State ready to revamp Medicaid payments to hospitals

State ready to revamp Medicaid payments to hospitals

By J. Saunders

The News Service of Florida

    THE CAPITAL, TALLAHASSEE, FL — With the hospital industry closely watching, the state is moving forward with a plan to revamp the way hospitals get paid to care for Medicaid patients.

    Lawmakers this year directed the state Agency for Health Care Administration to develop the plan, which is designed to more accurately tailor Medicaid payments to the treatment each patient receives. It will replace a complex system that involves calculating per-diem rates for inpatient care — a system that Gov. Rick Scott and other critics say has led to wide differences in how much hospitals get paid.

    Consultants briefed state and health-care industry officials Thursday about work on the plan, which is required to be submitted to Scott and legislative leaders by Jan. 1 and is scheduled to take effect July 1, 2013. The changes have high stakes for hospitals, as some likely will wind up getting paid more under the new system and others will get paid less.

Lawmakers required that the revamped system — known in the hospital world as a system of diagnosis related groups, or DRGs — not cost more than continuing the current system.

     “We have to be budget neutral,’’ said Jim Pettersson, a managing director of the consulting firm Navigant. “We don’t have an option.”

     The Medicare program and some other states already use DRG systems. But the Florida Medicaid changes could particularly affect so-called “safety net” hospitals, such as teaching hospitals, public hospitals and children’s hospitals, which treat large numbers of low-income patients.

     Jim Zingale, who closely tracks finance issues for the Safety Net Hospital Alliance of Florida, said he was concerned about being able to get the revamped system in place by next July. Consultants and state health officials will have to resolve myriad details and also will have get approvals from the Legislature and the federal government.

     “That timeline looks very difficult to deliver an accurate product that meets these requirements,’’ Zingale said.

     Pettersson, whose firm has worked on DRG systems in other states, said the timeline is aggressive, but “it can be done.” He also said the payment systems can include provisions that help shift money to hospitals that care for large numbers of Medicaid patients.

     “The states generally try to protect the hospitals that are really vested in the Medicaid program’’, Pettersson said.

     Zingale said it also is unclear how the DRG system would work with a broader state move to shift almost all Medicaid beneficiaries into HMOs and other types of managed-care plans. That shift, which is expected to play out over the next few years, will lead to hospitals and managed-care plans negotiating contracts that will include payments.

     Though DRG systems vary, the general idea is to classify patients based on such factors as their diagnoses or types of treatments. Those classifications are then used to calculate payment amounts that are designed to more closely reflect the costs of treating patients than a per-diem rate would.

     Pettersson said one possible DRG model, for example, includes numerous classifications for neonatal care. Such care can have widely varying costs because of complications suffered by infants, and the classifications could help better tailor payments to hospitals.