TRICARE will soon be out-of-network for Children’s Hospital of Colorado: What to know

COLORADO, USA (KRDO) - The Colorado Children's Hospital network claims that they're being forced to go out-of-network for their coverage of thousands of military families who are insured by TRICARE, due to major federal cuts to reimbursements for hospitals.

Children's Colorado says that this all stems back to October 2023, when the Defense Health Agency (DHA) elected to slash reimbursement rates down to 60% for TRICARE patients. Children's Colorado says they are aware their decision to go out of network will "significantly" impact their patients in the Southern Region of Colorado, but they also want to stress that the reimbursement cuts will prove to be too dangerous for their operations to continue.

"It was a very difficult decision for us to get to the point where we even considered this. But after 18 months of advocacy at the federal level, at the local level, we were left with no other choice." explained Greg Raymond, the President of the Southern Region of Children's Hospital.

Children's Colorado says that over the past several months they've been in negotiations with TriWest Healthcare Alliance (TriWest), who is set to become the new contractor for the TRICARE West Region, which includes Colorado, on Jan. 1, 2025. The hospital network added that negotiations will continue through June 1, 2025, however they say they had to make the decision sooner than later, to become a non-network, participating provider for TRICARE patients.

The decision was met with pushback from Colorado U.S Senators Michael Bennet and John Hickenlooper on Tuesday afternoon, claiming that a compromise needs to be found.

On Wednesday, Governor Jared Polis shared his thoughts on the situation exclusively with KRDO13:

"I really join and agree with Senator Hickenlooper and Senator Bennet. The Children's and the federal government need to make sure that they can find a way to include Children's Hospital care in that work for for TRICARE," said Polis, while at an unrelated event in Colorado Springs Wednesday morning.

"We want to do everything we can to advocate for them and make sure they have the strongest state-based network possible to meet their needs so that Colorado continues its great reputation as a great place to serve," the Governor added, explaining he would advocate on the federal level, since TRICARE is a federally administered insurance for military families.

According to Children's Colorado, the DHA’s cuts to TRICARE reimbursements have reduced payments amounting to a $2.4 million loss per month, coming out to just under $30 million per year. Children's Colorado says that this is unsustainable for what they say is the region’s only safety-net, nonprofit pediatric hospital system.

"Children's Hospital of Colorado as a system of care broke even last year, we did not have an operating margin. Children's Hospital of Colorado in Colorado Springs has not had an operating margin since we opened in 2019." explained Raymond.

Children's Hospital Colorado says that their Colorado Springs location has cared for nearly 23,000 children of military families insured by TRICARE, every year since opening in 2019.

Children’s Colorado says they're not alone either in seeing "devastating" impacts from the reimbursement cuts. They claim that of the top 20 children’s hospitals nationwide that see the most pediatric TRICARE patients, 14 will see cuts to their outpatient rates under DHA's new rule, and nine of those hospitals will see cuts greater than 30%.

On Wednesday, as way to combat the issue, U.S Colorado Senator Bennet announced that $270 million was allocated within the National Defense Authorization Act (NDAA) for Colorado, which included a stipulation that the Department of Defense (DoD) is now required to brief the Senate and House Armed Services Committees on the effects of the DHA's decrease of reimbursements. Also of note, is that the DoD must also provide a military contingency payment adjustments plan for assisting affected children’s hospitals.

The Impact to Children's Healthcare:

Children's Colorado says that 20% of their patient population in Colorado Springs relies on TRICARE for health insurance coverage.

The hospital network also says that they believe the other hospitals and health systems in Colorado will not be able to effectively expand their pediatric services to treat the unique needs of the children under TRICARE, including lifesaving treatments such as cancer treatments and complex pediatric and neonatal surgery. As a result, patients may need to travel out of state to receive these services.

One example of this is a mother, Destini Webb Walbroehl. She and her husband are a retired Army couple that lives in Pueblo West. She tells KRDO13 that her 13-year-old daughter has dealt with a rare metabolic/genetic disorder called Glycogen Storage Disease (GSD) type 0 for several years. The mother says they routinely used Children’s Colorado since they opened their Colorado Springs location.

"By Children’s possibly going out of network, that would mean we would now have to deal with places that are unfamiliar with her needs and also probably have to travel further," Walbroehl explained in a message to KRDO13.

