Category Archives: Decrease in Medicaid Spending
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.
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!
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
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.
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?
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???