MHA Voices Concern About MassHealth Reimbursement Policy

In a letter to CMS last week, MHA urged the federal agency to reconsider rules regarding how Medicaid Managed Care Organizations (MCOs) direct payments to providers.

Following substantial changes in 2016, CMS recently proposed modest updates to its Medicaid managed care rules. In its letter, MHA reiterated concerns stemming from changes made in the 2016 final rule that, among other complex provisions, preclude state Medicaid authorities from stepping into MCO/provider negotiations to, in effect, set rates. But that 2016 rule also allowed states to set “minimum” and “maximum” fee schedules. In 2016 comments, MHA raised concerns with this provision, arguing at the time that MCOs, given minimums and maximums, would default to those limits and providers would be forced to accept them.

In last week’s letter to CMS, MHA’s Senior Director of State Government Finance and Policy Daniel McHale wrote, “Just as we predicted a problem in 2016, it has now become a reality.” In 2017, Massachusetts restricted MassHealth MCO reimbursements to 105% of the MassHealth fee-for-service rates for in-network acute care hospital services. Effective March 1, 2018, the limit was dropped to 100% of the fee-for-service rate. The policy also applies to MCOs that fully integrate with Accountable Care Organizations (ACOs) as part of the state’s sweeping and forward-thinking MassHealth ACO initiative that went live March 1, 2018.

McHale wrote that on one hand CMS issued a rule effectively prohibiting state Medicaid agencies from directing how its MCO contractors reimburse healthcare providers, but on the other hand it has allowed a state to set a maximum fee schedule tied to the Medicaid rates the state itself sets.  In the case of Massachusetts, this effectively has exempted the state from the rule prohibiting the directing of payments and has resulted in de facto rate setting.

“The ability of hospitals and other providers to negotiate independently with MCOs is critical to ensure the added value a hospital may provide to support care management of MCO enrollees and to be a high-quality, key network provider for the MCO in a particular service area,” MHA’s letter states. “For many ACOs, hospitals serve as key elements to their model and provide much of the financial backing that will affect the ability of these ACOs to succeed. The limitations on reimbursement rates with MassHealth MCOs will make it difficult for many hospitals to continue critical community care initiatives on fragile financial margins. The ability to negotiate is also needed to minimize the likelihood they will be taken advantage of financially by non-network ACOs/MCOs.”

The lack of negotiating flexibility between providers and MCOs/ACOs has consequences. Earlier this month UMass Memorial Health Care announced 170 layoffs that the hospital attributed mainly to the MCO contracting issue. In an interview with the Boston Business Journal, UMass Memorial Health Care CEO Eric Dickson, M.D., said the system’s inability to negotiate rates reduced reimbursements to his system by $40 million, resulting in the layoffs.

“I understood what the state was trying to do by leveling the playing field by lowering reimbursements across the state, but it had a very negative impact on us — a disproportionate impact because of who we are and who we care for,” Dickson said in the interview, noting his system’s high proportion of MassHealth patients.