Valley Children’s Healthcare has spent the last decade rethinking its long-term growth and sustainability strategy across California’s Central Valley as pediatric unit closures accelerate nationwide and reimbursement pressures intensify. The system is building a more distributed model of care that keeps children closer to home through partnerships and outpatient expansion, while pursuing nontraditional revenue streams to support continued investment in patient care.
Over the past decade, the Madera, Calif.-based pediatric system has invested heavily in outpatient access points across its 45,000-square-mile service area and deepened partnerships with general acute care hospitals throughout the region. Together, these efforts are designed to preserve capacity at its main quaternary care campus for the sickest patients, reduce unnecessary travel for families and expand access in a landscape where it is increasingly difficult for community hospitals to sustain inpatient pediatric services, according to Todd Suntrapak, Valley Children’s President and CEO.
The strategy comes as hospitals nationwide continue to close inpatient pediatric units amid low volumes, workforce shortages and persistent reimbursement challenges. Mr. Suntrapak said these pressures are unlikely to ease as birth rates continue to decline.
“As the impact of diminishing birth rates continues, we will all need to come together and think about how we can provide care in a different way — in an efficient way and one that’s really focused on community health impact,” he told Becker’s.
About one-third of the kids Valley Children’s manages as inpatients are now cared for outside its main hospital, and their care is supported through partnerships with general acute care hospitals across the Valley region.
For example, the system partners with more than a dozen hospitals across the Central Valley, sending its hospitalists and nurses to provide on-site training and ongoing support for local care teams. Those teams help local clinicians build competency in caring for pediatric patients, including guidance on medication dosing, IV insertion and other pediatric-specific needs. The system also embeds its clinical pathways and pharmacy protocols into partner hospitals, allowing care teams to follow the same standards used at Valley Children’s quaternary care facility.
On average, roughly 100 pediatric inpatients each day are managed at partner hospitals rather than being transferred to the system’s main campus in Madera, according to Mr. Suntrapak. The effort is designed to keep lower-acuity patients closer to home while preserving capacity at the children’s hospital for the most complex cases.
“It’s a win for our partner acute care hospitals and health systems because they have the additional capability right in their community, and it also has meant that we have not had to build more infrastructure here at the main site,” Mr. Suntrapak said.
The approach also helps limit long travel times for families across the Valley, where some communities are located hours from the children’s hospital.
“It’s wise utilization of very, very rare resources today both in terms of human capital and financial capital,” he said.
The inpatient partnership model is closely tied to Valley Children’s outpatient strategy. The system has invested about $900 million in outpatient facilities across the broader Valley region over the past 10 years, building out a network of care sites intended to complement its hospital partnerships and provide access to specialty care closer to where patients live.
That continuity is especially important for children with ongoing care needs. Mr. Suntrapak pointed to Bakersfield as one example. If a child is managed as an inpatient there through one of Valley Children’s hospital partnerships and later needs follow-up specialty care, that patient can be referred to Valley Children’s outpatient campus in Bakersfield rather than traveling roughly three hours north to the main hospital in Madera.
“That’s only going to be better for everybody,” Mr. Suntrapak said.
Even as financial pressures mount, the system does not view outpatient expansion as optional.
“Backing away from outpatient management of care is not an option,” he said.
Sustaining that level of investment, however, has required Valley Children’s to rethink how it generates revenue.
Prior to the COVID-19 pandemic, the system’s board began closely evaluating its long-term financial outlook and concluded that patient care revenue alone would not be sufficient to support continued growth, particularly given its payer mix. About 75% of Valley Children’s patients are covered by Medicaid, which typically reimburses below the cost of care, Mr. Suntrapak said.
“We probably are not going to be able to have a future that is supported … just based on patient care revenue, because nobody’s really investing more in that,” he said.
That reality led the system to pursue a commercial real estate strategy tied to its main campus.
Valley Children’s is developing hundreds of acres surrounding its hospital in Madera, with plans for commercial retail and multifamily housing. At full build-out, the project is expected to generate tens of millions of dollars annually — potentially as much as $100 million — to help fund patient care and future expansion, Mr. Suntrapak said. The development is expected to take shape in phases over the next several years and will include a mix of retail, residential and recreational amenities surrounding the hospital campus.
“How do we leverage our balance sheet in creative ways to create revenue that will pay for patient care?” he said.
Mr. Suntrapak said healthcare leaders do not expect material reimbursement improvement in the years ahead, particularly given ongoing policy and Medicaid pressures.
“We don’t anticipate — especially after what we’ve all seen with H.R.1 and in the state of California — and we’ve not seen a lot of increases in the compensation for the care that we provide,” Mr. Suntrapak said.
For Valley Children’s, he said, the goal is to ensure the system can continue expanding outpatient access while maintaining its role as a regional hub for complex pediatric care.
“We need to make sure we’re here to take care of kids, so we’re going to look at some of our strengths and capitalize on them in a way that will make sure we’re here in another 100 years to continue to take care of them,” Mr. Suntrapak said.
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