Category Archives: Budget

BREAKING: House and Senate appear close to a Medicaid deal!!

In our last post on Medicaid reform, we updated you on the recent bill passed by the North Carolina Senate relating to the long-standing thorn in the side of the General Assembly, especially regarding the states’ budget – the Medicaid program. The Senate’s version of Medicaid reform is quite different from what we have previously seen and is a hodge-podge of managed care and a new idea: “provider-led entities.”

In a strong sign that this proposal is a compromise between competing sides that could end up getting passed, both House and Senate leaders are speaking positively on the record to news media about the prospects for a deal. Given how public the issue is and how big it is (an expected $14.2 billion in North Carolina in the coming year), that means they expect to get a deal done soon. The fact that the issue is so tied up with the budget that is overdue to be passed is a further headwind to passing a bill.

Right now, the bill is in a conference committee of negotiators from the House and Senate to work out an agreement, given the differences between the two chambers.

One major issue that the committee needs to look at is whether there will be a whole new state agency: the “Department of Medicaid.” The Senate endorsed that idea last week.

Our prediction: The legislators will chart a cautious course and not erect a whole new agency at the same time they are overhauling the system.

With Wos having (coincidentally?) just stepped down as Secretary of the Department of Health and Human Services, perhaps the lack of a lightning rod for criticism of DHHS will let the air out of the proposal to remove Medicaid from DHHS’s hands.

Stay tuned.

By Robert Shaw

Robert

The Nine Habits of a Highly Effective Secretary for DHHS

With the recent passing of the torch from Aldona Wos to Rick Brajer (see blog), I’ve been thinking about…

What are the qualifications of a Secretary of DHHS?

What exactly are the qualities that would make a great Secretary of DHHS?  Remember, in Mary Poppins, when the children draft their requirements for a nanny?  Or, better yet, what are the “Seven Habits of a Highly Effective” Secretary for DHHS?  Or…in this case, the “Nine Habits”…

Here are my “Nine Habits of a Highly Effective Secretary of DHHS;” our Secretary of DHHS should have the following:

  1. A health care background
  2. A successful track record of his/her ability to manage large companies or agencies
  3. An understanding of the Medicaid system, and, maybe, even have first-hand knowledge of how the system affects recipients and providers
  4. A relationship with someone on Medicaid or a parent of someone on Medicaid
  5. A working knowledge of clinical coverage policies, reimbursement rates, and regulations surrounding Medicaid
  6. Both the capacity to listen and speak and do both eloquently and genuinely
  7. True empathy about the physical and mental health of Medicaid recipients and about providers, plus have the patience to handle all types of demographic differences
  8. An understanding that he/she is handling tax payers’ money, that redundancy in staff is excess administrative costs, and ability to trim the fat
  9. An ability to communicate with both the Senate and the House and to be frank with both

wosbrajer

Let us analyze the qualifications of Wos that we came to witness over the last few years, as well as, review the qualifications of soon-to-be Sec. Brajer with information to which we are privy.

Let’s see if both, either, or neither have these “Nine Habits of a Highly-Effective Secretary for DHHS.”

  1. Health care background:

Wos: Yes. And, yet, maybe not.  She is an M.D. Although I do not know whether she ever practiced medicine in North Carolina.  According to Wikipedia, (which is never wrong) Wos “prides herself on her work in the field of preventing HIV and AIDS.”  However, I was unable to find a single clinic in which Wos provided services.  While, generally, an “M.D.” automatically bestows a certain aura of understanding health care, I question whether this “M.D.” automatically has a working knowledge of billing for and receiving reimbursements under Medicaid in North Carolina.

Brajer: Hmmmm.  This one is more tricky. The two companies that Brajer owned, Pro-nerve LLC and LipoScience Inc., are health care related, in that Pro-nerve was an intraoperative neuromonitoring (IONM) company and LipoScience sold a diagnostic tool to health care providers.  Arguably, both companies are health care related, at least, in an ancillary way.  However, Brajer is not a health care professional, and, to my knowledge, has never rendered health care services. Furthermore, neither of Brajer’s companies was successful; quite the opposite is true, in fact. From my understanding, one company declared bankruptcy and the other was not far behind.  Which brings us to the next category…

Answer: Both…kinda.

2. A successful track record of his/her ability to manage large entities:

Wos: Prior to acting as the Secretary to DHHS, Wos served as the Ambassador to Estonia until 2006.  What she did besides political functions between 2006 and 2012, I do not know. Acting as an Ambassador does not entail managing large entities.  The most managerial skills that I can find in her background, prior to being appointed Secretary, are related to political fund-raising. Since I would not call her brief reign as Secretary of DHHS a success, I give Wos a “two thumbs down” on this criterion.

Brajer: He managed two companies.  We can bicker as to whether these companies should be considered large…neither employed 17,000 employees.  Regardless, the “successful” criterion appears to be lacking.

Answer: Neither…pickles.

3. An understanding of the Medicaid system:

Wos: “You’re asking me without having all the data available to answer a question,” she told lawmakers on October 8, 2013.  In her defense, she responded as such when asked whether the State was moving toward privatization for Medicaid.  No one could know the answer, except, maybe, McCrory.

On the other hand, the implementation of NCTracks was nothing short of a catastrophe of epic proportion. See blog. See blog.  Anyone with nominal knowledge of the Medicaid system would have, at least, paused to consider keeping HP Enterprises under contract during the switch to NCTracks or pushed back the go-live date.

Brajer: Unknown

Answer: Here’s to hoping that Brajer does.  I’m cheering for you! Go! Fight! Win!

4. A relationship with someone on Medicaid or a parent of someone on Medicaid:

Wos: Unknown.  If I were shaking a proverbial “8 Ball,” it would read, “Doubtful.”

