Children's Hospital and Health Center of San Diego has lowered the cost of providing care and slashed the length of hospitalization by measurably increasing its quality outcomes. Yet, under the current business model of per diem payment, those savings have accrued mostly to insurers and other payers, and the hospital has forfeited millions of dollars in annual revenue. The per diem payment structure typical for children's hospitals (where Medicaid typically becomes the primary payer for chronic conditions) contrasts with the per discharge basis for Medicare; reducing length of stay thereby gives adult hospitals a financial gain, but gives children's hospitals a financial loss.
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