Category Archives: Decrease in Medicaid Spending
Medicare “Site Neutral” Reimbursements Hit Hospitals Hard, But Is It Legal?
Shockingly, not all new rules that emerge from the Center for Medicare and Medicaid Services (CMS) are actually compliant with the law. Wait! What? How can CMS publish Final Rules that are not compliant with the law?
This was an eye-opening discovery as a “baby lawyer” back 20 years ago. The government can and does publish and create Rules that, sometimes, exceed its legal authority. Of course, the Agency must follow appropriate rule-making procedure and allow for a comment period (etc.), but CMS does not have to listen to the comments. Theoretically, CMS could publish a Final Rule mandating that all Medicare providers provide 50 hours of free services a year or that the reimbursement rate for all services is $1. Both of my examples violate multiple rules, regulations, and laws, but until an aggrieved party with standing files a lawsuit declaring the Final Rule to be invalid or Congress passes a law that renders the Rule moot, the Rule exists and can be enforced by CMS and its agents.
The Rule-change (the “Site-Neutrality Rule”), which became effective January 1, 2019, reduced Medicare reimbursements to hospitals with outpatient facilities. Medicare will pay hospitals that have outpatient facilities “off campus” at a lower rate — equivalent to what it pays independent physicians for clinic visits. This decrease in Medicare reimbursements hits hard for most hospitals across the country, but, especially, rural hospitals. For the past 10+ years, hospitals have built outpatient facilities to serve more patients, and been reimbursed a higher Medicare reimbursement rate than independent physicians because the services at the hospital’s outpatient facility were connected to an outpatient facility affiliated with a hospital. Now the Site-Neutrality Rule leaves many hospitals trying to catch their breaths after the metaphoric punch to the belly. On the other hand, independent physicians claim that they have been providing the exact, same services as the hospital-affiliated outpatient facilities for years, but have received a lower reimbursement rate. I have no opinion (I do, but my opinion is not the topic in this blog) as to whether physicians and hospitals should be reimbursed equally – this blog is not pro-physician or pro-hospital. Rather, this blog is “pro-holding CMS liable to render Rules that follow the law.” Whether the hospitals or the physicians were receiving a cut in reimbursement rates, I am in favor of the those cuts (and future cuts) abiding by the law. Interestingly, should the AHA win this case, it could set solid, helpful, legal precedent for all types of providers and all types of decreased Medicare/caid reimbursements going forward.
Because of the Site-Neutrality Rule, in 2019, hospitals’ reimbursements will drop approximately $380 million and $760 million in 2020, according to CMS.
Before CMS brags on a decrease in the Medicare budget due to a proposed or Final Rule, it should remember that there is budget neutrality requirement when it comes to Rules implemented by CMS. 42 US.C. § 1395l. Yet, here, for the Site-Neutrality Rule, according to articles and journals, CMS is boasting its Site-Neutrality Rule as saving millions upon millions of dollars for Medicare. Can we say “Budget Non-Neutrality?”
The American Hospital Association filed a lawsuit December 2018 claiming that CMS exceeded its authority by implementing the Final Rule for “site neutral” Medicare reimbursements for hospitals with outpatient facilities. The lawsuit requests an injunction to stop the decrease and an order to repay any funds withheld thus far.
The claim, which, I believe has merit, argues that the Site-Neutrality Rule exceeds CMS’s statutory authority under the Medicare Act because of the budget neutrality mandate, in part – there are other arguments, but, for the sake of this blog, I am concentrating on the budget neutrality requirement. In my humble opinion, the budget neutrality requirement is overlooked by many attorneys and providers when it comes to challenging cuts to Medicare or Medicaid reimbursement rates.
On March 22, 2019, CMS filed a Motion to Dismiss or in the alternative, a Cross Motion for Summary Judgment. On April 5, 2019, AHA (and the rest of the Plaintiffs) responded in opposition. On April 19, 2019, CMS responded to AHA’s response in opposition. The Judge has not ruled on the Motions, as of today, April 25, 2019.
Obviously, I will be keeping a close eye on the progress of this case going forward. In the meantime, more reductions in reimbursement rates are on the horizon…
Recently, CMS recently proposed three new rules that would further update the Medicare payment rates and quality reporting programs for hospices, skilled nursing facilities (SNFs), and inpatient psychiatric facilities.
Stay tuned.
