Children’s Hospital of Philadelphia and Keystone First have reached a deal for a new contract

Children’s Hospital of Philadelphia and Keystone First, the largest Medicaid plan in southeastern Pennsylvania, announced late Tuesday that they had reached a deal for a new, multiyear contract.

The deal ends months of negotiations that had left families on edge about potentially losing access to the CHOP doctors or Medicaid benefits they rely on to care for children with complex medical needs.

“Providing patient, members, and families with access to high quality care is a shared priority, and we are proud to continue our efforts to serve our region’s most vulnerable children,” CHOP and Keystone First said in a joint statement late Tuesday.

The organizations planned to notify families of the deal this week.

» READ MORE: Families with medically vulnerable children caught in the middle of a CHOP-Keystone Health insurance standoff

The existing contract, which enables families with Keystone First health plans to see CHOP doctors in-network, expires at the end of June. Earlier this spring, CHOP notified patient families by text and through a webpage that the health system would no longer accept Keystone insurance beginning July 1, if the two were unable to make a deal.

Families informed of the news by a reporter Wednesday morning said they were relieved.

“I felt like I could breathe a little deeper, that things were a little less constricted,” said Karen Yosmanovich of Feasterville. Her 4-year-old son, Alex, has a rare genetic disorder, and relies on CHOP doctors and benefits from Keystone First.

The pending contract expiration date had been on Yosmanovich’s mind, “almost like a computer process, running in the background and taking up space.”

“When you’re a family with complex medical needs, there’s always something on the horizon, and you’re just trying to manage what you need to put the most attention to right now. This was becoming that thing.”

Large insurers and health systems often play hardball while negotiating over contracts, which typically center on how much is paid for health-care services. Health systems often argue their highly specialized care requires higher reimbursement rates, while insurers say tighter budgets are needed.

CHOP is seeing fewer patients with private insurance. Medicaid now accounts for half of its patients, a shift in payer mix that has put significant financial pressure on the nonprofit health system. Medicaid, which is funded by state and federal governments, pays less than private insurance.

Keystone First is run by AmeriHealth Caritas, a Delaware County-based subsidiary of Independence Health Group and one of the largest Medicaid insurers in the country. AmeriHealth Caritas posted a profit of $368 million in 2023, up 31% from the year before.

But executives have signaled that this year’s earnings could be affected by an ongoing decline in the number of patients on its plans, as states resume checking whether families still qualify for Medicaid post-pandemic. AmeriHealth Caritas had 887,715 Medicaid plan members in Pennsylvania in March, down from over a million a year before.

CHOP reported a profit of $23 million in its most recent fiscal year, which ended June 30 — well below its typical earnings and an 85% drop from its $154 million profit the previous year.