Brajer: Unknown. Perhaps one of his former employees at Pro-nerve, LLC and LipoScience, Inc. is on Medicaid.

Answer: Gimme a ‘B’! B! Gimme a ‘R’! R! Gimme a ‘A’! A! Gimme a ‘J’! J! Gimme a ‘E’! E! Gimme a ‘R’! R! Whats that spell? Brajer!!

5.  A working knowledge of clinical coverage policies, reimbursement rates, and regulations surrounding Medicaid.

Wos: Unknown. Whatever Wos’ knowledge of regulations and clinical coverage policies is or lacked, she, initially, made up for any knowledge lacked with the key hire and quick resignation of Carol Steckel.  Unfortunately, Steckel’s experience was never replaced.

January 2013: “I am pleased to say that we are already taking steps to address some of these issues,” Wos said. “Now, the most important of this is that we have hired Ms. Carol Steckel, a nationally recognized — nationally recognized — expert in Medicaid to run our Medicaid program for the state. Carol is already moving ahead with systemic reviews of operations in this division. She is reviewing and establishing new policies and procedures.”

September 27, 2013: Steckel resigns. And blog.

Brajer: Unknown.

Answer: B! R! A! J! E! R! Let’s go, Brajer!

6. Both the capacities to listen and speak and do both eloquently.

Wos: Wos brandished an ability to speak publicly with ease.  Listening, on the other hand….eh?

Brajer: Unknown

Answer: I think you can, I think you can, I think you can…

7. Genuine concern about the physical and mental health of Medicaid recipients AND about providers PLUS have the patience to handle all types of demographic differences

Wos: She seems to think so. Her country club does not discriminate.

Brajer: Unknown

Answer: Go! Go! Go! Go! Go, Brajer!!

8. An understanding that he/she is handling tax payers money and that redundancy in staff is excess administrative costs and trim the meat

Wos: “My obligation as secretary is to find the best possible team in order to get the job done.”  Les Merritt served as CFO of DMA on a $300,000-plus contract.  Joe Hauck was paid over $228,000 for 6 months of advise to Wos.  Matt McKillip was paid $87,500 to serve as chief policy maker without any health care background.  Ricky Diaz pulled in $85,000 as communications director. Id.  Wos has handed out $1.7 million in pay hikes to 280 staffers, many with “no career or educational experience for the jobs they hold.” Id. The implementation of the MCOs also fell under Wos’ watchful eye.  The MCO system has created thousands upon thousands of high-paying jobs with our Medicaid dollars.  I believe that in the “trim the fat” category, Sec. Wos scores a goose egg.

Brajer: Unknown.

Answer: Please, Brajer! For the love of Pete!

9. Ability to communicate with both the Senate and the House and to be frank with both.

Wos: “Separation pay” v. “Severance pay?

In April 2013: “I think the word transparency can get pretty dangerous,” Wos said. “Because what does transparency mean? If transparency means that we’re in a planning process and you’re asking us, ‘Tell us all the things you’re planning,’ well, my goodness, allow us to work, and then we’ll give you everything that you want.”

Brajer: Unknown

Answer: Brajer, Brajer, He’s our man! If he can’t do it…[gulp].

____________________________________________

It concerns me that so many of future Sec. Brajer’s core abilities/habits to run and manage DHHS and the Medicaid program in a highly effective manner are unknown.  Nothing like placing all your money on red!  But we have HIGH hopes for Brajer!!!  Don’t let us down!!

The whole point of this blog is to pause and really contemplate what characteristics would comprise a great Secretary for DHHS. Obviously, the Governor has the full authority to appoint the Secretary, meaning that we taxpayers have little to no input as to whether we deem a person qualified, except in the indirect method of voting or not voting for the Governor.

Call this blog an exercise in examining what habits, if in existence, would make the most highly effective Secretary of DHHS and an opinion as to whether these habits exist in our former and future Secretaries.

We are cheering for Brajer!  But…

One fact about the future is that it is unknown.

North Carolina Medicaid Reform Update – Round and Round She Goes

Given how long the Medicaid reform discussions have been going on at the legislature, you may be glazed over by now. Give me the memo when they pass something, right? Fair enough, let’s keep it brief. Where do things stand right now?

Last Wednesday, the Senate staked out its position in the ongoing debate between the House and the McCrory administration.

The Senate’s newest proposal is an unusual mix of different systems and new ideas. Not willing to commit to one model for the whole Medicaid program, the latest version of the bill includes something new called Provider Led Entities, or “PLEs.” PLEs are yet the latest in the alphabet soup of different alternatives to straight fee-for-service billing for Medicare/Medicaid. You’ve all heard of HMOs, PPOs, MCOs, and ACOs. PLEs appear to be similar to ACOs, but perhaps for political reasons the Senate bill sponsors saw the need to call the idea something different.  See Knicole Emanuel’s blog.

In any event, as the name suggests, such organizations would be provider-led and would be operated through a capitated system for managing the costs of the Medicaid program. The Senate bill would result in up to twelve PLEs being awarded contracts on a regional basis.

PLEs are not the only addition to the Medicaid alphabet soup that the Senate is proposing in its version of HB 372. The Senate has also renewed its interest in taking Medicaid out of the hands of the N.C. Department of Health and Human Services entirely and creating a new state agency, the Department of Medicaid (“DOM”).

(One wonders whether the continual interest in creating a new Department of Medicaid independent of the N.C. Department of Health and Human Services had anything to do with embattled DHHS Secretary Wos stepping down recently.)

The Senate also proposes creating a Joint Legislative Oversight Committee on Medicaid (“LOC on Medicaid”).