Trump-caid: Medicaid Under the AHCA
It is still unclear whether the American Health Care Act (AHCA), or H.R. 1628, will be signed into law. On March 6, 2017, the House Energy & Commerce Committee (E&C) and Ways & Means Committee (W&M) officially released the draft bill. The latest action was on April 6, 2017, H.Res.254 — 115th Congress (2017-2018) was placed on the House calendar. The rule provides for further consideration of H.R. 1628. The rule also provides that the further amendment printed Rules Committee Report 115-88 shall be considered as adopted.
So what exactly would AHCA change in relation to Medicaid?
For over fifty (50) years, states have created and implemented Medicaid programs entirely dependent on federal contributions. Medicaid is based on federal law. Although each individual state may have slight variances in the Medicaid program, because the state Medicaid programs must follow federal law, the state Medicaid programs are surprisingly similar. An example of a slight variance is that some Medicaid services are voluntary, like personal care services (PCS); some states offer PCS paid by Medicaid and others do not.
Currently, the federal government does not cap the federal contribution. However much a state spends – no matter how exorbitant – the federal government will match (at whatever percentage allotted for that state). For example, the federal government pays 66.2% of North Carolina’s Medicaid spending. Which means, BTW, that $264,800.00 of Cardinal’s CEO’s salary is funded by the federal government. These percentages are called Federal Medical Assistance Percentages (FMAP).
All this may change under the American Health Care Act (AHCA), or H.R. 1628, as approved by the House Ways and Means, Energy and Commerce, Budget, and Rules Committees.
The AHCA proposes many changes from the Affordable Care Act (ACA) germane to Medicaid. In my humble opinion, some of the replacements are stellar; others are not. No one (sane and logical) could argue that the ACA was perfect legislation for providers, employers, or recipients. It was not. It mandated that employers pay for health care insurance for their employees, which caused the number of part-time workers to explode. The ACA mandated the states to suspend Medicaid reimbursements upon a credible allegation of fraud, which, basically, could be a disgruntled employee lying with an anonymous accusation. This provision put many providers out of business without due process (Remember New Mexico?). The ACA also put levers in place that meant younger policyholders were subsidizing older ones. Healthy, young adults were paying for older adults. The ACA reduced payments for Medicare Advantage plans, hospitals, and other providers to save money. There was also a provider shortage due to the low reimbursement rates and regulatory audits. The Affordable Care Act was anything but affordable. At least the American Health Care Act does not protest itself to be affordable.
Here are some of the most poignant “repeal and replace” items in Trump-caid:
1. Health Savings Accounts
The AHCA will encourage the use of Health Savings Accounts by increasing annual tax free contribution limits. It will also modify ACA premium tax credits for 2018-2019 to increase the amount for younger adults and to reduce the amount for older adults. In 2020, the AHCA will replace ACA income-based tax credits with flat tax credits adjusted for age. Eligibility for new tax credits phases out at income levels between $75,000 and $115,000.
2. Cap on federal contributions
Beginning in 2020, the AHCA would cap federal contributions to state Medicaid programs. This will result in huge federal savings, but cause severe shortages on the state level. The federal per-enrollee caps would be based on states’ Medicaid expenditures in 2016, trended forward to 2019. A uniform, federal capped system would provide fiscal security for the federal government and shift the risk of over spending on the states.
The following categories would be exempt from the per-capita allotments (i.e. paid for outside of the per-capita caps): DSH payments, administrative payments, individuals covered under CHIP Medicaid expansion program or who receive medical assistance from an IHS facility, breast and cervical cancer patients, and partial benefit-enrollees
With the risk on the states, there is a high probability that optional Medicaid services, such as PCS, may be cut from the budget. If PCS were eliminated, more patients would enter long-term care facilities and fewer patients would be able to remain in their homes. The House bill essentially eliminates the enhanced funding levels that made possible states’ expansion of Medicaid to their poorest working-age adult residents. In all, 31 states expanded Medicaid under the ACA. While the House Bill does not prohibit Medicaid expansion; expansion will be difficult to remain funded by the states.
3. Presumptive eligibility program
The House bill would end the ACA’s special hospital presumptive eligibility program, under which hospitals can temporarily enroll patients who “appear” to be eligible and begin to get paid for their care while their full applications are pending. (What in the world does “appear to be eligible” mean. Is it similar to profiling?)
4. Home equity and eligibility
Under current law, states disregard the value of a home when determining Medicaid eligibility for an individual in need of long-term community-supported care. The bill would take away this state flexibility, capping the equity value at $500,000.
