the end of 2025.

Connecticut’s only freestanding children’s hospital and one of only six independent hospitals, CT Children’s needs to expand and add services to survive, Shmerling said. “For the hospital’s future, we’re increasing our capacity and building scale,” he said. “We have to be able to have enough patient volume to support the fixed overhead … We need to be much more efficient. Much more efficient.”

Sicker kids and lagging reimbursements challenge model

On one side of CT Children’s balancing act is a nationwide escalation in the needs of sick kids, driven by medical breakthroughs in treating once-fatal conditions. Although kids in general aren’t as sick as they were during the peak of the COVID-19 pandemic, “patient severity” was 4.5 percent higher in 2023 than 2019 at children’s hospitals across the nation, according to the most recent industry report by the Children’s Hospital Association.

Much of that increase has been driven by treating kids who once would have died at birth or soon after. “These children wouldn’t have survived 15, 20 years ago,” Shmerling said. “They’re surviving now, but they have … conditions requiring service, starting with the NICU (Neonatal Intensive Care Unit).” Two floors of the new tower in Hartford will house private NICU rooms, with space for both newborns and their families.

Balanced on the other side is the fact that these sicker kids also tend to be poorer, with 55 percent of patients staying in the hospital and two-thirds of children who require emergency care at CT Children’s relying on Medicaid, the insurance program for those with low incomes.

Connecticut’s low rate of reimbursement for Medicaid care is putting increasing strain on the nonprofit hospital’s bottom line, Shmerling told lawmakers earlier this year.

“Given that children who rely on Medicaid comprise such a significant percentage of our total patient population, low Medicaid payments have a more dramatic impact on our financial viability,” Shmerling said in testimony before the Legislature’s Human Services Committee in March. “Without a longer term revenue solution, the current Connecticut Children’s Medicaid reimbursement structure is unsustainable.”

Due to the state’s funding formula, CT Children’s gets between 5 and 7 percent less in Medicaid reimbursement compared to other Connecticut hospitals, contributing an annual deficit of $40 to $50 million, Shmerling said.

On top of that, Connecticut’s Medicaid program pays less in reimbursements than peer states like Massachusetts and New Jersey for 85 percent of medical services provided, according to a Department of Social Services report released earlier this year.

Kids also cost more to treat: Younger patients need specialized pharmacists and more nursing care because they can’t communicate their needs. Care for children also must take into consideration the needs of parents and families, who often stay with patients and use hospital facilities.

“So we’re carrying these higher costs because of the nature of our business with much less revenue, and that combination puts a huge strain on us,” Shmerling said.

Lawmakers this spring deferred action on a bill that would have raised rates, but House Speaker Matt Ritter said getting more money to CT Children’s is a priority for next year’s budget negotiations.

“We’re leaving federal dollars on the table, and that really bothers me,” Ritter said of the state’s current funding formula. Reimbursing CT Children’s at a higher rate is important in sustaining the state’s touted health-care offerings, he said.

“I think it’s one of the reasons people like living here is we have high quality of health care, and that’s why these Medicaid rates threaten that a little bit,” Ritter said. “We also can’t put (CT Children’s) in a financial position where they can’t thrive and they can’t succeed and attract the best and brightest.”

Tower rises as hospital’s debt grows

With the need for newer services like fetal surgery and expanded newborn care in mind, Shmerling and his team at Connecticut Children’s broke ground on the new clinical tower in May 2023, seeking to add 60 more beds beyond the hospital’s current 205-bed capacity. More than 400 new jobs are expected to be added as part of the tower expansion, along with expanded space for research and a 50,000-square-foot neonatal intensive care unit.

The project is being paid for in part by a $114 million bond issue by the State of Connecticut Health and Educational Facilities Authority. A $100 million bump in bond payments helped push up CT Children’s total liabilities in the 2023 fiscal year to $385 million, compared to revenue of $539 million. The hospital broke even in the 2024 fiscal year, which ended in September, and is projected to break even next year, Shmerling said.

Even as the hospital took on more debt, Fitch Ratings praised CT Children’s financial fundamentals and potential for growth, awarding the bond issue an A-plus rating.

“The affirmation reflects CT Children’s excellent market position as the only independent children’s hospital in Connecticut, with a 90 percent market share in its primary service area,” Fitch said in an April statement. “A highlight of the expected clinic growth is a new fetal surgery program that will be housed in the new (clinical) tower.”

The fetal surgery program, launched at CT Children’s with the hiring of national expert Dr. Timothy Crombleholme last year, is projected to be a growth area at the hospital, with about three of the complex procedures expected a month when the new tower is fully online.

Along with the tower comes the construction of a new 910-space parking garage, a project that required the relocation of four historic homes and the closure of the historic J Restaurant.

Connecticut Children’s isn’t the only medical institution planning to expand in the capital city: Hartford HealthCare started floating a plan this fall that would add five new buildings to its campus including a new cancer center. Hartford Hospital operates across Seymour Street from CT Children’s and owns the land occupied by the children’s hospital’s main campus.

The preliminary plan “is conceptual in nature to show how the Hartford Hospital campus could evolve to better serve the needs of the community and improve the patient experience,” Hartford HealthCare said in a statement. “There are many steps as we evaluate potential future buildings and share those plans with the city.”

Even with the disruption caused by years-long construction projects on Washington Street in the city’s Frog Hollow neighborhood, Hartford city officials have remained supportive of CT Children’s expansion.

“We celebrate their continued investment in pediatric healthcare in service to Hartford families,” Hartford Mayor Arunan Arulampalam said. The CT Children’s clinical tower — along with Hartford HealthCare’s proposed growth plan — help build Hartford’s “robust healthcare ecosystem,” he added.

“Together, these initiatives will not only improve care for our children but also create jobs and stimulate economic growth, positioning Hartford as a leading medical hub for generations to come,” Arulampalam said.

New locations and new programs

With a third of Connecticut children located in Fairfield County, CT Children’s is also expanding its services in Westport, adding specialists and treatment options at 191 Post Road West to draw patients who once might have gone to New York for treatment.

“I’ve learned that (Fairfield) families don’t like to go north … They want to be close to home,” Shmerling said. “For us to have access to those children, we need to be where they are.”

About 50 people work for CT Children’s in Westport at present, with expectations that the clinic will exceed 20,000 patient visits next year.

Other recent additions at CT Children’s include a new 12-bed unit in renovated space on the main Hartford campus designed to treat children with both medical and psychiatric needs in the same facility.

Serious mental-health issues in children remain at high levels in the post-pandemic period, Shmerling said, with an urgent need for more treatment beds despite staffing challenges. “We can reduce the amount of time they spend in the hospital by half, and we start the mental health intervention much quicker,” he said. “That’s been a tremendous help.”

Another new initiative is a portal launched last year to help transgender children and their families access services. More families are moving to Connecticut from other states for transgender care and demand has increased for services, Shmerling said.

With the election imminent, CT Children’s leaders are alert for federal action on both transgender care and immigration policy, which could impact many parents and children, Shmerling said. “We got to watch this carefully and see what policies may or may not change.”

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