But creating the DOM and using new PLEs to handle the provision of Medicaid services is not the whole story. Perhaps unwilling to jump entirely into a new delivery system managed by a wholly new state agency, the Senate bill would keep LME/MCOs for mental health services in place for at least another five years. Private contractor MCOs would also operate alongside the PLEs. The North Carolina Medicaid Choice coalition, a group which represents commercial MCOs in connection with the Medicaid reform process, is pleased.

One very interesting item that the Senate has included in its proposed legislation is the following requirement: “Small providers shall have an equal opportunity to participate in the provider networks established by commercial insurers and PLEs, and commercial insurers and PLEs shall apply economic and quality standards equally regardless of provider size or ownership.” You can thank Senator Joel Ford of Mecklenburg County for having sponsored this amendment to the Senate version of House Bill 372.

By pulling the Medicaid reform proposal out of the budget bill, the matter appears headed for further negotiation between the House and the Senate to see if the two can agree this year, unlike last year.

By legislative standards, that counts as forward progress… Here come the legislative discussion committees to hash it out more between the two chambers. We will keep a close eye on the proposals as they continue to evolve.

By Robert Shaw

Lawyer photo

 

Passing the Torch: Wos Resigns!! Brajer Appointed!

Aldona Wos resigned today after two years and seven months as Secretary of NC DHHS.  Wos’ last day will be Aug. 14.

McCrory named Rick Brajer, a former medical technology executive, as the new Secretary of DHHS.

Soon-to-be Sec. Brajer, 54, was the chief executive of ProNerve and LipoScience.  LipoScience was sold to LabCorp in 2014, and ProNerve was sold to Specialty Care in April.

Brajer is not a doctor, as Wos was.  Instead, Brajer touts an MBA from Stanford.

I do not have any information as to why Wos resigned now, especially in light of the recent resignation of the Secretary of Transportation, but will keep you apprised.

More to come….

State Auditor Finds Robeson County School NOT Using Medicaid Money

Our State Auditor Beth Wood’s most recent audit finds that The Public Schools of Robeson County failed to spend approximately $1 million in Medicaid dollars intended for special needs children in schools!!

See audit report.

“The Public Schools of Robeson County (School District) did not use approximately $1 million per year in Medicaid administrative reimbursements to provide required services to students with disabilities. The School District missed this opportunity to better serve students with disabilities because it was unaware of a contractual requirement to use the Medicaid reimbursements to provide required services.

Over the last three years, the School District reported that it used $26,780 out of $3.16 million in Medicaid administrative reimbursements to provide services to students with disabilities.

The amounts reportedly spent each year are as follows:

• $ 8,969 out of $1,010,397 (0.89%) in 2013

• $12,043 out of $872,299 (1.38%) in 2012

• $ 5,768 out of $1,278,519 (0.45%) in 2011”

The question that I have after reading the audit report is…WHERE IS THE MONEY?

Was this $1 million given to the school system and spent on items other than services for children? Is the school district sitting on a surplus of money that was unspent? Or was this amount budgeted to the school system and the remainder or unspent money is sitting in our state checking account?

To me, it is relatively unclear from the audit report which of the above scenarios is an accurate depiction of the facts.  If anyone knows, let me know.

MCO CEO Compensated $400,000 Plus Bonuses with Our Tax Dollars!

On July 1, 2014, Cardinal Innovations, one of NC’s managed care organizations (MCOs) granted its former CEO, Ms. Pam Shipman, a 53% salary increase, raising her salary to $400,000/year. In addition to the raise, Cardinal issued Ms. Shipman a $65,000 bonus based on 2013-2014 performance.

$400,000 a year, plus bonuses.  Apparently, I got into the wrong career; the public sector seems to pay substantially more.

Then in July 2015, according to the article in the Charlotte Observer, Cardinals paid Ms. Shipman an additional $424,975, as severance. Within one year, Ms. Shipman was paid by Cardinal a whopping $889,975. Almost one million dollars!!!! To manage 16 counties’ behavioral health care services for Medicaid recipients.

For comparison purposes, the President of the United States earns $400,000/year (to run the entire country). Does the CEO of Cardinal equate to the President of the United States? Like the President, the CEO of Cardinal, along with all the other MCOs’ CEOs, are compensated with tax dollars.

Remember that the entire purpose of the MCO system is to decrease the risk of Medicaid budget overspending by placing the financial risk of overspending on the MCO instead of the State. In theory, the MCOs would be apt to conservatively spend funds and more carefully monitor the behavioral health care services provided to consumers within its catchment area to ensure medically necessity and not wasteful, unnecessary services.

Also, in theory, if the mission of the MCOs were to provide top-quality, medically necessary, behavioral health care services for all Medicaid recipients in need within its catchment area, as the MCOs often tout, then, theoretically, the MCOs would decrease administrative costs in order to provide higher quality, beefier services, increase reimbursement rates to incentivize health care providers to accept Medicaid, and maybe, even, not build a brand, new, stand-alone facility with top-notch technology and a cafeteria that looks how I would imagine Googles’ to look.

Here is how Cardinal’s building was described in 2010:

This new three-story, 79,000-square-foot facility is divided into two separate structures joined by a connecting bridge.  The 69,000-square-foot building houses the regional headquarters and includes Class A office space with conference rooms on each floor and a fully equipped corporate board room.  This building also houses a consumer gallery and a staff cafe offering an outdoor dining area on a cantilevered balcony overlooking a landscaped ravine.  The 10,000-square-foot connecting building houses a corporate training center. Computer access flooring is installed throughout the facility and is supported by a large server room to maintain redundancy of information flow.

The MCOs are not private companies. They do not sell products or services. Our tax dollars comprise the MCOs’ budget. Here is a breakdown of Cardinal’s budgetary sources from last year.

Cardinals budget

The so-called “revenues” are not revenues; they are tax dollars…our tax dollars.

