State changes plans for sharp Medicaid cuts, payment delay

June 04--Hospitals and doctors have caught a break now that Ohio Medicaid has decided not to delay payments and has softened a previous plan to cut hospital payments by 5 percent.

Ohio Medicaid planned the cuts and payment delay because it projected that it was not given enough money from the state legislature to pay for expenses without making cuts.

But officials with the insurance program for the poor say since the state's poverty rate has declined, Medicaid's analysts now expect to hit their budget, although with razor thin margins.

The fiscal year starts July 1 and Ohio Medicaid had been planning to make $1.1 billion in hospital payment cuts during the 2018 and 2019 fiscal years but the department reforecast and only needs to cut $214 million.

"There was enough savings to avoid that cut," said Greg Moody, director of the Ohio Department of Health Transformation, which oversees the Department of Medicaid.

The Ohio Hospital Association, however, said that while the cuts in payment won't be as steep as the state originally planned, they are still unsustainable to many hospitals.

Nearly 30 percent of Ohio hospitals operate below a two percent margin, of which 20 percent operate with negative margins, said John Palmer, spokesman for the hospital association.

"We were relieved to hear that the amount was reduced but overall cutting payments to hospitals is impacting patient care," Palmer said.

The primary reason for the savings is that the number of enrollees in Medicaid has declined and resulted in a savings, Moody said.

"The economy has continued to strengthen slowly but steadily," Moody said.

Addiction and mental health care providers had also anticipated being hit hard by Medicaid's payment delay in June, which could have created additional money problems for these providers at the same time as the state overhauling the way those providers get paid.

On July 1, Ohio Medicaid will switch from directly paying those providers for their services and instead have those providers contract with private insurance companies like CareSource that manage Medicaid plans on behalf of the state.

For the first phase of this change, Ohio Medicaid at the beginning of the year switched to a different billing coding system, which providers said made it more technically difficult to submit the paperwork to get paid.

The Ohio Council of Behavioral Health & Family Services Providers has warned that the financially fragile providers it represents -- which provide needed services for addiction and mental health care -- could be pushed out of business from the burden of the changes and should be given more time to prepare.

The state is still going through with its plans to implement the changes July 1.

In April, state had delayed payments back a week, which in effect pushed back into the next year a weeks worth of bills that Medicaid needs to pay. The move saved $66 million this fiscal year, but strained providers who are now a week behind on payments.

"The one-week Medicaid payment delay in June would have been catastrophic for many providers as they recover from the one-week delay in April and are headed into nearly a three-week delay when the state closes the system for year-end and the July 4th holiday," said Lori Criss, CEO of the The Ohio Council of Behavioral Health & Family Services Providers.

This state shut down is an annual occurrence, but Criss said the impact for behavioral health providers is magnified this year because the April delay and first phase of the payment overall has cash reserves and lines of credit have been depleted by the April delay and BH Redesign implementation."

The state was considering another payment delay in June if it was still unable to make its budget. However, Moody said new projects from Medicaid's analysts show the state is going to end the fiscal year on June 30 with a small surplus.

"We had heard and are sensitive to concerns from providers that the transition on July 1 to managed care is going to require their full focus and we didn't want them to be distracted with a cash flow delay right on the eve of that transition," Moody said.

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