States' Missteps Can Be a Medicaid Boon to Hospitals
States’ Missteps Can Be a Medicaid Boon to Hospitals
Are you ready to write off Medicaid health plans? Common sense tells you as more patients sign up for Medicaid managed care, providers will inevitably suffer financially.
Not necessarily, according to some experts. Some administrators are monitoring the purported adverse effects of Medicaid health plans on two key indicators of performanceutilization and reimbursements.
And what is evolving with respect to both suggests that despite the hoopla about payment cuts and utilization shifts in emergency medicine, Medicaid managed care may end up getting mixed reviews from many states.
Medicaid volumes are still strong
For one thing, hospitals and physician groups are still seeing strong managed care patient volume from Medicaid in EDs. True, payments are down by large margins, but efforts by states to shift utilization and curb non-emergency cases away from hospitals have been a slow.
And as long as hospitals are able to negotiate better rates and shift some of their costs onto other sectors of the payer mix such as private-pay patients, they will be able to blunt the adverse effects of payments cuts.
On the whole, it is true that Medicaid managed care programs are diverting patients away from hospitals to less costly sites such as physician offices and walk-in clinics. "I don’t know of a single state where it hasn’t effected some change," says Neva Kaye , director of the Medicaid Managed Care Resource Center at the National Academy for State Health Policy in Portland, ME.
But, Kaye isn’t sure states are meeting all their objectives. After a decade of trying, "the system isn’t working everywhere or all the time," she says. As a result, providers who once braced for impending disaster are breathing a little easier. Here’s why:
Despite financial disincentives imposed by states on providers, patients are still indiscriminately selecting hospital EDs as their first choice for primary care, Kaye says. Indicators vary, but nationally an estimated half of all emergency visits are regarded as non-urgent.
In Wisconsin, where the total number of emergency visits lags behind the rest of the country, hospitals are still getting a large chunk of business from true emergency cases.
Health plans don’t educate enrollees
"The state is paying next to nothing. But hospitals don’t have a choice but to treat all emergencies regardless of ability to pay," says Christopher J. Knuth, MD, vice president of finance at Infinity Healthcare, a 50-member emergency physician group practice near Milwaukee. Knuth is referring to the decade old federal Emergency Medical Treatment and Labor Act of 1986 (EMTALA), which requires that hospitals evaluate and stabilize all patients, even those without insurance coverage.
On the other hand, a drop in non-emergency patients is having a beneficial effect on costs. The relative rise in treating true emergencies is helping to hold down the often high variable costs associated with triaging low-priority, non-emergency cases, says Kaye.
While some states such as Tennessee have achieved vigorous enrollment-growth and reduced ED utilization sharply under Medicaid managed care, overall visits have remained high in real numbers. In some cases, they’ve even risen due to the overall enrollment growth.
Furthermore, health plans aren’t educating enrollees in redirecting their care, according to John Proctor, MD, medical director of Southern Hills Medical Center’s ED in Nashville, TN. ED visits have dropped between 10% and more than 25% at individual facilities since 1995, according to state Medicaid officials. But they’ve risen in overall volume because enrollment has doubled in only a few years, Proctor says.
Health plan contracts vary among and within states. This results in considerable variation in policies. For example, some health maintenance organizations (HMOs) will allow one non-emergency ED visit annually per enrollee while others will refuse payment for any, according to Kaye.
In another instance, Knuth says his group hammered out a deal with two Milwaukee-area HMOs, Compcare and PrimeCare. The HMOs agreed to pay a $25 triage fee if payment was otherwise denied for any reason. Other plans refused to go along although Knuth says Wisconsin Medicaid had originally promised to pay for all triage.
Patients face no alternative
Hospitals and physicians are doing a better job in general of diverting non-emergency Medicaid cases to less costly sites. And in many instances, these alternate sites are located within or next door to the ED. They are also owned either by the hospital, its physicians, or both and bolstering overall income.
But for some providers, the reverse situation has also helped curb utilization drops. In some cities, enrollees don’t have a lower-cost alternative, especially at night and on weekends, Knuth says.
Due partly to a lack of options, hospitals report treating many non-urgent cases and making a strong argument for payment. In Wisconsin, for example, these conditions have helped shore up utilization although rates to individual hospitals and groups have remained weak, Knuth adds.
Emergency medicine typically represents a small portion of overall Medicaid managed care dollars. Some providers believe that this situation creates opportunities for negotiating better reimbursements.
And strapped by rate cuts or fixed capitated payments, providers are finding it necessary to cost-shift shortfalls to other, more lucrative contracts or self-pay patients. "As government contracts have ratcheted down payments, providers have ratcheted up prices to private payers," Knuth says.
Payers are being conciliatory
The average hospital charge for an ED visit in Wisconsin is about $325. Under Medicaid managed care, physicians are receiving less than $34.00 of every $284 in hospital charges for performing a level-five evaluation and management procedure. A level-two code pays $19.81 while charges are about $75.
Although cost shifting isn’t a permanent solution, commercial payers have been generally conciliatory in negotiations, Knuth says. "Payers are beginning to look for a middle ground. They still have to answer to employers," he adds.
Providers should exploit these conditions to work out reasonable reimbursements and lower the variable cost of treating each patient through efficiencies, Proctor suggests. Negotiate triage fees and investigate how plans are basing fees. "They’re often founded on average utilization levels that don’t change as the levels drop," Knuth says.
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