Hospitals, other providers withhold participation in Medicaid managed care program, putting state in a bind


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The promised $16 million in savings that New Hampshire was supposed to see though a new Medicaid managed care program is quickly evaporating, because three vendors have not been able to set up networks with providers – especially hospitals – that are already upset with the Medicaid rates they are currently receiving.

Most of the state’s hospitals have refused to sign on to participate in the managed care program while their lawsuit continues over cuts made in Medicaid payments, in conjunction with requiring larger institutions to pay more than $100 million in a Medicaid enhancement tax to allow the state to balance its budget in the current biennium.

“We are suing over the rates as it is,” said Frank McDougall, vice president for government affairs for Dartmouth–Hitchcock Medical Center in Lebanon. “Why in the heck would we sign into a new system that would pay us less? Why would we choose to increase our pain?”

Participation by hospitals is the key to success of any managed care program, said Nick Toumpas, commissioner of the state Department of Health and Human Services.

“You cannot implement a managed care program without the hospitals participating. I need the hospitals,” he said.

But as it becomes clearer that the hospitals are balking at taking part in the program, some lawmakers are becoming increasingly impatient.

“They are doing everything they can to screw up our budget in revenge for making them pay more,” said Rep. Ken Weyler, R-Kingston, chair of the Legislative Fiscal Committee, who threatened to go after the institutions’ tax-exempt status if they don’t participate in Medicaid managed care. “If this is the game the way you want to play, we smoked you out. We know you are greedy. You don’t deserve tax exemption. Game on.”

Unanticipated difficulty

It wasn’t supposed to be this way. Last May, when the state awarded the three vendors a $2.3 billion contract – the largest in the state’s history – to manage the care of 140,000 Medicaid recipients, it was supposed mean more collaboration, healthier patients and lower costs. And that $16 million in savings was supposed to start this fiscal year (which began in July), with the program going into effect in December.

But the vendors are “not close to network adequacy,” Toumpas told the Executive Council on Oct. 17.

The commissioner said the state has already lost $9 million of anticipated savings, money that the department will have to find in its budget, and would lose an additional $1.5 million for each extra month of delay. (Toumpas didn’t say what, if anything, would have to be cut.)

The Medical managed care program also was supposed to be relatively easy to implement because it had been done before in other states, with the very same vendors. Indeed, some 47 states have already adopted some sort of managed care for their Medicaid programs.

It is in the second year when the state would be breaking relatively new ground, by providing managed long-term care for the developmentally disabled and the elderly in nursing homes. It is here that, theoretically, the state has the chance to reap the greatest savings, because this third of the Medicaid population accounts for two-thirds of the spending.

But at this point no one knows whether the third phase – which was designed under the assumption that New Hampshire would go along with the Affordable Care Act and expand its Medicaid population – will actually happen.

Adding to the troubles is the unanticipated difficulty the state has faced in implementing the first phase of the program. Indeed, in its first progress report to the federal Centers for Medicare and Medicaid Services (which has to sign off on the program’s rates to move forward) the state reported that only a portion of the three vendors have signed up enough pharmacies to create an adequate network in some of the state’s 10 counties.

There was no information provided to report on whether there is an adequate network for hospital, primary care, specialty care and behavior health services.  

“Where no information is populated, there is not yet progress to report,” the letter explained.

According to that same letter, the state has not even started testing most aspects of its computer system to operate the managed care program. Indeed, its attempt to modernize its existing system is more than five years behind schedule.

Some progress, many hurdles

However, the most significant challenge managed care has faced is signing up providers. Toumpas said the state needs at least two vendors with an adequate statewide network for things to work.

“They have all made progress,” Toumpas said, but neither he nor the vendors would say how many providers they have on board, noting that vendors are in a competitive situation with each other. (The larger the network and the more recipients being managed, the more money each vendor would make.)

“We are actively building a statewide provider network and are making positive progress,” said Deanne Lane, a spokesperson for Centene Corp., a $5 billion Fortune 500 company based in St. Louis, Mo., that runs Granite State Health Care.

While Centene is setting up its network in New Hampshire, it is trying to get out of a similar contract in Kentucky. It filed a lawsuit on Oct. 22 in that state arguing that Kentucky did not provide it with accurate data in the bidding document when it signed onto the contract. As a result, the company charges, the vendors are losing millions of dollars.