5. Disproportionate Share Hospital Payments
The AHCA would repeal the Medicaid DSH reductions set in motion by the ACA in 2018 for non-expansion States, and 2020 for expansion states.
6. Section 1115 Waivers
States with Waivers will not be penalized for having a Waiver. In other words, the expenses and payments under the Waiver will be treated in the same manner as if the state did not have a Waiver. However, if a state’s waiver contains payment limitations, the limitations in the new law, not the Waiver, apply.
Again, the future of the AHCA is uncertain. We all remain watchful. One change that I would like to see is that due process is afforded to providers prior to suspension of all funds when there is a credible allegation of fraud.
Managed Care – Eight Reasons Why MCOs Smell Like Pre-Minced Garlic
When it comes to the managed care organizations (MCOs) in NC, something smells rancid, like pre-minced garlic. When I first met my husband, Scott, I cooked with pre-minced garlic that comes in a jar. I figured it was easier than buying fresh garlic and dicing it myself. Scott bought fresh garlic and diced it. Then he asked me to smell the fresh garlic versus the pre-minced garlic. There was no contest. Next to the fresh garlic, the pre-minced garlic smelled rancid. That is the same odor I smell when I read information about the MCOs – pre-minced garlic in a jar.
In NC, MCOs are charged with managing Medicaid funds for behavioral health care, developmentally disabled, and substance abuse services. When the MCOs were initially created, we had 13. These are geographically situated, so providers and recipients have no choice with which MCO to interact. If you live in Sandhills’ catchment area, then you must go through Sandhills. If you provide services in Cardinal’s catchment area, then you must contract with Cardinal – even though you already have a provider participation agreement with the State of NC to provide Medicaid services in the State of NC.
Over the years, there has been consolidation, and now we have 7 MCOs.
From left to right: Smoky Mountain (Duke blue); Partners Behavioral Health (Wake Forest gold); Cardinal Innovations Healthcare (ECU purple); Sandhills (UNCC green); Alliance Behavioral Healthcare (mint green); Eastpointe (Gap Khaki); and Trillium (highlighter yellow/green).
Recently, Cardinal (ECU purple) and Eastpointe (Gap khaki) announced they will consolidate, pending authorization from the Secretary of DHHS. The 20-county Cardinal will morph into a 32-county, MCO giant.
Here is the source of the rancid, pre-minced, garlic smell (in my opinion):
One – MCOs are not private entities. MCOs are prepaid with our tax dollars. Therefore, unlike Blue Cross Blue Shield, the MCOs must answer to NC taxpayers. The MCOs owe a duty of financial responsibility to taxpayers, just like the state government, cities, and towns.
Two – Cardinal CEO, Richard Topping, is paid $635,000, plus he has a 0 to 30 percent bonus potential which could be roughly another $250,000, plus he has some sort of annuity or long-term package of $412,000 (with our tax dollars).
Three – Cardinal is selling or has sold the 26 properties it owns or owned (with our tax dollars) to lease office space in the NASCAR Plaza office tower in uptown Charlotte for $300 to $400 per square foot plus employee parking (with our tax dollars).
Four – Cardinal charges 8% of public funds for its administrative costs. (Does that include Topping’s salary and bonuses?) How many employees are salaried by Cardinal? (with our tax dollars).
Five – The MCOs are prepaid. Once the MCOs receive the funds, the funds are public funds and subject to fiscal scrutiny. However, the MCOs keep whatever funds that it has at the end of the fiscal year. In other words, the MCOs pocket any money that was NOT used to reimburse a provider for a service rendered to a Medicaid recipient. Cardinal – alone – handles around $2.8 billion in Medicaid funding per year for behavioral health services. The financial incentive for MCOs? Terminate providers and reduce/deny services.
Six – MCOs are terminating providers and limiting access to care. In my law practice, I am constantly defending behavioral health care providers that are terminated from an MCO catchment area without cause or with erroneous cause. For example, an agency was terminated from their MCO because the agency had switched administrative offices without telling the MCO. The agency continued to provide quality services to those in need. But, because of a technicality, not informing the MCO that the agency moved administrative offices, the MCO terminated the contract. Which,in turn, puts more money in the MCO’s pocket; one less provider to pay. Is a change of address really a material breach of a contract? Regardless – it is an excuse.
