healthcare financial management association...current system is vulnerable to manipulation ... the...

Healthcare Financial Management Association

February 2020

Medicaid Outpatient Simplified Fee Schedule

2

State Rationale for a Fee Schedule

Simplifies the current complex methodology based on cost-to-charge ratios, regression analysis and payment ceilings and floors

Current system is vulnerable to manipulation

Current system does not promote efficiency

Fee schedule minimizes variance among hospitals in Medicaid outpatient payment rates

Aligns Medicaid with Medicare and other payers

3

Design of the Proposed Fee Schedule

Pay for Medicaid outpatient services at a rate of 90% of the Medicare Ambulatory Payment Classification (APC) payment.

Federally deemed critical access hospitals will receive a 25% add-on payment to supplement the fee schedule amount.

4


For outpatient procedures or services with no comparable Medicare APC, MO HealthNet Division will pay 90% of other Medicare fee schedules:

physician services

clinical laboratories

medical equipment

Remaining codes will pay using a Medicaid-defined fee.

5


The Medicare wage index adjustment for Jefferson City (.8494) will be used in determining Medicare payment rates.

Because of state system limitations, some procedures will be bundled and paid differently than for Medicare.

“Payment will be the lower of the provider’s charge or the payment as calculated under the OSFS payment methodology.”

The proposed OSFS payment methodology will replace the current Medicaid fee schedules for outpatient radiology and laboratory services, and spinal and bariatric surgeries.

6

Rationale for Using Medicare APCs

Familiar to hospitals

Easier for the state to implement than other models

Proposal differs from APCs in some areas:

“Medicare payment policy is not always appropriate for Medicaid”

“MHD’s goal is to avoid some of the complexities of the Medicare method”

7

Projected Fiscal Effect

MO HealthNet Division budget data states the fee schedule will reduce Medicaid outpatient payments by $60 million from current rates.

$20 million Medicaid managed care payments

$40 million for fee-for-service payments

MHA staff believes this is understated.

In a reversal, MHD now won’t be releasing hospital-specific estimates of the effects.

8


MHD recently issued a prerelease draft of its proposed regulation to implement the change.

The fiscal note projects the state will save:

$58.5 million from lower payments to Missouri hospitals

$28 million from lower payment to out-of-state hospitals

This projection appears to ignore any effect on Medicaid managed care payments for outpatient services.

9


Projected savings to the state will come from both Medicaid fee-for-service and managed care sectors.

Medicaid managed care plans already are pressing for payment cuts, reflecting the expected reduction in their state payment.

Hospital-plan contracts often tie managed care payment rates to fee-for-service. Examine your contracts.

10


Staff worked with Milliman, Inc., to compile an integrated set of analytical tools and Medicaid and Medicare data needed to do hospital-specific financial modeling of reform proposals.

The MHA board endorsed modeling of the outpatient fee schedule as a priority.

Milliman projects delivery of hospital-specific data by Friday, February 21.

11

Modeling Details

MHA staff developed a template for assessing hospital-specific effects, if a hospital wishes to do so. The template is available upon request.

The state has not released its fee schedule amounts.

State caveat on its FAQs: “Please note that details of the payment method shown in this document remain subject to change before the implementation date. If so, an update will be available on the MO HealthNet Division’s website.”

12

State’s Rationale for Budget Cuts

According to MO HealthNet Director Todd Richardson, the payment rate of 90% of Medicare was chosen after assessing other states’ Medicaid outpatient payment rates.

90% of Medicare was “at the high end” of the range of payments among the comparison states.

13

Timeline for Implementation

The proposed rule was filed with the Secretary of State around February 18, with publication March 1.

Regular regulatory review requires 6-8 months.

MHD target date is July 1, 2020. It acknowledges a likely delay until August at the earliest.

14

Billing Requirements

Medicaid outpatient claims will be paid based on line-level procedure codes (CPT/HCPCS).

CPT/HCPCS codes currently are expected, but are not now used in paying CAHs.

The accuracy of CPT/HCPCS coding and charging will become more important.

Hospitals should bill for all services provided to a patient on the same day on the same claim.

15

Advocacy Initiative

Milliman’s hospital-specific projections will enhance MHA’s plan for coordinated advocacy with legislators and the Governor’s office.

A previous MHA-MHD workgroup explored and generally favored moving to Medicare as a basis for Medicaid outpatient payments.

The initiative was dropped for lack of state technology capacity.

MHA has never favored using a methodology change to cut overall spending.

16

Advocacy Initiative

Challenge “reform” as budget cutting exercise

Challenge interstate payment comparisons, with FRA funding about 35% of Missouri’s share of outpatient spending

Challenge accuracy of MHD fiscal estimates

Challenge timeline for implementation

Highlight local effects of spending cuts

17

Disproportionate Share Hospital Payments

19

Update on DSH Audit Litigation

As you may recall, MHA filed suit against the Centers for Medicare & Medicaid Services challenging:

the methodology used to calculate costs in the 2011 and 2012 DSH audits through the use of sub-regulatory guidance

the 2017 final rule attempting to codify that methodology

Specifically at issue was CMS’ requirement that Medicare and third-party payments offset costs in the DSH audits.

20


On December 31, 2018, CMS abandoned the informal guidance that was at issue in the first part of the litigation.

This means that third-party and Medicare payments are not required to be offset for SFYs 2011 through SFY 2017 (for services through June 1, 2017).

The CMS regulation that codified the requirement to offset third-party and Medicare payments had been blocked by federal court rulings as violating federal Medicaid law which CMS appealed.

21


In November 2019, the Eighth Circuit Court of Appeals ruled in favor of CMS regarding MHA’s challenge to CMS’ 2017 rule.

Therefore, CMS’ Medicare and third-party payment standards will apply beginning 6/2/17.