She says her daughter just had extensive orthopedic surgery in May 2024, which was done by Children’s and she now needs more operations, however now that could be in jeopardy as they may need to look for another provider.

"I am not looking forward to basically having to train an entire new group of doctors and nurses about her issues and what she can, and can not take, and basically how to treat her," added Walbroehl in a message with KRDO13.

Other mothers like Jami Swartz, says that her 6-year-old son is set to have open heart surgery on December 30, and will subsequently be in recovery within Children's Hospital

Beginning on Jan. 1, 2025, due to the planned non-network status, Children's Colorado says that TriWest may require patients to obtain prior authorization for certain services provided by their hospitals.

Children's Colorado says that patient families should check with TriWest prior to scheduling services, including lab, radiology and urgent care, at any Children’s Colorado location to determine if prior authorization is required.

What Negotiations Looked Like with TriWest:

Children's Colorado says that for several months they worked closely on reimbursement negotiations with TriWest, however due to the final decision on those rate cuts, they had to move to being out of network. Their previous in-network status was held with Health Net, who is the contractor for TRICARE’s West Region until January 1, 2025, when TriWest takes over.

According to Children’s Colorado, their status as a non-network, participating provider will remain in place at least through June 1, 2025. They say this provides time for TriWest to address the challenges they have shared with them in their contract negotiations, however should they not come to terms on a resolution, Children's Colorado says it will be forced to make a final decision whether to move to a non-network, non-participating provider status in June.

What Were the Cuts That the DHA Made in 2023:

According to Children's Colorado, the TriWest contract shows nearly 60% cuts by the DHA to reimbursements for TRICARE patients at Children’s Colorado. Children's Colorado also claims that the cuts were larger than originally promised.

Since the Spring of 2023, when the reimbursement change was announced, Children's Colorado says they spent the next 18 months trying to request meetings with the DHA and advocate with members of Congress and other officials about the perceived consequences of this change.

Children's Colorado says they decided to pursue legal action against the Department of Defense, and are actively spearheading a national coalition to oppose the payment cuts to ensure equity and access to healthcare for military children. However, the hospital network says that their efforts have been to no avail, despite support from other pediatric hospitals and legislators across the country.

KRDO13 reached out to the DHA for comment on the situation. A spokesperson shared this statement:

"The Defense Health Agency (DHA) published a final rule in April 2023 updating the payment structure for reimbursing Cancer and Children’s Hospitals (CCHs) and Ambulatory Service Centers (ASCs), effective October 1, 2023.

This rule established payment at the Medicare Outpatient Prospective Payment System (OPPS) rates, which is required under Federal law, with additional payments available to these hospitals to ensure that TRICARE reimburses 100% of their costs for TRICARE covered services. 

DHA recognizes that Children’s Hospital of Colorado would prefer to continue to receive payments above their reported costs; however, TRICARE is committed to maintaining access to a robust benefit and fairly reimbursing providers while responsibly managing taxpayer dollars. 

By law, TRICARE must reimburse institutional providers in accordance with the same reimbursement rules as apply to providers of services of the same type under Medicare to the extent practicable.

TriWest has authority to continue to negotiate in good faith with Children’s Hospital of Colorado and would welcome them to remain in the TRICARE network."

When asked about the allegation that "Children’s Hospital of Colorado would prefer to continue to receive payments above their reported costs", Raymond replied saying:

"The rule change is specific to outpatient services, so emergency room visits, outpatient surgeries, specialty care visits. What the Defense Health Agency fails to acknowledge is their reimbursement for inpatient services." said Raymond. "We've made repeated requests to sit down with the Defense Health Agency and negotiate in a way that allows [them] to accomplish their goals, to be prudent stewards of taxpayer dollars, and at the same time acknowledge that we just can't pick outpatient services." he later added.

The Hospital Network Has a Rough Time Operating to Begin With:

Since Children's Colorado opened in Colorado Springs, they say that their Southern Region has run at a loss for each year between 2019 and 2023. They say that they've been able to offset those losses by positive performances in other parts of their system of care, and through philanthropy, which still remains a key part of the hospital being able to carry out their goals of caring for Colorado's youth.

How to Learn More, and Advocate :

Raymond says that families who are looking for additional services, or are wanting to advocate on behalf of TRICARE beneficiaries like themselves, can go to this link. There you can find helpful information during this changeover, and also provide feedback to the Defense Health Agency and TRICARE to share what kind of impact this course of action is having on your insurance plan.