Mercy Hospitals of Bakersfield Issues Public Comment on Centers for Medicare & Medicaid Services Proposed Rule

WASHINGTON, Feb. 10 -- Bruce Peters, president of Mercy Hospitals of Bakersfield, California, has issued a public comment on the Centers for Medicare and Medicaid Services' proposed rule entitled "Medicaid Program: Medicaid Fiscal Accountability Regulation". The comment was written on Jan. 31, 2020, and posted on Feb. 6, 2020:

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Mercy Hospitals of Bakersfield appreciates the opportunity to provide comments to the Centers for Medicare and Medicaid Services (CMS) on its proposed Medicaid Fiscal Accountability Regulation (MFAR). Mercy Hospitals of Bakersfield is a faith based, not for profit hospital located in California. Mercy Hospitals of Bakersfield is a 226 bed hospital located on two campuses with over 1,500 employees. We are a part of CommonSpirit Health, which was created in February 2019 through the alignment of Catholic Health Initiatives and Dignity Health. CommonSpirit operates more than 135 hospitals and delivers care in 21 states. Both Mercy Hospitals of Bakersfield and CommonSpirit Health are committed to creating healthier communities, delivering exceptional patient care, and ensuring every person has access to quality health care.

The proposals included in MFAR are numerous, varied, and complicated. However, buried within these complexities lies the simple fact that limiting a state's ability to tax and distribute funds as it sees fit (and which are compliant with current CMS rules) will certainly reduce overall funding for state Medicaid programs and limit access to care for millions of American children, elderly, pregnant women, and people with disabilities. Mercy Hospitals of Bakersfield is extremely concerned about the effect the MFAR proposed rule will have on access to care and our ability to maintain services in rural and low-income communities. If our state Medicaid program sees significant reduction in funding, we also are concerned about the likely decrease in Medicaid hospital reimbursement, which could make it difficult for us to maintain or expand some services, such as emergency services and specialty services to include orthopedic, bariatric, cancer and community outreach. Indeed, our Medicaid population accounts for 36.2% of our payer mix. Mercy Hospitals of Bakersfield is located in Kern County, which is in the Central Valley of California. We have one of the highest rates of poverty and residents without health insurance in the entire state and our community relies on the Medicaid services we provide to receive lifesaving services.

Mercy Hospitals of Bakersfield also is deeply concerned about the impact this proposed rule would have on California's budget. MFAR proposes dramatic changes to Medicaid funding mechanisms that will lead to a reduction in overall funding available for Medicaid. States will have to fill in the gaps somehow, likely looking to other programs with large budgets (e.g. education, transportation), or making drastic reductions to the Medicaid program, including reducing services or eligibility.

Mercy Hospitals of Bakersfield strongly urges CMS to withdraw the proposed regulation in it's entirely. If finalized, the rule would significantly change Medicaid payments and cripple Medicaid program financing.

SEVERE FINANCIAL IMPACT

Although CMS failed to complete a comprehensive regulatory analysis, we have data from external sources that detail the devastating effects that could arise if MFAR is finalized. According to the American Hospital Association, the Medicaid program could face total funding reductions between $37 billion and $49 billion annually or 5.8% to 7.6% of total program spending. Hospitals and health systems specifically could see reductions in Medicaid payments of $23 billion to $31 billion annually, representing 12.8% to 16.9% of total hospital program payments./1

Moreover, the impact at the individual state level would vary significantly. In nearly all states, the reductions from this rule would unquestionably result in cuts in Medicaid program enrollment and covered services. The impact to some state programs, however, could be catastrophic.

The nearly 75 million individuals who rely on the Medicaid program as their primary source of health coverage, including 11,625,083 in California, are the most at risk. The Medicaid program pays for approximately half of the births in the country including 51% in California, as well as the care for almost half of all children and adults with special health care needs, such as physical and developmental disabilities, dementia and serious mental illness. The magnitude of financial loss to the program as a result of this rule could force our state to make untenable choices regarding eligibility, benefits and provider reimbursement. Each of these choices is fraught with negative consequences such as eligibility rollbacks that would thwart important public health interventions; reduced benefits, which would decrease the availability of services; and lower provider reimbursement, which could lead to reduced access to care for many of our country's most vulnerable patients.