Seven – Medicaid recipients are not receiving medically necessary services. Either the catchment areas do not have enough providers, the MCOs are denying and reducing medically necessary services, or both. Cardinal cut 11 of its state-funded services. Parents of disabled, adult children write to me, complaining that their services from their MCO have been slashed for no reason….But the MCOs are saving NC money!
Eight – The MCOs ended 2015 with a collective $842 million in the bank. Wonder how much money the MCOs have now…(with our tax dollars).
Rancid, I say. Rancid!
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
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.
A Brave New World With Mergers and Acquisitions of Behavioral Health Care Providers: Not Always Happily Ever After!
Unintentionally, I misrepresented the Benchmark panel discussion on which I appeared last Thursday. See blog. I thought that I would be sitting on the panel along with MCO representatives. I honestly cannot tell you from where I got this idea. Maybe it was a subconscious desire. Regardless, the panel discussion was about merges and acquisitions among behavioral health care providers. While the subject of managed care organizations (MCOs) did come up, managed care was not the primary subject. And the only MCO representative that I saw was Smokey Mountain’s attorney.
Nevertheless, the panel discussion went fantastic and was informative for those who attended. I will summarize the panel discussion here for those who could not attend. First, if you are a behavioral health care provider in NC, joining an association, such as Benchmarks, is an asset. Not only do you get the benefit of attending educational programs, but you also have the opportunity to meet other behavioral health care providers across the state at the events. You never know the potential relationships that could be created by attending a Benchmark event.
Going back to the panel…
There were 5 people sitting on the panel. Besides myself, the panel consisted of Robert Shaw, Senior Counsel with me at Gordon & Rees, Frank Williams, a broker who facilitates mergers and acquisitions for health care providers, and two CEOs of health care providers who have undergone successful mergers and/or acquisitions.
The general consensus of the panel was that the future of behavioral health care will be larger companies which offer multiple services, instead of mom and pop shops that provide few types of services. The panel was intended to bring potential mergers/acquisitions together in one venue and to educate the providers on “Do’s and Don’ts of Merging/Acquiring,” which is summarized below.
This consensus is generally derived from the MCO atmosphere here in NC. Right or wrong, the MCOs are operating in closed networks and have the financial incentives to save money by contracting with fewer providers and decreasing authorizations for Medicaid services requested by Medicaid recipients. See blog. And blog. And blog.
The MCOs seem to be terminating or refusing to contract with smaller health care providers, which, in turn, incentivize small health care providers to join other providers in order to grow its footprint.
Merging or acquiring a company is similar to partnering with another person in marriage. Both parties have to familiarize themselves with the other’s habits, expectations, learn the other’s faults/liabilities, and, ultimately, have to work together on projects, issues and other matters. And as we can discern from today’s high divorce rate, not everyone lives happily ever after.
Some marriages, as well as mergers, simply do not work. Others live happily ever after.
The two provider panelists shared successful merger/acquisition stories. Both shared experiences in creating new and larger entities effectively. Both panelists were happy with the mergers/acquisitions and hopeful as to what the future will bring both new entities.
But all mergers and acquisitions do not have happy endings. The two entities do not always live happily ever after.
Robert and I shared a story of an acquisition from Hades. There is no other way to describe the outcome of the acquisition.
The story of these two companies begins with the fact that the companies leased space in the same building. One company was on floor 2 and the other was on floor 1. The staff knew each other in passing.
The problem with the merger of these companies stemmed from a difference in culture.
Theoretically, the two companies did everything right. The owner of the company getting acquired agreed to stay and work for the company buying it in order to ensure consistency. The buying company agreed to hire all the seller’s employees at their current salaries. The acquisition was to be seamless.
The problems arose when news of the acquisition passed to the employees. There was genuine discontentment with the arrangement. The employees from the seller reacted with hostility and resentment. Prior to the acquisition, the seller was fairly lax in regulatory compliance. For example, if a service note was not drafted and filed the date of services….eh?…not that big of a deal. Well, the buyer had strict document compliance rules for daily service notes. Anytime more stringent policies are enacted on employees, there is sure to be a negative reaction. The buyer also expected the seller’s employees to provide more services for the same salary received before the acquisition.
There was no legal or logical step omitted in the acquisition of the one company to the other. On paper, the acquisition should have been successful. But, then, personalities got in the way of happily ever after.
