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Hello, 2014! And Hello 3% Decrease in Medicaid Reimbursements (But Call the Decrease “Shared Savings”)

Tomorrow is the first Medicaid checkwrite for 2014 (and its my birthday too).  Happy New Year! Happy birthday!! (I’m turning 29 for the 10th year).  For New Years, my husband and I had a very quiet evening eating crab legs at home. Yum! I am sure many of you made New Years resolutions…work harder…lose weight…get paid 3% less….WHAT?

With the first Medicaid checkwrite tomorrow, due to Session Law 2013-360, many health care providers will receive 3% less in Medicaid reimbursements.  You will receive a 3% cut if you are the following types of providers:

  • Inpatient hospital.
  • Physician, excluding primary care until January 1, 2015.
  • Dental.
  • Optical services and supplies.
  • Podiatry.
  • Chiropractors.
  • Hearing aids.
  • Personal care services.
  • Nursing homes.
  • Adult care homes.
  • Dispensing drugs.

(This is the exact list as found in Session Law 2013-360.  I am well aware that the list is grammatically-challenged, but I did not write it).  Both the federal government and NC are calling this 3% withholding “Shared Savings Plan with Provider.” 

How is this “shared savings with providers” when the government is withholding money from providers??? Sure, supposedly, there will  be a “pay for performance payment” to some providers, but most providers will just be reimbursed 3% less.

How is this fair?  How is this “shared savings?” 

Here’s an example:

Say I work at Harris Teeter and my manager comes up to me and says, “Hey, Knicole, Harris Teeter is really concerned with our overhead costs.  Salaries seem to be a big cost, and we want to “share the savings” with you.  So we are going to cut your pay by 3%.  If we, subjectively, determine, at the end of the year, that you are working hard and saving us money, then we will give you a performance reward.  It will not be all the money we retained, but it will be some amount.  This way Harris Teeter profits off the interest of the 3% we retain all year, plus the amount we never give you.”

Folks, the above example is called a decrease in pay and a swift kick in the bottom.  It is not “shared savings.”

In DHHS’ shared savings scheme, the money will go to:

“The Department of Health and Human Services shall use funds withheld from payments for drugs to develop with Community Care of North Carolina (CCNC) a program for Medicaid and Health Choice recipients based on the ChecKmeds NC program. The program shall include the following:

  1. At least 50 community pharmacies by June 30, 2015.
  2. At least 500 community pharmacies in at least 70 counties by June 30, 2016.
  3. A per member per month (PMPM) payment for care coordination and population health services provided in conjunction with CCNC.
  4. A pay for performance payment.”

Session Law 2013-360.

According to the Centers for Medicare and Medicaid Services (CMS), “[a] shared savings methodology typically comprises four important concepts: a total cost of care benchmark, provider payment incentives to improve care quality and lower total cost of care, a performance period that tests the changes, and an evaluation to determine the program cost savings during the performance period compared to the benchmark cost of care and to identify the improvements in care quality.”

Employers chop salaries all the time in order to maximize profit.  Back in 2011, Sony proposed 11% salary cuts for executives due to such a terrible fiscal year.  But guess what is different between Sony’s 11% cut and Medicaid’s 3%?  I know…I know…a lot….but what difference am I thinking about?

Sony sought shareholder approval.

I guess you can make the argument that the General Assembly sought voter approval because our citizens voted for all the legislators in the General Assembly.  But I think that argument is weak.  No legislator ran his or her campaign on: “Vote for Me! If you are a Medicaid provider, I plan to decrease your salary by 3%!”

Better yet, with the Sony salary cut, executives had the option to seek employment elsewhere.  What is a Medicaid provider’s option? Move?  Not take Medicaid? (Sadly, I see this as a more viable option).

On a legal note, I question the constitutionality of our new shared savings plan.  Wouldn’t the decrease of 3% in Medicaid reimbursements be considered an unlawful taking without due process.  In essence, could one argue that the decrease of 3% in Medicaid reimbursements is just a way for the State to decrease Medicaid reimbursements without going through the proper lawful process?

