While they wait for Gov. Bob McDonnell to approve or change a budget presented to him by the Virginia General Assembly, administrators from the Children’s Hospital of the King’s Daughters have renewed a fight for more state funding.

If the budget passes as proposed by legislators, the hospital would lose millions of dollars in state funds during the next two years. To close that gap, legislators are trying to secure additional funding.

At issue is a proposed drop in reimbursements for Medicare and Medicaid patients at CHKD, so-called “DSH, or disproportionate service hospital, payments.” Because of the nature of its mission and the its commitment to serve all children, without regard to their families’ ability to pay, CHKD would be unfairly impacted by such cuts, administrators say.

“We’re attempting to ensure DSH payments will be the same in 2011 as they were in 2010,” said Delegate Chris Jones (R-76th), who is spearheading CHKD’s cause in Richmond. “We recognize they will still retain cuts like all the other hospitals are expecting, but we’re trying to make their DSH payments are whole, because they have such a high number of Medicaid patients.”

In 2010, DSH payments accounted for $19 million of CHKD’s budget. When the budget was introduced for 2011, it only allowed for $17.2 million from that category.

“Losing that $1.8 million (each year) would be a big deal for us,” said Jim Dahling, CHKD president and CEO. “With 53 percent of our children on Medicaid and the fact that we serve all of Hampton Roads, we have a minimal margin on any year.”

Cuts in funding for CHKD would be particularly painful, since that facility has the highest proportion — 53 percent — of Medicaid inpatient days of any hospital of the state. The next closest provider is at 28 percent.

CHKD is the commonwealth’s only freestanding hospital dedicated exclusively to children, and it has a policy that no child is refused treatment because of the parent’s ability to pay.

“If we are hit with reductions, we will have to look at resources, positions, services and access sites,” Dahling said. “It would not be a good thing for CHKD or the community.”

Knowing the hospital would face budget cutbacks, CHKD officials tried to prepare for the losses by reducing 137 positions — a total reduction of $6.5 million — last year.

While efforts by Jones have already restored $2.5 million, which is effectively $5 million because state funds are met by federal funds, he is seeking to close the gap even more.

“We were pleased we were able to restore the majority of cuts CHKD had received in the budget,” Jones said. “While we feel there’s still work to be done, we certainly feel good we were able to add $2.5 million in state general funds, which are matched by federal funds.”

While discussions are still under way, Dahling said he is optimistic.

“We remain optimistic we will find a solution to this,” he said.