The other panelists offered great advice as to mergers and acquisitions, both from the providers’ view and a broker’s view. I have compiled the advice that I recall below. I have taken the liberty to provide analogous dating advice, as well, since marriages and mergers/acquisitions are so similar. Hope it helps!!
Do’s and Don’ts of Mergers/Acquisitions
- Do not let the secret out.
One provider panelist explained that if your employees learn of a possible merger/acquisition, they will kill the deal. Confide only in the CEO of the firm of which you are looking to merge, acquire, or sell. Those dating: Never tell other that you want to marry (until the appropriate time).
- Look outside your catchment area.
The reason companies merge/acquire is to grow. Think of potential companies outside your own catchment area to grow even more. For example, if you are in Alliance’s catchment area, think of merging with a company in ECBH/Eastpointe’s area. Those dating: Have you exhausted your resources? Think of others, such as church, Match.com, etc.
- Do your due diligence
This is a task as important as the oxygen you breath. The last thing that you want is to acquire or merge with a company that owes $500,000 in employment taxes or an alleged overpayment. Part of due diligence will be to check the credentials of every single staff member. If someone is acting in the role of a LCAS, ensure the person is appropriately licensed. Those dating: Is he/she employed? Have significant debt?
- Review the other company’s documentation policies
This could be lumped into the due diligence section, but I think its importance is worth emphasizing. Whatever service(s) the other company provides, what are its policies as to documentation? Does the provider have a computer program to maintain electronic health records (EHR)? Does it employ paper copies? Does the other company require the providers to submit daily service notes? Look at your own documentation policies. Contemplate whether your own documentation policies would mesh well with the other company’s policies. Those dating: How does your potential partner document spending, taxes, and calendared events?
- Analyze both company’s corporate culture
Merging or acquiring a company is difficult in many ways, but it’s also hard on staff. Imagine walking into work one day and you notice that the staff had doubled…or tripled. And you and your colleagues are being told what to do by someone you never met. This is not an uncommon occurrence with mergers and acquisitions. Sometimes accepting change of supervision or team members can be a bitter pill to swallow. How will you work through employee issues? Personality clashes? Ego fights? Those dating: Analyze both person’s personalities, dispute resolutions, religion and beliefs. Do you like his/her friends?
In addition to the potential conflicts with employees that stay with the merged entity, you also need to contemplate which employees, if any, may, potentially leave the new entity. Disgruntled employees are a liability. Those dating: How does he/she treat ex-partners?
- Research the company’s relationship with its MCO
In our current MCO atmosphere, it is imperative to know, before merging or acquiring, whether the company has a good relationship with its MCO. What if you acquire the company and its MCO refuses to continue to contract with the new entity. Knowing the company’s relationship with the MCO is not an absolute. As in, the company may believe it to have a good relationship with the MCO, while, in truth, it does not. Ask to review some correspondence between the company and the MCO to discern the tone of the communications. Those dating: How does he/she treat his/her mother/father?
- Surround yourself with knowledge
Have a broker and an attorney with expertise in Medicaid. Those dating: What do your friends think?
To watch the video of me speaking as a panelist for Benchmark, click here. Scroll down until you see the video with Robert and me.
Otherwise, I hope you live happily ever after!
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:
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
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.
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.
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???
Medicaid Reform in a House Divided and MCO, ACO…Who Cares?
We are living in the most polarized society in recent American history. A recent study shows that the feeling of political partisanship has more than doubled over the past 2 decades. So since 1995, politically, America has parted the Red Sea with voters increasingly ebbing away from the middle.
Even more interesting is that, according to the same 2014 study, political animosity is at an all-time, recent high. I say “recent” because I cannot fathom a more polarized society than the society in the 1850s-1860s leading up to the Civil War. So, when I say “recent,” I mean post-invention of the telephone.
According to the Pew Research Center, “[i]n each party, the share with a highly negative view of the opposing party has more than doubled since 1994. Most of these intense partisans believe the opposing party’s policies “are so misguided that they threaten the nation’s well-being.””
If BOTH parties express this identical sentiment, someone is wrong.
So, now, here, in this extremely polarized society, our NC General Assembly is tackling one of our most important and most divisive issues…Medicaid Reform.
But, you say, “Knicole, our General Assembly is an overwhelming Republican majority. Our Governor is Republican. How can this vast and deep political polarization prevent NC from creating a new, better, non-broken Medicaid system?”