Then again, maybe we won’t need to worry about the 3% decrease at all…given NCTracks’ track record, it is plausible that NCTracks will not be able to adjust the Medicaid reimbursements by 3%.

Attention Medicaid Providers: Potential SPA Decreases PCS Rates By 60 Cents Per 15 Minutes

The North Carolina State Medicaid Plan (State Plan) is constantly revised.  The result of its constant revisions make for an 1800+ page, jumbled mess of plans, rules, amendments, and effective dates that make the State Plan as much fun to read as reading every volume of the Encyclopedia Britannica in Japanese with the aid of a Japanese translation dictionary.

First of all, what the heck is the State Plan?  Basically, a State Plan is a contract between a state and the Federal Government describing how that state administers its Medicaid program.  It “assures” the federal government that we, here in NC, will follow the State Plan because the federal government has “blessed” our State Plan.  Whenever we need to change the State Plan, we file an amendment.  In circumstances that call for much greater deviation from the State Plan, we can apply for a Waiver…or an exception.

On or about August 15, 2013, the Department of Health and Human Services (DHHS) issued a Public Notice providing notice of its intent to amend the Medicaid State Plan for the purpose of defining the reimbursement methodology of Personal Care Services as directed by Section 10.9F of Session Law 2013-306 (House Bill 492). “

Personal Care Services (PCS) are Medicaid-covered, in-home services to recipients “who have a medical condition, disability, or cognitive impairment and demonstrates unmet needs for, at a minimum three of the five qualifying activities of daily living (ADLs) with limited hands-on assistance; two ADLs, one of which requires extensive assistance; or two ADLs, one of which requires assistance at the full dependence level. The five qualifying ADLs are eating, dressing, bathing, toileting, and mobility.”  See DHHS Website.

In a letter dated September 30, 2013, and signed by Sec. Aldona Wos, DHHS sent what is called a SPA or a State Plan Amendment to the Centers for Medicare and Medicaid Services (CMS), in part, asking to be allowed to change the PCS unit rate from $3.88 to $3.28.

$3.88 to $3.28…

It may not sound like a huge decrease in pay to you, but a 60 cent drop per unit will be extremely harmful to providers who provide PCS services and, ultimately Medicaid recipients because less providers will be willing to serve the population.

One PCS unit is 15 minutes.  There are 4 units in an hour.  A 60 cent/unit cut to the rate will result in a $2.40 hourly cut.

Providers who employ staff who provide PCS are not paying staff upwards of $20/hour.  Oh, no, most PCS providers make, maybe, $7-9. 

Think about it…a small business provider of PCS (Let’s call it ABC Provider) employs 5-10 staff to provide PCS to recipients.  ABC Provider has to pay its overhead (lease, office supplies, salaries of execs) plus pay the hourly wages of the PCS staff, and, supposedly, still make a profit…otherwise why even work?

For one hour of PCS, prior to a rate reduction, ABC Provider grosses $15.52/hour.  Obviously, a portion of the $15.52 must go to overhead.  ABC Provider pays her staff $9.00/hour. So ABC Provider nets $6.52/hour to pay for overhead.  After 1000 man-hours, maybe ABC Provider can pays its rent and its utility bill.  BTW: In order to reach 1000 man hours, it would take a person to work 41.66 days, 24 hours/day.  Or it could take 10 staff working 10 hours/day for 2 weeks…just for the provider to make $6520 to pay bills…we aren’t even talking about profit…

After the rate reduction?

$2.40 has to be recouped somehow.  Does the provider’s profit margin shrink or does the employee’s hourly rate decrease?  Maybe a little of both.

According to the September 30, 2013, Sec. Wos letter, NC DHHS requested a retroactive date for the PCS rate reduction to July 1, 2013, or, in the alternative, October 1, 2013.

What? Retroactive reduced rates?  Would DHHS recoup payments already made?

As of the day of this blog, I have not found out whether CMS approved the SPA sent to CMS September 30, 2013.  I looked on CMS’ website.  So if anyone reading has information as to whether CMS approved, is approving, denied, or is denying the rate reduction, I, as well as other people, would be much obliged for the information.