Missouri hospitals sounding the alarm about new Medicaid reimbursement policy

The Missouri House Budget Committee has scheduled a hearing Tuesday morning which could include testimony from hospital administrators who have been chomping at the bit.

Many of these Missouri hospitals are sounding the alarm about a change in Medicaid reimbursements that could leave them struggling to keep their doors open.

The state converted to a managed care system for all adults, children and pregnant women who are Medicaid recipients last year.

A new policy implemented by the state Department of Social Services allows insurance plans to reimburse providers at 90% of the Medicaid managed care rate if the provider is not “in network” with the insurer.

Tim Wolters, director of reimbursement at Citizens Memorial Hospital in southwest Missouri’s Bolivar, says the insurance companies now have an unfair advantage in negotiations over a provider’s network status.

“It’s unfortunate that the state has gotten in between the two parties to the contract, the providers, and the insurance companies,” said Wolters.  “The state stepped in between and sort of tilted the negotiations in favor of the insurance companies.”

The new policy affects reimbursements to providers who care for adults, children and pregnant women who are Medicaid recipients.

A number of hospitals say they were blindsided by the arrangement that state lawmakers incorporated into the Department of Social Services portion of the state budget that was signed by Governor Parson June 29th.  The department held a meeting in the last few days of June to discuss its new policy that went into effect July 1st.

Steven D. Edwards is the President and CEO of CoxHealth, a group of nonprofit hospitals with six locations in southwest Missouri.  He suspects politics may have played a role in creating the new policy.  “There’s a lot of commercial insurance money funding that has gone to various political campaigns, and I can’t help but think that’s probably a factor,” said Edwards.

Three insurance companies have contracted with the state to cover managed care recipients, which before an expansion last year, only applied to individuals living in counties that straddled or were close to the I-70 corridor across Missouri.

Hospitals with a high percentage of patients on Medicaid say they’re feeling especially disadvantaged at the negotiating table.

As of June 29th, there were 712,335 individuals in the Medicaid managed care system in Missouri. All other eligible recipients – low income disabled and elderly people – still receive benefits through the traditional fee-for-service method.

In a managed care system, insurers receive a monthly fixed payment from the state for each person enrolled in their plans.  Edwards says the only beneficiaries of the policy that allows for lower reimbursements to out of network providers are insurance companies.

“It doesn’t save the state any money because they have a fixed amount they’ve already committed to, to the insurance companies,” said Edwards.  “So, all it really does is make the insurance companies more profitable, in my mind, at the cost of patients, doctors, and hospitals.”

The Department of Social Services says its new policy allowing 90% reimbursements to out of network providers is meant to encourage more providers to participate in the managed care plans.  But providers are quick to point out that every hospital in Missouri has a contract with at least one of the three insurance companies and all but 12 are signed-up with all three.

Hospitals say the policy will hurt their bottom line and cause more doctors to refuse treatment to Medicaid patients.  Dave Dillon with the Missouri Hospital Association says the absence of available physicians will leave managed care patients with few options in certain parts of the state.

“The only option to get care will be to get it in the emergency (room) department, which is for non-emergent care, one of the worst places that you can get health care that is consistent and will keep you out of needing more health care,” said Dillon.

Physicians already receive a much lower rate of pay from Medicaid than they do from traditional employer-provided insurance plans.  Dillon thinks cutting those already low reimbursements by 10 percent will only drive doctors away in bigger numbers.

“There’s nothing requiring that doctor to participate in the program,” Dillon said.  “They can easily walk away and say, ‘I’m not going to take any more Medicaid enrollees.”

Individuals under managed care have the option to choose from either Home State Health Plan (Centene), UnitedHealthcare or WellCare.

Most hospitals in Missouri are not-for-profit operations, and rural hospitals are especially susceptible to financial setbacks.  Wolters of Citizens Memorial in Bolivar says 70% of his rural hospital’s patients have some sort of government coverage such as Medicaid.

He contends the new reimbursement policy could put Citizens Memorial in a risky financial position.  “For our last year, our bottom line was only $1.6 million,” said Wolters.  “That’s a margin of about 1.2%, a minor, very modest margin.  But if we lost 10% of our Medicaid managed care money, that would be about $1 million, over half our bottom line.”

Four rural Missouri hospitals have closed in the past eight years, with one having done so last month. Twin Rivers Regional Medical Center in Kennett, which shut its doors on June 11th, joined Parkland Health Center-Weber Road (Farmington), Sac-Osage Hospital (Osceola), and SoutheastHealth Center of Reynolds County (Ellington) as rural hospitals in the state that have closed since 2010.  According to the North Carolina Rural Health Research Program at the University of North Carolina at Chapel Hill, 85 rural hospitals have closed nationally since 2010.

The new Medicaid reimbursement policy for out of network providers does not apply to local public health agency services and specialty pediatric hospital services.

Medicaid is a federal healthcare program for low-income individuals that states are also required to help subsidize.  The state contributions vary from state-to-state, but federal support is higher in those that have higher poverty levels.  The federal government covers 64.6% of Medicaid costs in Missouri, where roughly 1/6 of the state’s 6 million residents are on the program.

Missouri is also unique in that hospitals pay a tax that helps pay for the state’s portion of Medicaid costs.

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