78.1% of Cardinal’s budget, in 2014, came from our Medicaid budget. The remaining 21.7% came from state, federal, and county tax dollars, leaving .2% in the “other” category.

Because Cardinal’s budget is created with tax dollars, Cardinal is a public company working for all of us, tax paying, NC, residents.

When we hear that Tim Cook, Apple’s CEO, received $9.22 million in compensation last year, we only contributed to his salary if we bought Apple products. If I never bought an Apple product, then his extraordinarily high salary is irrelevant to me. If I did buy an Apple product, then my purchase was a voluntary choice to increase Apple’s profits, or revenues.

When we hear that Cardinal Innovations paid $424,975 to ousted CEO, Pam Shipman, over and above her normal salary of $400,000 a year, we all contributed to Shipman’s compensation involuntarily. Similarly, the new CEO, Richard Toppings, received a raise when he became CEO to increase his salary to $400,000 a year. Again, we contributed to his salary.

A private company must answer to its Board of Directors. But an MCO, such as Cardinal, must answer to tax payers.

I work very hard, and I expect that my dollars be used intelligently and for the betterment of society as a whole. Isn’t that the purpose of taxes? I do not pay taxes in order for Cardinal to pay its CEO $400,000.

For better or for worse, a large percentage of our tax dollars, here in NC, go to the Medicaid budget. I would venture that most people would agree that, as a society, we have a moral responsibility to ensure that our most vulnerable population…our poorest citizens…have adequate health care. No one should be denied medical coverage and our physicians cannot be expected to dole out charity beyond their means.

Hence, Medicaid.

We know that Medicaid recipients have a difficult time finding physicians who will accept Medicaid. We know that a Medicaid card is inferior to a private payor card and limits provider choice and allowable services. We know that certain services for which our private insurances pay, simply, are not covered by Medicaid. Why should a Medicaid-insured person receive sub-par medical services or have more difficulty finding willing providers, while privately insured persons receive high quality medical care with little effort?  See blog or blog.

Part of the trouble with Medicaid is the low reimbursements given to health care providers. Health-care consulting firm Merritt Hawkins conducted a study of Medicaid acceptance rates which found that just 45.7 percent of physicians are now accepting Medicaid patients in the U.S.’s largest 15 cities and the numbers worsen when you look at sub-specialties.

The reimbursement rates are so low for health care providers; the Medicaid services are inadequate, at best; and people in need of care have difficulty finding Medicaid physicians. Yet the CEO of Cardinal Innovations is compensated $400,000 per year.

Cardinal has 635 employees. Its five, top-paid executives are compensated $284,000-$400,000 with bonuses ranging $56,500-$122,000.

Richard Topping, Cardinal’s new CEO, told the Charlotte Observer that “it doesn’t cut into Medicaid services.”

He was also quoted as saying, “It’s a lot of money. It is. You’ve just got to look at the size and the scope and the scale.”

In contrast, Governor McCrory is compensated approximately $128,000.  Is McCrory’s “size, scope, and scale” smaller than the CEO’s of Cardinal?  Is the CEO of Cardinal “size and scope and scale,” more akin to the President of the US?

“We are a public entity that acts like a private company for a public purpose,” Toppings says.  Each MCO’s Board of Directors approve salaries and bonuses.

Cardinal is not the only MCO in NC compensating its CEO very well.  However, according to the Charlotte Observer, Cardinal’s CEO’s compensation takes the cake.

Smokey Mountain Center (SMC) pays its Chief Medical Officer Craig Martin $284,000 with a $6,789 longevity bonus.

Four years ago, before the initial 11 MCOs, the administrative cost of the MCOs was nonexistent (except for the pilot program, Piedmont Behavioral Health, which is Cardinal now).  Implementing the MCO system increased administrative costs, without question.  But by how much?  How much additional administrative costs are acceptable?

Is it acceptable to pay $400,000+ for a CEO of a public entity with our tax dollars?

Massive Medicaid Metamorphosis: Providers Beware! Be Proactive NOT Reactive!

Medicaid is ever-changing. But every 5 years or so, it seems, that a substantial section of Medicaid is completely revamped. Sometimes to the detriment of many uninformed, un-suspecting providers. For providers, it is imperative to stay above the curve…to foresee the changes in Medicaid, to plan for those changes, and to morph your own practice into one that will persevere despite the changes to come.

We are on the brink of a massive Medicaid metamorphosis.

Medicaid modifications have happened in the past. For example, a substantial shift in Medicaid occurred when DHHS switched from HP Enterprises to Computer Science Corporation (CSC) as its billing vendor. When the NCTracks system went live, the new NCTracks system forced office managers to re-learn how to bill for Medicaid. It was a rough start and many office managers spent countless hours inputting information into NCTracks, only to get erroneous denials and high blood pressure.

Another example of a Medicaid modification was the implementation of the managed care organizations (MCOs) which came on the heels of the new CABHA certification requirements. Only a couple of years after the shellshock of CABHA certification and thousands of providers going out of business because they could not meet the demands of the CABHA standards, behavioral health care providers were again put through the wringer with new standards created and maintained by the MCOs.

Think about it…Ten years ago, we never used the acronym MCO.

Enter [stage left]: A NEW ACRONYM!!

PLE

Don’t you love acronyms? My family has this game called Balderdash. It is one of my favorite games. The object of the game is to have the best fabricated answer. For example, if the category is “Acronym,” the “Dasher” will read the acronym, say, “PLE.” All the players draft their fake renditions of what “PLE” really means.

Plato Learning Environment; or
Panel of Legal Experts; or
Perinatal Lethality.

You get the point. In the game, the players vote on which answers they believe are correct (BTW: All of the above are real definitions for the acronym “PLE” (according to Google).)

