The following opinion article was written by DHA student Thomas J. Kayal, MHA, Senior Manager, Hospital Operations Analytics, Connecticut Children’s for Becker Hospital Review on November 2, 2025
Financial pressure, consolidation, and Medicaid shortfalls are dismantling the rare pediatric services that sustain discovery and innovation.
Children’s hospitals have always operated within fragile budgets. More than half of the children they care for are covered by Medicaid or CHIP, yet these programs rarely pay the full cost of the care provided. On average, Medicaid covers only about eighty percent of what it actually costs to treat a child, even after accounting for special payments meant to close the gap. The math simply doesn’t add up. Hospitals make up the difference through donations, research revenue, or higher payments from commercially insured patients, but these sources are stretched thin as costs rise faster than reimbursement.
In Connecticut, Medicaid covers just over half the cost of care for children enrolled in the state’s program. In Pennsylvania, nearly half of the children at major pediatric hospitals rely on Medicaid, even as payments remain far below commercial rates. In states like Florida, where outpatient specialty payments are among the lowest in the nation, many children’s hospitals depend heavily on philanthropy to keep programs open. The strain is felt everywhere, especially in smaller markets where hospitals lack the financial base to offset those losses.
Programs that focus on rare and complex diseases often feel the pressure first. These conditions, such as Williams syndrome, or rare metabolic and neuromuscular disorders, require small but highly skilled teams of specialists, such as cardiologists, neurologists, geneticists, and developmental experts. They rely on advanced imaging, complex testing, and lifelong follow-up. The costs are high and the patient numbers are small, which means the revenue seldom matches the expense. When budgets tighten, these programs are often reduced, merged with others, or quietly discontinued.
Between 2008 and 2022, U.S. hospitals closed nearly 30 percent of pediatric inpatient units. While those reductions are often framed as a response to declining admissions, they have an unintended cost, the loss of shared capacity that once sustained rare and complex care. While much of the decline in inpatient pediatric units reflects a broader shift toward outpatient and community care, those losses compound the vulnerability of rare disease programs. These services do not generate the volume or margin to stand alone. They rely on the institutional infrastructure, clinical teams, research capacity, and cross-subsidies sustained by a healthy inpatient base. When hospitals consolidate or close pediatric units, the scaffolding that supports rare and complex care erodes with them.
Programs for rare diseases are the first to feel the squeeze, but they will not be the last. The same financial logic that endangers rare care today will shape neonatal intensive care, behavioral health, and pediatric surgery tomorrow. When the system can no longer afford its rarest patients, it will soon struggle to afford its most common ones.
Even at the nation’s leading hospitals, such as those in Boston or Philadelphia, major collaborations have been built to support rare disease research and patient care. These programs show what is possible when institutional mission and financial resources are aligned. But even large academic centers face difficult choices about where to invest, what to expand, and what to preserve. Some have already scaled back specialty clinics or shifted long-term care to community pediatricians simply to survive.
At the same time, the broader structure of health care is changing. Investor-owned systems and private equity firms now have a growing influence over hospitals, outpatient centers, and specialty networks. Although few children’s hospitals have been purchased outright, the effects ripple through the system. When large for-profit systems drive down commercial rates or focus on high-margin procedures, it squeezes the mission-driven hospitals that provide care regardless of a family’s ability to pay. The competition for clinical staff, outpatient revenue, and behavioral health services further reduces the margin that once helped support unprofitable programs.
Across the East Coast and in many other regions, consolidation among health systems has accelerated. Large academic networks have expanded through mergers and affiliations, creating efficiency but also concentrating pediatric subspecialty care in a few major hubs. Families often travel farther for appointments, face higher out-of-pocket costs, and lose local access to specialists. Virtual visits help in some cases, but for children who need hands-on evaluation or complex infusions, technology cannot replace in-person care.
Rare disease programs are more than clinical services; they are the foundation of pediatric discovery and innovation. They drive new therapies, clinical trials, and breakthroughs that improve care for all children. When these programs contract, so does the training pipeline for future specialists and the research that leads to new cures. Each closure means fewer opportunities for progress and fewer children who can access life-changing treatment. Though costly to sustain, these programs give back in the most profound way by turning once untreatable conditions into stories of survival and health.
Fixing the problem will require more than appeals to compassion. Medicaid reimbursement must begin to reflect the true cost of caring for complex pediatric patients. States can design payment systems that recognize the unique demands of rare and chronic conditions and provide additional support to hospitals that care for these children. Federal policymakers could strengthen this effort by expanding the Federal Medical Assistance Percentage for high acuity pediatric care or by creating a dedicated matching fund for rare disease programs, similar to the way the federal government supports rural health or trauma centers. Policymakers could also create funding streams to sustain rare disease programs through competitive grants, academic partnerships, and virtual specialty outreach.
Oversight of health system mergers and acquisitions must also evolve. Regulators should ensure that essential pediatric services are protected before approving consolidations, possibly by requiring certificate of need reviews or pediatric impact assessments. The Federal Trade Commission and state attorneys general could work together to prevent market concentration from reducing children’s access to specialty care. Hospitals should be required to publicly report any reduction or closure of rare disease programs, giving communities the chance to respond before services disappear.
In the end, this is about more than economics. It is about the values that define pediatric medicine. Caring for children with rare and complex diseases has never been a path to profit, but a reflection of a deeper commitment to doing what is right. When financial models undervalue that work, and ownership structures prize efficiency over compassion, the very identity of children’s hospitals is at risk. The rarest patients should never be the first to lose care in a system that was built to protect them.