Largest Medicaid pediatric provider sues DeSantis administration over pay rates

Florida's largest Medicaid pediatric healthcare provider is suing the administration of Gov. Ron DeSantis, alleging it erred when Medicaid officials adjusted the rates the state pays to managed care plans to include the costs of applied behavioral analysis (ABA) services to children with autism and special needs.

Pediatric Associates said it notified the state Agency for Health Care Administration Tuesday morning that it plans to seek $300 million in primary care Medicaid funding it claims it was denied over the last 20 months under a revised payment schedule the agency adopted in February 2025.

The pediatric healthcare provider says it cares for more than 300,000 Medicaid-eligible children in South Florida, or about 15% of Florida's pediatric Medicaid population.

"AHCA's changes have jeopardized pediatric care for hundreds of thousands of Florida families. Many pediatricians caring for children on Medicaid are now being paid less than it costs to provide care, placing these doctors in an untenable position: continue to treat children on Medicaid at a financial loss or exit Medicaid altogether," attorneys for Pediatric Associates wrote in the challenge, which eventually will be filed in the state Division of Administrative Hearings.

Pediatric Associates asserts the new rates were adopted in violation of state and federal statutes and is asking a state administrative judge to issue a final order banning the state from using them. It also is asking the judge to require the agency to recalculate the rates going forward.

Represented by the Greenberg Traurig law firm, Pediatric Associates also wants the judge to award it legal fees.

Before filing the suit, Pediatric Associates maintains, it met with AHCA "at least five times" in the stretch between January and May to discuss the new Medicaid payments and the errors it alleges were made in determining the rates.

AHCA acknowledged in an April 17 correspondence to Medicaid managed care plans that the inclusion of the ABA services in value-based contracts that the managed health plans ink with providers "has the potential to result in access issues."

Value-based contracts reflect clinical performance and set pre-determined, mutually agreed upon quality, financial, and patient experience targets that need to be met to reap incentives such as bonuses.

As such, the correspondence encourages managed care plans that have value-based contracts that put healthcare providers at full risk—such as Pediatric Associates— to renegotiate those agreements and reach "mutually agreeable terms to mitigate unanticipated financial losses."

The correspondence gave the health plans 45 days to work with their contracted providers to reach a resolution, a deadline that has come and gone.

In its legal challenge Pediatrics Associates alleges AHCA "has taken no action to mitigate, let alone solve, this problem."

AHCA declined to comment telling the Phoenix in an email "the Agency does not comment on pending litigation."

Pediatric Associates also claims it went to the Florida Legislature for a fix before heading to state administrative court.

"We've repeatedly raised this issue with Florida's leaders, engaging in good faith for months to identify a resolution to a problem that seems so simple to solve. We met with agency and legislative leadership. While they understood our concerns and the crisis ahead, a fix is yet to come. We've now been forced to take formal legal action against the state because Florida's children should not have to wait any longer for a solution," the suit asserts.

The root of the problem

Florida mandates that most Medicaid enrollees — the poor, elderly, and disabled — enroll in a state-contracted managed care plan to receive benefits. For Medicaid purposes, the state is divided into nine regions. Medicaid clients choose a plan based on the region in which they live.

There have been exceptions, though. For instance, the Medically Needy program (which helps people with acute illnesses who otherwise wouldn't qualify for Medicaid), dental services for non-pregnant adults, and home-and community-based services for people with intellectual and developmental disabilities aren't mandated managed care services.

Until recently, ABA services were carved out from the state's Medicaid managed care mandate, meaning people weren't required to receive the care through their managed care plans. But the state has grappled with holding down ABA costs which, according to a recent AHCA document, exceed $2 billion annually. Beginning in February 2025 AHCA required ABA services to be provided through managed care plans.

ABA includes therapy for adults, children with autism and special-needs children that focuses on individualized interventions to help control challenging behaviors. It helps to improve the quality of life for children with special needs and their families.

AHCA relied on its contracted actuarial consultants to calculate how to modify the managed care rates, which are adjusted by age cohort and geographic location, to cover the ABA services the plans are now required to provide.

Math mistakes

The lawsuit argues that the actuarial consultants made several math mistakes, such as when they spread the costs for ABA services equally across the nine Medicaid regions and across all age groups.

"In reality, utilization of ABA services is far higher in South Florida than elsewhere. By allocating ABA funding uniformly across rate cells to all Medicaid regions, the consultant's rates effectively underfunded care (including pediatric care) in regions that use the most ABA services (such as South Florida) while overfunding in parts of the State where ABA utilization is lower," the suit asserts.

Similarly, actuaries allocated the costs of ABA services across all age groups even though "nearly all ABA services are utilized by children and adolescents, not by adults or infants," attorneys wrote.

Additionally, the consultants didn't preserve the underlying payments made to pediatricians for core, non-ABA services before developing the new rates.

The errors, attorneys wrote, resulted in rates that in some instances were too low for Medicaid patients who required ABA services and too high for patients who didn't require the services.

Quotation

I know from experience that if action is not taken, more families will end up relying on emergency rooms for everyday care — or worse, skipping care entirely. The funding miscalculation we are asking the state to correct is fixable, and fixing it matters for every Medicaid-insured child in Florida, not just the ones in my practice.

– Dr. Rasciel Socarras, Pediatric Associates

In the aggregate, the new rates "changed the funding formula for (managed care) in a way that has dramatically reduced funding for pediatric care — primary, specialist, and acute — by as much as 20 to 30% in some counties. Overall, Florida has experienced a roughly 15% drop in reimbursement for core pediatric care — approximately $15 million per month in cuts to essential funding — even as the cost of providing this care has risen."

The flawed formula has allowed Medicaid reimbursement to fall below the costs of providing the care, the complaint says.

And while losing money is never ideal, it's exacerbated by the value-based purchasing contracts Pediatrics Associates has with managed care plans. The contracts put the pediatric healthcare provider at full risk of the costs of providing care to its Medicaid patients.

Children without healthcare access

Pediatric Associates said in its challenge that because it's at full risks for the care the new rates "have adversely affected Pediatric Associates economically, jeopardizing Pediatric Associates' ability to continue providing care to its Medicaid patients."

That could leave hundreds of thousands of families who rely on Medicaid for their children's healthcare in need, the pediatric provider claims.

"If the children I care for every day lose access to pediatric care, it would be absolutely devastating," Dr. Rasciel Socarras of Pediatric Associates said in a prepared statement. "I know from experience that if action is not taken, more families will end up relying on emergency rooms for everyday care — or worse, skipping care entirely. The funding miscalculation we are asking the state to correct is fixable, and fixing it matters for every Medicaid-insured child in Florida, not just the ones in my practice."

Highlighted

The Phoenix highlighted a sentence in the April 17 letter from AHCA to contracted Medicaid managed care plans that is referenced in the DOAH legal challenge.

Courtesy of Florida Phoenix