In the Medicaid/care world, we play alphabet soup constantly. MCO, DD, SAIOP, DHHS, BWX, MID CPT….Throw out a few letters, and, most likely, you will have said some acronym that means something to someone. See my acronym page for a list of those pertinent to us (and it is ever-growing).

The most recent new acronym to the Medicaid arena here in North Carolina that I have seen is PLE, which is the crux of the new, upcoming massive Medicaid metamorphosis.

House Bill 372’s short title is “Medicaid Modernization” and has passed in the House.

On June 25, 2015, the Senate passed the House Bill on its first read!

I waited to blog about HB 327 until the Senate had an initial reaction to it. If you recall, the Senate and House has been on contradictory sides when it comes to Medicaid reform. However, it appears that HB 327 may have some traction.

House Bill 372 defines PLE as “[a]ny of the following:

a. A provider.
b. An entity with the primary purpose of owning or operating one or more providers.
c. A business entity in which providers hold a controlling ownership interest.”

Over the last couple years, the Senate and the House have stood divided over whether Medicaid should be managed by ACOs (House) or MCOs (Senate). It appears from the definition of a PLE, that a PLE could be a much simpler version of an ACO, which has had my vote since day 1. The whole concept of an ACO is a provider-run entity in which the providers make the decisions instead of utilization reviews, which have little to no contact with the patients, and, sometimes little health care experience, especially on the provider side.

From my cursory review of the proposed PLEs, it seems that a PLE would mimic an ACO, except, and, further federal research is needed, without some of the highly-regulated mandates that the federal government requires for MCOs (it will still be highly-regulated).

Is this just a question of semantics?  Is this just a question of changing its name?

“What’s in a name? that which we call a rose, By any other name would smell as sweet.” Romeo and Juliet, Act II, Scene II.

Let’s look again at the definition of a PLE, according to Version 3 of House Bill 372.

a. A provider.
b. An entity with the primary purpose of owning or operating one or more providers.
c. A business entity in which providers hold a controlling ownership interest.”

A provider?

Any provider? Does that provider need to ask to become a PLE or is it automatic? Does being a PLE give enhanced benefits other than being just a provider?

The answer is that all providers are not PLEs and providers will need to undertake significant legal and administrative steps to become a PLE.

“PLEs shall implement full-risk capitated health plans to manage and coordinate the care for enough program aid categories to cover at least ninety percent (90%) of Medicaid recipients to be phased in over five years from the date this act becomes law.”

What is “full risk?”

“Full risk” is not defined in HB 372, although, I believe that the definition is self-evident.

Capitation payment is defined by reference to 42 CFR 438.2:

“Capitation payment means a payment the State agency makes periodically to a contractor on behalf of each beneficiary enrolled under a contract for the provision of medical services under the State plan. The State agency makes the payment regardless of whether the particular beneficiary receives services during the period covered by the payment.”

Interestingly, this definition for “capitation payment” is found in the same section of the Code of Federal Regulations (CFR) as all the managed care regulations. Part 438 of the CFR applies to managed care.

We have managed care organizations in our state now managing the behavioral health care aspect of Medicaid. Will the same provisions apply to MCOs…to ACOs…to PLEs?

A rose by any other name…

What else does House Bill 372 purport to do?

• Within 12 months, the Department shall request a waiver from CMS to implement the components of this act.
• Within 24 months, the Department will issue an RFP for provider-led entities to bid on contracts required under this act.
• Within 5 years, 90% of all Medicaid services must be provided from a PLE, except those services managed by the MCOs , dental services, pharmaceutical products and dispensing fees. The Department may implement a pilot within 3 years.

As a provider, if you want to continue to serve the Medicaid population, then you may want to insert your company or agency into the creation of the PLEs, whether you sell, merge, acquire, or create a conglomerate.

It is my prediction that those providers who are reactive, instead of proactive, will lose business, consumers, and, potentially, a lot of cash. It is my “predictive recommendation” [as you are aware, we do not have an attorney/client relationship, so no recommendation of mine is tailored for you] that those providers who proactively seek mergers, acquisitions, and/or business agreements with other providers to morph into PLEs will be more successful, both financially and in serving their consumers better.

What you need to know about the future PLEs:

  • Must cover at least 30,000 recipients
  • Must provide all health benefits and administrative services, including physical, long-term services and supports, and other medical services generally considered physical care
  • Must meet solvency requirements
  • Must provide for appeal processes
  • Will cover 100% of the NC counties

The PLEs will, effectively, absorb the Medicaid dollars for recipients across the entire state and provide care for all physical health needs of Medicaid recipients.

In this environment, providers need to be proactive, not reactive!

If House Bill 327 passes into law, our next Medicaid metamorphosis will be monumental!  And the state will issue an RFP for providers within 2 years!

NC MCOs and Consolidation: “When the Music Stops? Nobody Knows!”

Our General Assembly is pushing for the managed care organizations (MCOs) to consolidate and/or morph.  Consolidating the MCOs makes fiscal sense for our state, but if I were executive management at an MCO, I would be be anxiously awaiting direction from our General Assembly.  A metaphoric 3-4 chair game of”Musical Chairs” is proceeding with 9 (now 8) players.  Five to six players will have no chairs when the music stops.

What are MCOs?  See blog and blog.

Multiple bills have been proposed.

Senate Bill 703 proposes 3 statewide MCOs. Senate Bill 574 seems to incorporate provider-led capitated health plans, but is unclear as to the exact model. Senate Bill 696 seems to create a symphony of provider-led and nonprovider-led, risk-based entities. Senate Bill 568 contemplates licensed commercial health insurers offering health care plans.

No one really knows how many MCOs will remain in the end…if any. Regardless, what the number of existing MCOs in the future will be, there is little dispute that the number will be fewer than the number of MCOs that exist now.