REDEFINING MEDICAID PROGRAM FINANCING

CMS states in the MFAR preamble that the agency is merely clarifying policies regarding providers role in funding the non-federal share of Medicaid; however, the rule goes far beyond clarification and introduces new, vague standards for determining compliance. In the preamble to the proposed rule, CMS indicates that MFAR is intended to clarify the following objectives:

1. Promote transparency in the Medicaid program;

2. Establish requirements to ensure that state plan amendments proposing new supplemental payments are consistent with proper and efficient operation of the state plan; and

3. Address issues related to the financing of the non-federal share of supplemental and base payments including the requirements pertaining to the non-federal share of any Medicaid payment.

We would argue that "establishing requirements" not previously in place and making changes to the "financing of the non-federal share of supplemental and base payments" are, in fact, major changes to the fundamentals of the Medicaid program and not merely clarifications. Indeed, the rule contains significant changes to health care-related taxes (provider taxes), "bona fide" provider donations, intergovernmental transfers (IGTs) and certified public expenditures (CPE), all of which fall squarely under the purview of the state. In addition, the agency would grant itself unfettered discretion in evaluating state financing arrangements through vague concepts such as "totality of circumstances," "net effect," and "undue burden."

While Mercy Hospitals of Bakersfield understands and agrees with CMS's interest in enhancing its stewardship of the Medicaid program through greater transparency of Medicaid financing, the proposed regulation goes far beyond this supposed intent.

EFFECTIVE DATES, TRANSITION PERIODS

The proposed rule has virtually no transition timeline for states to make changes to their financing and supplemental payment programs. We are concerned that states could panic at the sudden loss of funding streams and make dramatic cuts to the Medicaid program that would affect enrollees' access to quality health care services.

In addition, CMS proposes to limit approval for supplemental payment programs to a three-year period, which will leave states with insufficient time to secure approval from regulating agencies and legislatures. These financing and payment programs are complex; state governors and Medicaid directors need considerable time to work with their legislatures and affected stakeholders to implement any possible mitigation strategies. Also, CMS has often taken one to two years to approve state plan amendments, which adds even more concern to the three-year reapproval timeline.

CONCLUSION

While state administrators, lawmakers, and hospitals will certainly feel the crunch from a sudden change to Medicaid financing streams, loss of supplemental payment revenue, and the other proposals in MFAR, it is the people who receive Medicaid services who will feel the greatest effect. Although Medicaid recipients will be hit hardest, everyone in the community will suffer as a result of the changes proposed in MFAR. If a hospital has to reduce its number of employed clinicians or close a particular service because of reductions to Medicaid reimbursement, that service or those providers are closed to everyone. Particularly for services with high Medicaid utilization, such as obstetrics and neonatal intensive care, we are concerned that a significant reduction in reimbursement could reduce access for everyone in the community.

We believe the proposed rule undermines the Medicaid program in California and makes unnecessary and drastic changes to a program millions of Americans rely on each day to receive essential mental health services, prenatal care, cancer treatments, and more. CMS has provided little to no justification for these proposed changes, even though it will disrupt millions of Americans lives. As discussed in the comment letter of our parent organization, CommonSpirit Health, and the American Hospital Association, the proposal also suffers from numerous legal infirmities, particularly proposed policies that exceed the bounds of CMS authority. Mercy Hospitals of Bakersfield request that MFAR be withdrawn in its entirety.

We appreciate your consideration of these comments. We look forward to working with the agency at a future date to explore reasonable transparency measures in the Medicaid program.

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Footnote:

1/ Analysis provided to the American Hospital Association by Manatt Health, 2020

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The proposed rule can be viewed at: https://www.regulations.gov/document?D=CMS-2019-0169-0001

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