“The circumstances in Kentucky are unique,” explained Lane. “The state of New Hampshire is working with us in a collaborative fashion, and we have every belief and expectation that the program will be a success"

Boston Medical Center, the $1.1 billion nonprofit that runs the BMC HealthNet Plan in Massachusetts, issued a statement saying that its New Hampshire Well Sense Health Plan is “excited about the progress we made” in setting up a network. Working with Harvard Pilgrim Health Care of New England, it has signed up “several hundred” providers and have “contracted with medical hospitals and negotiations continue with many others.”

Meridian Health Plan – a subsidiary of privately held Caidan Enterprises Inc., based in Detroit, Mich., -- didn’t return phone calls, but its website indicates that it has signed up two small hospitals, Cottage Hospital in Woodsville and Memorial Hospital in North Conway, to take part in its network, along with about 75 other providers, half of which are in primary care, and also are mostly in the North Country. It has signed up one mental health provider, in Conway.

Aside from hospitals, there are three other provider sectors from which the vendors need to recruit participants: independent community health centers, mental health centers and the various independent specialty practices. And, although negotiations are proceeding with each, they still have a long way to go.

“We have not had many issues,” said Tess Stack Kuenning,, executive director of the Bi-State Primary Care Association, which represents community health centers that serve about a quarter of the Medicaid population. The association is assisting the members in “finalizing the contracts,” she said.

Things are more complicated when it comes to the state’s 10 mental health centers.

“We started working with these folks in March and April, and it’s moving quite slowly,” said Roland Lamy, executive director of the New Hampshire Community Behavioral Health Association.

Before the organization even begins talking rates, the health centers want it spelled out whether the vendors can try to save money by “denying necessary services.”

“That’s the key area where we are hung up on,” Lamy said.

The association is concerned over whether the vendors will “question what we do every day to keep people stable to avoid psychiatric institutions,” adding that concern has not been addressed “in a way we have a lot of confidence.”

There are also concerns that the centers would have increased administrative expenses in order to comply with managed care, and if that is so, that would need to be factored into the Medicaid rates.

The managed care plan calls for “a 15 percent reduction in mental health, and we are not clear where that is going to come from,” he said.

Many independent specialists haven’t been signed up either.

“We are just looking at the contracts,” said Eileen Serratore, administrator of The Eye Center of Concord, as well as a surgery center and two anesthesia centers. “We haven’t sat across the table to go line by line about what we are good with and what we are not.”

A ‘lose-lose’ proposition?

But the major sticking point for the Medicaid managed care vendors is the hospitals.

According to McDougall, it currently costs Dartmouth-Hitchcock some $90 million to treat 42,000 patients, but it only receives reimbursement of $26 million, resulting in a net loss of $64 million. In addition, DHMC paid a $43 million Medicaid enhancement tax last year.

“We pay for the privilege of treating Medicaid patients,” he said. “In a legitimate Medicaid system, we would participate, but when the system is on the verge of bankruptcy, what the heck are we talking about?”

Laconia-based LRGHealthcare estimates that the state’s Medicaid rates – already the lowest in the country --- would be decreased an extra 10 to 20 percent as a result of managed care.

“We are barely breaking even as it is,” said LRGHealthcare’s chief financial officer, Henry Lipman. “We can’t shift it onto the commercial patients. It’s no longer an option.”

LRGHealthcare also is ironing out some “technical concerns,” such as factoring requirements from the Affordable Care Act into rates, but the major problem is “how do they expect to cut costs?”

And if there are savings, “it should be shared with the providers. The system is structured as a lose-lose. I don’t know any business that is losing money that puts itself on purpose in the position of losing more.”

But that’s exactly the kind of business nonprofit hospitals are in, according to Representative Weyler.

The hospitals are just trying to put another “roadblock” in the way of the state so they can continue to pay their CEO’s “outrageous” salaries.

“It is a pattern. The hospitals have been abusing their tax-exempt statures,” he said. “If you expect everyone to pay full boat, you are not doing a community service and you don’t deserve tax-exempt status.”

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