Nebraska hospitals upset over decisions by Medicaid officials that will cost them $21 million a year in funding – Omaha World-Herald
LINCOLN — Nebraska hospitals are crying foul over a pair of recent decisions by state Medicaid officials that are hurting hospital finances.
One saddled hospitals with the biggest share of budget-cutting payment changes.
The other left in place errors in the Medicaid hospital payment formula that date to 2014.
Together, the decisions will cost hospitals more than $21 million a year in state and federal funds, with most of the impact falling on the 27 largest hospitals.
“This is an unsustainable budget strategy that will harm hospitals, patients and the private payers who will be forced to pick up these costs,” said Andy Hale, vice president for advocacy of the Nebraska Hospital Association.
But Thomas “Rocky” Thompson, interim state Medicaid director within the Department of Health and Human Services, said the decisions were necessitated by Nebraska’s budget woes.
Hospitals are better able to withstand cuts than other health care providers, many of whom rely more heavily on Medicaid, he said.
“We are working within our budget to try to preserve essential services to our Medicaid clients,” Thompson said.
The two decisions came in late May, as Nebraska lawmakers wrapped up a lean state budget for the two years ending June 30, 2019. Lawmakers had started the year with a budget shortfall estimated at nearly $900 million.
But the hospitals’ concerns date back to a 2014 revamping of the Medicaid payment system for larger hospitals.
The change was supposed to adjust payment rates while being cost-neutral, Hale said. That is, it was supposed to produce the same revenue for hospitals as the previous system.
Instead, last-minute changes in the new system yielded payments that were 6 percent lower.
“It wasn’t intentional, but an error was made,” said Jeanette Wojtalewicz, senior vice president and chief financial officer of CHI Health.
Hospital and state officials began talks immediately, she said, with state Medicaid officials agreeing that a correction was needed.
But HHS has twice set dates for fixing the formula with no changes being made. The latest target was Jan. 1. Thompson said the state’s worsening fiscal situation got in the way of making the planned correction.
In frustration, the hospitals turned to the Legislature this year for help.
They thought the problem had been resolved when lawmakers earmarked money in the budget to increase hospital payment rates by 3 percent, or half of the amount of the error.
State Sen. Robert Hilkemann of Omaha, who introduced a bill addressing the error, said the 3 percent represented a compromise by the hospitals.
They agreed not to seek reimbursement for the previous years.
They also agreed to a rate increase that, hospital officials figured, equaled the net of the 6 percent error and a 3 percent rate cut planned for Medicaid providers.
State officials saw the situation differently.
Thompson said the planned 3 percent rate cut canceled out the 3 percent payment correction, so HHS decided to leave hospital rates flat.
“HHS is interpreting what happened different than what our intention was,” Hilkemann said.
The state ended up not carrying out the 3 percent provider rate cut after lawmakers raised concerns about potential harm to nursing homes, behavioral health providers and other health care providers.
But HHS did not implement the 3 percent increase in hospital rates, either.
Instead, HHS reduced Medicaid spending — and added to hospital losses — by changing how Medicaid pays for the care of people covered by both Medicare and Medicaid.
The move is expected to save the state about the same amount of money as the planned rate cuts — about $11.3 million. The state and federal total is $23 million. More than half of Medicaid funding comes from the federal government.
Previously, Nebraska Medicaid paid Medicare rates for the care of people covered by both programs. Since July 1, the state has paid whichever rate is lower, generally the Medicaid rate.
Medicare is a federal program that covers people age 65 and older and some disabled people. Medicaid is a state-federal program for low-income people, including children, some parents, disabled people and the elderly.
“We anticipate this will impact providers much less than rate cuts,” Thompson said of the Medicare/Medicaid decision.
That’s not the case for all providers, however. About 43 percent of the impact from the Medicare/Medicaid payment change will fall on hospitals.
Still, Thompson said hospitals can handle the loss more easily because they have a mix of payers, including private insurers and Medicare.
He also pointed to American Hospital Association data showing that, for 2014, Nebraska hospital operating margins were nearly twice the national average.
Even with the two decisions, HHS estimates that Nebraska hospitals will get about $508 million in Medicaid payments this year.
But hospital officials said their facilities already take a loss on caring for Medicaid patients. The two recent decisions make the shortfall larger.
Russ Gronewold, chief financial officer and vice president of finance for Bryan Health, said he expects that the Medicare/Medicaid change will cost the Lincoln-based system about $1 million.
That’s on top of a $1 million loss from the ongoing payment error.
“This is just one more thing that puts pressure on the most vulnerable populations,” he said. “We have to make that up in other ways, either in cost cuts or in charges to other people.”
Medicaid pays the bill for about 1 in 10 patients at Bryan’s two Lincoln hospitals, Gronewold said. In areas such as the emergency room, behavioral health and neonatal intensive care, the figure is closer to 1 in 3 patients.
Wojtalewicz estimated the Medicare/Medicaid payment change would mean more than $3 million less for CHI hospitals, clinics and doctors.
She said the CHI network is looking for ways to absorb that loss, while coping with increases in the cost of salaries, drugs and supplies.
Their answers could involve cutting back on some clinics or services.
“We want to make it work,” she said. “We’re committed to the community and our mission.”