Medicaid defies federal order to update hospital plan

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Mississippi’s Division of Medicaid is using an outdated formula to reimburse hospitals more than 15 months after the federal government ordered the agency to update the program, according to documents obtained by Mississippi Today.

The federal Centers for Medicare and Medicaid Services granted the state’s Division of Medicaid Services a temporary waiver, giving the agency extra time to submit a corrective action plan for its Mississippi Hospital Access Program. But that waiver expired Friday — and with it goes official federal permission for the agency to distribute $533 million in reimbursements to hospitals across the state.

Despite this deadline, Division of Medicaid spokeswoman Erin Barham is confident these payments will continue for fiscal year 2018.

“DOM and CMS have a mutual understanding of the importance of this program and we don’t believe it will be an issue,” she says.

The Centers for Medicare and Medicaid Services declined to comment on funding. But neither agency has given any indication that a solution to the program is imminent.

Rogelio V. Solis, AP

State Medicaid Executive Director David Dzielak 

In communication dated March 21, 2016,  CMS asked the division to submit a corrective action plan showing how the $533 million the division uses to reimburse hospitals is actually tied to the services these hospitals provide.

A second letter from CMS, dated March 25, 2016, gave the division 120 days to comply. But more than a year and three months later, the federal government has yet to approve a plan.

In the meantime, hospitals, which rely on these payments to supplement Medicaid and charity care expenses, say they face an uncertain financial future.

“As hospitals are planning their budgets, they’d like to know what’s around the corner so they can start preparing for that,” said Richard Roberson, vice president of policy at the Mississippi Hospital Association. “It could be services they’d have to look at, it could be staffing. If they don’t feel they’re going to receive specific payments from MHAP, are there services they’re not going to be able to provide?”

The Division of Medicaid said delays in getting an approved corrective action plan are typical when transitioning from a fee-for-service reimbursement system to managed care.

Erin Barham, Mississippi Division of Medicaid

“Mississippi Medicaid is one of many programs throughout the nation contending with the managed care regulations and working with CMS through various aspects of the relatively new concept of value-based models,” said Barham.

Although dispersed by the Division of Medicaid, the $533 million in funds used by the Mississippi Hospital Access Program comes from the hospitals and the federal government.

First, Mississippi hospitals pay a provider tax to the Division of Medicaid three times a year. The Division of Medicaid then adds this to its state budget and uses it to “draw up” the federal match. At 74 percent, Mississippi has the highest federal Medicaid matching rate in the country, which means that the federal government matches every in-state dollar spent on Medicaid with three federal dollars.

The issues with disbursement arose in 2015, after the Division of Medicaid began transitioning many of its beneficiaries from a fee-for-service reimbursement structure to managed care. Prior to this, Medicaid reimbursed hospitals using a system known as Upper Payment Limit payments, which allocate funds to each hospital based on the number of days patients spend there.

Because managed care seeks to reduce inpatient stays, transitioning patients to this program would ultimately reduce these payments. So federal policy requires states that transition to managed care to base their payments to hospitals on three metrics: utilization of a hospital’s services, delivery of services and the quality or outcomes associated with these services.

Mississippi’s Division of Medicaid called its new program the Mississippi Hospital Access Program, but the way payments were made was not altered, as the Division of Medicaid itself wrote in a memo posted to its website that same year.

“Starting in December, 2015 inpatient hospital Upper Payment Limit (UPL) payments will be phased out and DOM will implement the Mississippi Hospital Access Payment (MHAP) program in its place. … As in the past, the three taxes will be allocated among Mississippi hospitals based on non-Medicare Inpatient Hospital days reported on 2013 cost reports.”

Since December 2015, the Centers for Medicare and Medicaid Services has made several requests for the Division of Medicaid to change its program, according to letters obtained by Mississippi Today.

“As outlined in a separate communication to the state on MHAP, dated March 21, 2016, these payments violate (federal code)… CMS also requires the state to develop a corrective action plan, within 120 days of this correspondence, outlining the state’s timeline, key metrics and milestones to move from a pass-through payment structure that is divorced from actual utilization to a payment structure with clear linkages between payment and the utilization, quality or outcomes of delivered services,” wrote Jackie Glaze, associate regional administrator of the Division of Medicaid.

In an email to Mississippi Today, Barham said the Division of Medicaid submitted its corrective action plan to CMS last October. But the letter, dated October 27, 2016, and signed by state Division of Medicaid Executive Director David Dzielak, is not a correction of the existing plan but, in its own words, an explanation of “why we believe our MHAP request is completely reasonable.”

Glaze’s response, in a January 2017 letter, echoed her letter from the previous spring, reinforcing the idea that Mississippi needed a plan that reimbursed hospitals on services they provide.

“CMS is requesting the state to include timelines, key metrics and milestones that the state will follow to meet the requirements to move from a pass-through payment structure to a payment structure with clear linkages between the utilization, quality, or outcomes of delivered services,” Glaze wrote.

CMS would not confirm whether the Division of Medicaid had submitted a corrective action plan since Glaze’s response in January. In an email to Mississippi Today a representative for CMS said the agency is “working with the state on this matter.”

But Roberson said that the Division of Medicaid has yet to reach out to the Hospital Association or its members to formulate this plan.

Richard Roberson, vice president, Mississippi Hospital Association

“What we’re trying to do is make sure whatever method is developed is fair for all hospitals. We don’t think it can be a one-size-fits-all. We want to make sure the payment structure incorporates the unique (status) of each hospital,” Roberson said.

In the March 21, 2016, letter referenced above, the Centers for Medicare and Medicaid Services had temporarily approved the Mississippi Hospital Access Program, which went into effect earlier that year, because “there is no easy way to reverse the implementation without potentially significant disruption to the continuity of care for Medicaid enrollees.”

Although the temporary approval expires June 30, some health care experts said they were surprised that the Division of Medicaid has been allowed to continue with an unapproved program for this long.

“I continue to work with hospitals and states that are seeking innovative Medicaid payments models that comply with the Code of Federal Regulations. To date, none seem to feel confident that CMS will, after stipulating in writing that such payments violate the CFR and other recent guidance, allow them to pay billions without constraints or even applying for a waiver,” said David Mosley, a government health care expert with Navigant Consulting.

“I am envious of Mississippi and hopeful that this establishes precedent for all states.”

  • Charles Pearce

    and citizens continue to listen to all the nonsense from many political leaders about Mississippi being an independent state while the very same politicians push and shove for billions of federal dollars.