22

DSH Audit Recoupments and Redistributions

MHD has a period of two years from April 30, 2019, to resubmit revised DSH audits and submit any related claims for federal funding related to SFYs 2011 through 2015.

It is our understanding that MHD plans to begin processing recoupments and redistributions related to SFY 2015 and SFY 2011 in the spring of this year.

MHD has not yet received the final SFY 2011 revised DSH audit from Myers and Stauffer but expects to receive it in April.

23

SFY 2015 DSH Audit Recoupments and Redistributions Based on the revised SFY 2015 DSH audit:

2 hospitals have DSH liabilities totaling $5.6 million that will be recouped

118 hospitals have DSH shortfalls totaling nearly $1.4 billion

With the limited funds available from recoupments, DSH shortfall hospitals likely will only receive approximately 0.4% of their shortfall from the SFY 2015 DSH redistributions.

DSH shortfall hospitals also may receive additional DSH payments using unspent DSH allotment; however, we do not yet have estimates.

24

Timing of SFY 2015 DSH Audit Transactions

Once the DSH recoupment letters are sent, hospitals with DSH liabilities will be required to return the full amount of any DSH liability to MHD.

There likely will be significant delays between the DSH recoupments and the MSC pooling transactions.

25

Timing of SFY 2015 DSH Transactions

26

• The DSH redistributions may occur over a number of payrolls.

•The MSC pooling transactions are limited by the funds available.

• MHD will proportionally redistribute payments to DSH shortfall hospitals as funds are available.

• Hospitals with DSH liabilities will be required to return the full liability to MHD.

DSH Liabilities Are Paid to MHD

MHD Redistributes Funds it received to DSH Shortfall

Hospitals

DSH Shortfall Hospitals

Receive DSH Redistribution

Payments Based on Available

Funds

MSC Pooling Arrangement

Relies on the DSH Redistribution Payments to

Process Pooling Transactions for its Participants

Unspent DSH Allotment

We have been working with MHD to identify the amount of unspent DSH allotment available for SFYs 2011 through 2015 and exploring the option to process additional DSH payments for those years.

Before additional DSH payments can be made for unspent DSH allotment, MHD must have:

appropriation authority

funding for the state match

27

Unspent DSH Allotment

As part of their budget request, MHD has requested additional appropriation authority to accommodate additional DSH payments resulting from unspent DSH allotment in prior years.

We are monitoring the FRA fund balance to determine whether payments can be made using existing fund balance or if the FRA assessment rate will need to be increased to generate enough funds support the payments.

We anticipate these payments likely will occur in the spring.

28

Board Workgroup Considers Options

An MHA-board appointed DSH Audit Litigation Redistribution Workgroup was appointed in February 2018.

It is assessing whether and how to redistribute hospital funds resulting from any unspent DSH allotment payments to address concerns about payment equity under DSH audits.

This group likely will meet again in March as more details become available.

29

Impact of Federal DSH Allotment Reductions on

Missouri

30

Impact of Federal DSH Allotment Reductions on Missouri

Under federal law, the $4 billion in FFY 2020 Medicaid DSH allotment cuts originally were set to become effective October 1, 2019.

Congress since has delayed the FFY 2020 reductions from taking effect until May 23, 2020.

Unless Congress repeals or delays the $4 billion DSH allotment reduction, hospitals can expect a reduction in DSH payments yet this state fiscal year.

32


CMS has not released the formula that will be used to calculate the state specific DSH allotment reductions.

Using the methodology outlined in CMS’ July 28, 2017, regulation for allocating DSH cuts among the states, Missouri’s share of the allotment reductions would be approximately 4.7 percent.

33


Missouri’s share of the cut would approximate $146.5 million for SFY 2020.

On March 5, 2019, MHA provided hospital-specific estimates for this reduction based on each hospital’s proportional share of SFY 2019 uncompensated care costs.

34

State Legislation for 2020

36


FRA Reauthorization

Because the state law authorizing the FRA lapse on September 30, 2020, it must be reauthorized during the 2020 legislative session.

The General Assembly has reauthorized the FRA provider tax laws 14 times since they were first enacted in 1992.

37


Out of state payment program

A number of proposals are pending in the General Assembly to end the Medicaid payment stream that augments what other states pay for treating their residents in Missouri hospitals.

No legislative hearings have been held on the issue, but we anticipate those soon.

38

Proposed Federal Regulation

39

Medicaid Fiscal and Accountability Proposed Regulation

MHA orchestrated a joint letter to Governor Parson and the Missouri Congressional Delegation about CMS’ proposed Medicaid Fiscal Accountability Regulation.

A number of the proposed regulation’s components are adverse for hospitals, but its most significant effect is to allow CMS to invalidate the private sector provider tax pooling arrangement that the MHA Management Services Corporation has administered for nearly 30 years.

40

Medicaid Fiscal and Accountability Proposed Regulation

Losing the pooling arrangement would imperil the viability of the FRA provider tax and associated Medicaid payments.

41

Miscellaneous Medicaid Updates

43

Provider Based Rural Health Clinic Settlements

MHD will begin processing provider based rural health clinic settlements using cost-to-charge ratios from the Medicaid cost reports instead of the Medicare cost reports beginning with 2018 clinic settlements.

44

SFY 2020 Medicaid Inpatient Upper Payment Limit

MHD notified MHA that a preliminary draft inpatient UPL calculation for SFY 2020 shows that approximately 40 hospitals are projected to exceed the inpatient UPL for SFY 2020 by approximately $42 million.

MHA has been in contact with these hospitals.

We are working with MHD to ensure the methodology used by Myers and Stauffer is correct.

45

healthcare financial management association...current system is vulnerable to manipulation ... the...

Documents