HB1142 / SB662
An Act to Cap Liability Related to Hospital Financial Penalties
Joint Committee on Health Care Financing

The Massachusetts Health & Hospital Association (MHA), on behalf of our member hospitals, health systems, physician organizations and allied health care providers, appreciates the opportunity to submit comments in strong support of HB1142 / SB662, “An Act to Cap Liability Related to Hospital Financial Penalties.”

This bill provides necessary guardrails for a new and questionable payment penalty that is being implemented on hospitals for inpatient services provided to MassHealth patients. MassHealth recently changed its readmission penalty for acute care hospitals, raising serious concerns with the fundamental objective of the penalty as well as with its process and financial effect on hospitals. Regarding the latter, the new method is highly problematic in that it exposes hospitals to significant financial losses related to inpatient care provided to MassHealth patients.

As background, the previous MassHealth readmission penalty applied a reduction to the inpatient reimbursement rate for hospitals that had “higher-than-expected” rates of preventable readmissions based on prior-year data. This penalty ranged from a fraction of a percent to as high as 4.4% of total inpatient fee-for-service payments for hospital medical services covered under the acute care hospital RFA contract. Under that construct, hospitals could estimate the losses they could expect in a given year. Under the new penalty, MassHealth will phase-in a new method that will potentially deny an entire claim following a post-payment clinical review for certain readmissions to the same hospital within 30 days of discharge. The effect is therefore unknown.

MHA and our member hospitals continue to have concerns with the overall concept of the proposed 30-day readmission policy and we have urged MassHealth to remain open to working with hospitals on alternative ways of reducing the rate of readmissions. The criteria that will be used in the clinical evaluations are not clear and, in many cases, are very broad, which potentially can be used subjectively by a reviewer to deny a hospital claim. The criteria, in some cases, also references circumstances that are not directly in the control of the hospital.

Responsibility and accountability for readmissions, as with most patient health issues, is shared among hospitals, ambulatory care providers, long-term care/post-acute care institutions, community service organizations, payers (including MassHealth), patients themselves, and patients' families. Several Massachusetts hospitals implemented population health management initiatives to address the needs of chronic and behavioral health patients through the Health Policy Commission’s now-completed CHART grant program. These care teams included case managers, community health workers, and other non-medical staff to help patients manage their health outside of the hospital walls. However, much of this work is not considered reimbursable by traditional health plans, further compounding the difficulty in thoughtfully addressing readmissions and the complex issues at play. Creating a readmission policy that captures the broad array of contributing factors to patient’s readmission and does not unfairly penalize hospitals will be a significant challenge.

Putting aside our fundamental concern with the new readmission policy, MHA and our member hospitals are engaged with MassHealth on the planned implementation. While many of the technical details of the penalty will be addressed, it is important that hospitals are not unfairly harmed by this new penalty.

The new payment denials for readmission will be based on a process with a significant amount of subjective review that will likely not be able to adequately take into consideration all of the factors that contribute to a patient returning to a hospital. MHA recommends that if this policy is adopted that there be a penalty cap similar to the previous methodology, limiting any financial penalty to no more than 4.4% of a hospital’s total annual inpatient payments covered under the RFA. This is of significant concern to all hospitals but especially disproportionate share hospitals (DSH) that care for large numbers of MassHealth patients. HB1142 / SB662 limit the financial penalty at an individual hospital level to the highest penalty in effect during FY2018 on a percentage basis, protecting hospitals from an unknown and unlimited penalty.

The Executive Office of Health and Human Services (EOHHS) stated that it does not intend the changes to produce savings to the state. To ensure that this intent is fulfilled, HB1142 / SB662 limit the financial effect of the new readmission penalty policy so that it is more closely aligned with the previous penalty amounts. Hospitals are already significantly underpaid for services provided to MassHealth patients and penalties that result in the full denial of a claim further reduce the financial support needed to care for these complex patients.

In the event of a readmissions penalty, the reimbursement is now considered an overpayment and subject to recovery under MassHealth regulations. These recoveries may be appealed to MassHealth; however, the current appeals process is administratively burdensome and suffers from a multi-year backlog. As we expect these preventable readmission determinations to be very questionable, a more expedited process will be needed for these cases so the financial exposure is not indefinite. HB1142 / SB662 protects against the uncertainty of a prolonged appeal process by requiring any appeal that is not adjudicated within 180 days be automatically ruled in favor of the hospital.

Creating a readmission policy that captures the broad array of contributing factors and does not unfairly penalize hospitals will be a significant challenge. HB1142 / SB662 provide needed guardrails on this new controversial penalty on providers caring for MassHealth patients. Given the significant concerns that our member hospitals and health systems have raised regarding this policy, we respectfully request the committee report favorably on HB1162 / SB662.

Thank you for the opportunity to offer comments on this important matter. If you have any questions or concerns or require further information, please contact Michael Sroczynski, MHA’s Senior Vice President of Government Advocacy, at (781) 262-6055 or msroczynski@mhalink.org