In an atmosphere where there is supposition that there are too many people or companies and that only a few will remain, competition brews. People/companies are forced to strategize if they want to survive.

Think about the childhood game, “Musical Chairs.” You start with a large group of people, but with one less chair than the number of people. The music plays and the players meander around at a relatively slow pace, around and around, until the music stops. And what happens when the music stops? The people scramble for a chair.  The person left standing is “out” and must sit on the sideline.

We have 9, soon to be 8, MCOs in NC right now. And the music is playing. But which MCOs will be left standing when the music stops?

Here is a map of our current MCOs:

2014 mco

 

As of July 1, CoastalCare and East Carolina Behavioral Healthcare (ECBH) will be merged. We will be down to 8 MCOs. Which means that the light blue on the bottom right hand side of the map will merge with the bright yellow on top right hand side of the map.

Mecklenburg county, which houses most of the Charlotte area, was not always light purple. It recently merged with Cardinal Innovations.

Partners (light yellow) and Smokey Mountain (dark blue) had serious discussions of a merger until, recently, when both walked away from negotiations of merger.

Why should it matter which MCOs are in existence or how many? Theoretically, it shouldn’t. These MCOs are created in order to manage behavioral health care (Medicaid services for those suffering from substance abuse, mental illness, and developmentally disabled), not to make a profit, right? The only issue of importance should be that medically necessary behavioral health care services are rendered to Medicaid recipients in the most efficient and most effective manner.

Yet competing interests come into play.

Think about it…each MCO employs hundreds of people. Each MCO has a CEO, who is not working for free. Generally, unless other arrangements have been negotiated, there can only be one CEO per MCO. When there are 2+ MCOs merging with 2 CEOs and only 1 “chair” for 1 CEO, it can seem like “Musical Chairs.” Multiple people are vying for one “chair.”

The money at issue for behavioral health care in NC is not a small amount. It is likened to a fire hose spouting money. We have a Medicaid budget in NC of approximately 14 billion dollars. To put it in perspective, with $14 billion dollars, you could purchase the LA Lakers 14 times. This is how much money we spend on Medicaid every year. It is really quite staggering when you think about it.

As every North Carolinian learns in the 6th grade, North Carolina is composed of 100 counties. The estimated Medicaid budget of $14 billion is allocated across 100 counties and among approximately 1.9 million Medicaid recipients.

When it was decided to implement the MCOs across the state, about 2012-ish (we actually obtained permission from CMS for the waiver years prior to 2012, but we began with a pilot and did not implement the MCOs statewide until 2012-13), we found ourselves, initially, with eleven MCOs, and now we have 9…soon to be 8.

The newly merged entity of CoastalCare and ECBH (CC+ECBH) will manage state funds and Medicaid dollars for behavioral health services across 24 counties in eastern North Carolina. In other words almost ¼ of the Medicaid budget will be handed to CC+ECBH, leaving approximately ¾ of the Medicaid budget for 7 other MCOs (the budget is determined by number of recipients, so I am assuming, for the purpose of this blog, that more counties mean more people).

The amount of counties controlled by the remaining 7 MCOs are as follows:

Smokey: 23
Partners: 8
Centerpointe: 4
Cardinal: 16
Sandhills: 9
Eastpointe: 12
Alliance: 4

chart for mcos

Looking at the chart above, it would appear that Smoky and CC+ECBH will manage almost 1/2 the state’s behavioral health care for Medicaid.

Prior to the 1915 b/c Waiver allowing the MCOs to manage behavioral services for Medicaid recipients in NC, DHHS managed it. (Obviously ValueOptions and other vendors had a part in it, but not with actual management).  As the single state agency for Medicaid, DHHS cannot delegate administrative duties to contracted parties without a “Waiver,” or permission for an exception from the federal government, or, more specifically, the Center for Medicare and Medicaid Services (CMS).

Prior to the 1915 b/c Waiver, we did not have 9 companies with hundreds of employees managing behavioral health care for Medicaid recipients. We had DHHS, which employs approximately 18,000 employees.  To my knowledge DHHS did not terminate those employees who were in charge of behavioral health care issues in order to compensate the creation of new companies/employees.  In other words, say 1000 people at DHHS devoted their time to issues arising our of behavioral health care. Once we had an additional 9 (well, 11, at first), those 1000 employees were not asked to join the MCOs. Maybe some did, but, to my knowledge, there was no suggestion or incentive or requirement to leave DHHS and go to an MCO (to shift the administrative burden).

When we created an additional 9 (well, 11 at first) companies to, essentially, take over behavioral health care…

We created more administrative costs, in order to lift the risk of overspending the Medicaid budget off the state.  It is estimated that America wastes $190 billion in excess administrative costs per year.

Waste in health care

In theory, consolidating the MCOs would decrease administrative costs by having fewer paid employees, not dissimilar to why MCOs want a closed network.  See blog. Again, in theory, having fewer MCOs may create a more consistent statewide manner in managing behavioral health care.

Assume for the purpose of this blog that each MCO employs 100 people (which is a very low number) and each employee is paid $50,000, then the administrative cost associated with delegating behavioral health care to MCOs equals $500,000, counting only employee salaries. Multiple that number by 9 (number of current MCOs) and you get an increased administrative cost of approximately $4.5 million dollars per year, not counting the additional overhead each MCO bears (rent/mortgage, equipment, salary benefits, health care benefits, etc.). Plus you have to include the top management’s salaries, because you know the executives are receiving more than $50,000/year.

What motivated us to implement a MCOs system? With an MCO system, the General Assembly is able to allocate funds for Medicaid and place the risk of going over the budget on the MCOs, not the state. This is a completely understandable and reasonable objective. It is without question that the Medicaid budget is swelling to the point of unsustainability.