In NC, even the Republicans are polarized, at least as to the issue of Medicaid reform. The two differing opinions as to Medicaid reform can be found in our separate houses: the Senate and the House of Representatives (House). As for our executive branch, Governor McCrory sides with the House.
The houses are divided by acronyms: ACOs (House) versus MCOs (Senate).
The House plan for Medicaid reform involves accountable care organizations (ACOs). The ACO plan includes physicians, hospitals and other health care providers collaborating to serve Medicaid recipients and assuming the monetary risks. For example, one ACO may be liable for 6000 Medicaid recipients. The ACO would be given X dollars per Medicaid recipient to cover the person’s overall health care. Say the ACO, via its health professionals, conducts a preventative breast exam on a woman and discovers a lump. The ACO would pay to remove the lump and, hopefully, the woman is ok. If the ACO fails to practice preventative medicine and the woman is diagnosed with breast cancer, then the ACO must finance the more expensive surgery and chemotherapy required. The ACO’s incentive would be to provide the best, proactive health care because, regardless, the ACO will be liable for that individual’s care. With ACOs, there is a financial incentive to keep people healthy and the profit is shared with the state.
The Senate plan for Medicaid reform involves managed care organizations (MCOs). Unlike ACOs, MCOs will not be comprised of health care providers. The MCOs will be large companies that will be charged with managing Medicaid by contracting with a network of providers. Many Medicaid services require prior authorization, which would be in the hands of the utilization review team employed by the MCO. Similar to the ACO, the MCO would be given an amount of money based on the number of Medicaid recipients within its network. The profit for the MCO is the money remaining at the end of the fiscal quarter that was not spent on services for Medicaid recipients.
What is better? Does better mean the most cost-savings? Does better mean the best quality of care for Medicaid recipients?
In order to determine whether the MCO-model or ACO-model is better and what exactly “better” means, you have to follow the money. For both models, you have to ask, “If the actual medical services provided cost double the anticipated amount, who bears the burden?” And, conversely, “If the actual medical services provided cost half the anticipated amount, who pockets the profit?”
There are numerous ways for an insurer to be paid. At one end of the spectrum, you have capitation; while at the other end of the spectrum you have a more typical financial relationship in which the insurer simply pays the health care provider its reasonable and usual amount.
Capitation is how we currently have our MCOs set up for behavioral health care in North Carolina. As we currently use capitation for our MCOs, I would assume that the Senate-model MCOs would also be capitated. Capitation places the risk on the MCO because the MCO receives a fixed amount regardless of actual cost. However, there is concern (or should be) that the MCOs will provide patients less care than needed in order to pocket a profit.
On the other hand, ACOs typically do not rely on full capitation. The ACOs may share the risk, and, therefore, the profit, with the state.
Another HUGE difference between ACOs and MCOs is that, with MCOs, the insurer in effect dictates what a health care provider is allowed to do. For example, say a dentist believes that a person is in need of dentures. Maybe 4-5 teeth have already fallen out and the remaining teeth are suffering more mild rot. The dentist requests prior authorization from the MCO to extract teeth, create a mold of the mouth, and order dentures to be custom-created. The MCO denies the requests saying, for example, not enough teeth have fallen out or not enough rot is present in the remaining teeth. The dentist’s hands are tied to the decision of the MCO, unless the patient can fork over the cost of care that the MCO refuses to authorize. And, BTW, the person who denied the request may have graduated from college with a BA in History . . . or in any event something else other than a field of medical or dental care
An ACO, on the other hand, is run by physicians, hospitals, and other health care providers. Theoretically, the decisions to authorize services would be made by those same people who swore the Hippocratic Oath.
With regard to healing the sick, I will devise and order for them the best diet, according to my judgment and means; and I will take care that they suffer no hurt or damage.
(I doubt a History major ever swore to heal the sick).
There has also been contemplation as to whether the General Assembly should remove the responsibility of managing Medicaid from the Department of Health and Human Services (DHHS) completely. Obviously, this suggestion is extreme and would require a Waiver from the federal government to transfer the “single state agency” requirement from DHHS to another entity.
Regardless of what decisions are made…whether the GA requires a private Medicaid panel to usurp Medicaid responsibilities from DHHS….whether NC adopts an MCO-model or an ACO-model for Medicaid reform….as it currently stands, our houses are divided. No bills pass a divided legislature.
The Senate and House both indicate that Medicaid reform is a forefront issue during this long session, but, so far, there has been no indication of a Great Compromise.