However, are we trading “control/supervision” for “knowability?” Are we also trading “risk” for “higher administrative costs,” which, in turn, equals less Medicaid dollars for providers and Medicaid recipients? Every dollar paid to an MCO employee is a dollar not going to a health care provider to reimburse for services.

For these reasons, the government’s push for consolidation of the MCOs is astute. Fewer MCOs = less administrative costs. Fewer MCOs = easier supervision by DHHS.

Less administrative costs = more Medicaid dollars going to providers…to serve our most needy. Because, at the end of the day, the most important issue when it comes to Medicaid is providing quality care for recipients.

It is no matter which entity controls/manages behavioral health care for Medicaid, because regardless the entity, that entity should be managing our tax dollars in the most efficient way that provides the best quality to services to those in need.

“Around and around we go, when we stop? Nobody knows…”  But we do know this…when the music stops, there will be scrambling!

NC Medicaid Reimbursement Rates for Primary Care Physicians Slashed; Is a Potential NC Lawsuit Looming?

Here is my follow-up from yesterday’s blog post, “NC Docs Face Retroactive Medicaid Rate Cut.

Nearly one-third of physicians say they will not accept new Medicaid patients, according to a new study.  Is this shocking in light of the end of the ACA enhanced payments for primary physicians, NC’s implementation of a 3% reimbursement rate cut for primary care physicians, and the additional 1% reimbursement rate cut?  No, this is not shocking. It merely makes economic sense.

Want more physicians to accept Medicaid? Increase reimbursement rates!

Here, in NC, the Medicaid reimbursement rates for primary care physicians and pediatricians have spiraled downward from a trifecta resulting in an epically, low parlay. They say things happen in threes…

(1) With the implementation of the Affordable Care Act (ACA), the Medicaid reimbursement rate for certain primary care services increased to reimburse 100% of Medicare Cost Share for services paid in 2013 and 2014.  This enhanced payment stopped on January 1, 2015.

(2) Concurrently on January 1, 2015, Medicaid reimbursement rates for evaluation and management and vaccination services were decreased by 3% due to enactments in the 2013 NC General Assembly session.

(3) Concurrently on January 1, 2015, Medicaid reimbursement rates for evaluation and management and vaccination services were decreased by 1% due to enactments in the 2014 NC General Assembly session.

The effect of the trifecta of Medicaid reimbursement rates for certain procedure codes for primary care physicians can be seen below.

CCNC

As a result, a physician currently receiving 100% of the Medicare rates will see a 16% to 24% reduction in certain E&M and vaccine procedure codes for Medicaid services rendered after January 1, 2015.

Are physicians (and all other types of health care providers) powerless against the slashing and gnashing of Medicaid reimbursement rates due to budgetary concerns?

No!  You are NOT powerless!  Be informed!!

Section 30(A) of the Medicaid Act states that:

“A state plan for medical assistance must –

Provide such methods and procedures relating to the utilization of, and the payment for, care and services available under the plan (including but not limited to utilization review plans as provided for in section 1396b(i)(4) of this title) as may be necessary to safeguard against unnecessary utilization of such care and services and to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.”

Notice those three key goals:

  • Quality of care
  • Sufficient to enlist enough providers
  • So that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area

Courts across the country have held that low Medicaid reimbursement rates which are set due to budgetary factors and fail to consider federally mandated factors, such as access to care or cost of care, are in violation of federal law.  Courts have further held that Medicaid reimbursement rates cannot be set based solely on budgetary reasons.

For example, U.S. District Court Judge Adalberto Jordan held in a 2014 Florida case that:

“I conclude that while reimbursement rates are not the only factor determining whether providers participate in Medicaid, they are by far the most important factor, and that a sufficient increase in reimbursement rates will lead to a substantial increase in provider participation and a corresponding increase to access to care.”

“Given the record, I conclude that plaintiffs have shown that achieving adequate provider enrollment in Medicaid – and for those providers to meaningfully open their practices to Medicaid children – requires compensation to be set at least at the Medicare level.

Judge Jordan is not alone.  Over the past two decades, similar cases have been filed in California, Illinois, Massachusetts, Oklahoma, Texas, and D.C. [Notice: Not in NC].  These lawsuits demanding higher reimbursement rates have largely succeeded.

There is also a pending Supreme Court case that I blogged about here.

Increasing the Medicaid reimbursement rates is vital for Medicaid recipients and access to care.  Low reimbursement rates cause physicians to cease accepting Medicaid patients.  Therefore, these lawsuits demanding increased reimbursement rates benefit both the Medicaid recipients and the physicians providing the services.

According to the above-mentioned study, in 2011, “96 percent of physicians accepted new patients in 2011, rates varied by payment source: 31 percent of physicians were unwilling to accept any new Medicaid patients; 17 percent would not accept new Medicare patients; and 18 percent of physicians would not accept new privately insured patients.”

It also found this obvious fact:  “Higher state Medicaid-to-Medicare fee ratios were correlated with greater acceptance of new Medicaid patients.”

Ever heard the phrase: “You get what you pay for.”?

A few months ago, my husband brought home a box of wine.  Yes, a box of wine.  Surely you have noticed those boxes of wine at Harris Teeter.  I tried a sip.  It was ok.  I’m no wine connoisseur.  But I woke the next morning with a terrible headache after only consuming a couple of glasses of wine.  I’m not sure whether the cheaper boxed wine has a higher level of tannins, or what, but I do not get headaches off of 2 glasses of wine when the wine bottle is, at least, $10.  You get what you pay for.

The same is true in service industries.  Want a cheap lawyer? You get what you pay for.  Want a cheap contractor? You get what you pay for.

So why do we expect physicians to provide the same quality of care in order to receive $10 versus $60?  Because physicians took the Hippocratic Oath?  Because physicians have an ethical duty to treat patients equally?

While it is correct that physicians take the Hippocratic Oath and have an ethical duty to their clients, it’s for these exact reasons that many doctors simply refuse to accept Medicaid.  It costs the doctor the same office rental, nurse salaries, and time devoted to patients to treat a person with Blue Cross Blue Shield as it does a person on Medicaid.  However, the compensation is vastly different.

Why?  Why the different rates if the cost of care is equal?

Budgetary reasons.

Unlike private insurance, Medicaid is paid with tax dollars.  Each year, the General Assembly determines our Medicaid budget.  Reducing Medicaid reimbursement rates, by even 1%, can affect the national Medicaid budget by billions of dollars.

But, remember, rates cannot be set for merely budgetary reasons…

Is a potential lawsuit looming in NC’s not so distant future???

NC Docs Face Retroactive Medicaid Rate Cut

This is a story from NC Health News by Rose Hoban…a follow up blog to come

In the 2014 state budget passed last August, state lawmakers inserted what could be considered a poison pill for Medicaid providers: a 3 percent pay cut that for specialists could be effective retroactively to January 2014.

Primary care providers such as pediatricians, internists and family doctors will see the same pay cut, effective back to Jan. 1, 2015.

But the cut is only now being implemented.

“All of us were optimistic that the cut wouldn’t happen,” said Karen Smith, a family doctor in Raeford who runs her own practice.

Smith said she and other physicians have been writing, calling and talking to legislators, working to convince them not to implement the cut.

But she and thousands of other primary care providers received notification late last week that on March 1 they would begin seeing the 3 percent cut.

And for specialists, the reduction will go back 14 months.

“It’s quite a hit,” said Elaine Ellis, spokeswoman for the North Carolina Medical Society.

Failed shared-savings plan behind the problem

The origin of the 3 percent cut goes back to the 2013 budget for Medicaid, the program that covers health care for low-income children, some of their parents, pregnant women and low-income seniors. In 2013, the federal government paid North Carolina 65.5 percent of every dollar billed for Medicaid-eligible care, while the state covered the other 34.5 percent (The rate, which changes annually, is 65.9 percent for 2015).
In 2013, the Medicaid budget had grown to close to $4 billion in state dollars, and lawmakers at the General Assembly were looking for ways to trim costs. So they devised a “shared-savings” program, in which Medicaid providers would take a 3 percent rate cut that would be collected by the state Department of Health and Human Services. If doctors and hospitals saved money by operating more efficiently, DHHS would share those savings back with the providers, effectively reducing the amount of the 3 percent cut.

But DHHS needed federal approval to initiate the program, which would have been complicated. The agency never submitted a plan to the federal government, so neither part of the program was initiated.

That created a problem for lawmakers, who had calculated the savings from the rate cut into their state budget. When lawmakers returned to Raleigh in 2014 to adjust the state’s biennial budget, they implemented the rate cut retroactively to Jan 1, 2014 for specialists. Primary care providers, such as Karen Smith, had their rate cut put off until the beginning of 2015.

Big bucks

Officials from the Medical Society have been gathering numbers from around the state and are finding that some specialty practices could owe tens of thousands of dollars that would need to be repaid to state coffers.

The need for retroactive payment is in part a logistical problem: The computerized Medicaid management information system, known as NCTracks, has not been able to process the cuts. NCTracks has had technical issues since it was rolled out in mid-2013; at that time, glitches in the system created months of delays and tens of thousands of dollars in unpaid services for providers.

“Requiring these [specialist] medical practices to pay back 3 percent of what the state has already paid them for the last 14 months would wreak havoc with the finances of these businesses – really, any business would struggle to recover from such a financial blow,” Robert Schaaf, a Raleigh radiologist and president of the Medical Society, wrote Monday in a press release.

And primary care doctors like Smith are also fretting over paying back 3 percent of what she earned from Medicaid for the past two months.

“Practices such as my own are functioning on an operating budget that’s month by month,” said Smith, who said that a great many of her patients are Medicaid recipients.

“We simply do not have that type of operating reserve to allow for that,” she said.

The cuts will be especially tough for rural providers, who have high numbers of Medicaid patients, said Greg Griggs from the N.C. Academy of Family Practitioners (The Academy of Family Practitioners is a North Carolina Health News sponsor).

“It’s one thing to make the cuts going forward, but to take money back, especially for that period of time, is pretty significant for people who’ve been willing to take care of our most needy citizens,” Griggs said.

“It’s pretty bad,” he said, “and its not like Medicaid pays extraordinarily well to begin with.”

Piling on

In addition to the state cut is a federal cut of 1 percent to Medicaid reimbursements for primary care providers that went into effect on Jan. 1.

As part of the Affordable Care Act, primary care providers like Smith got a bump in reimbursement last year, but that ran out with the new year. Smith said that legislators in other states found ways to keep paying that enhanced rate for primary care doctors.

“We were hoping our legislators would do the same,” she said.

Instead, Smith finds herself talking to her staff about possible reductions, and she’s hearing from providers in her area that they’re throwing in the towel.

“I already have colleagues who’ve left practice of medicine in this area,” she said. “My personal physician is no longer in this area. Another colleague who was a resident three years in front of me told me he cannot deal with the economics of practicing like this anymore.”

Smith acknowledged that North Carolina’s Medicaid program has a slightly higher reimbursement to physicians than surrounding states. But she said many of her patients are quite ill.

“We are in the stroke belt,” she said, referring to the high rate of strokes in eastern North Carolina. “When we look at how sick our patients are compared to other states, is it equivalent? Are we measuring apples to apples?