Math errors, Medicaid changes cause reimbursement pressures for Massachusetts hospitals

A cap on MassHealth reimbursement could serve a financial blow to Massachusetts hospitals in fiscal year 2017. 

In Massachusetts, Medicaid and the Children's Health Insurance Program are rolled into MassHealth. In an attempt to control costs and improve care coordination, the state is implementing various proposals to encourage MassHealth members to move away from fee-for-service plans and toward managed care organizations, which pay a provider group a set fee to coordinate a patient's healthcare.

Under the proposal, which is slated to take effect Oct. 1, MCOs are banned from paying hospitals more than 105 percent of the fee-for-service rates. Under fee-for-service, the state's Medicaid program pays hospitals about 76 percent the cost of care. With the cap in place, hospitals would be paid 20 percent below the cost of care.

As the state implements proposals to push more MassHealth beneficiaries toward managed care plans, the cap would cause Massachusetts hospitals to lose between $100 million and $150 million in reimbursement on an annualized basis, according to Tim Gens, executive vice president and general counsel at the Massachusetts Hospital Association.

Mr. Gens says the reimbursement cut is coming at a challenging time for hospitals. "This latest cut is inside an environment where there is already chronic underpayment," he says. "There's tremendous pressure to lower commercial payment rates and, similarly, there's lower reimbursement coming from Medicare this year for Massachusetts hospitals."

Although hospitals across the state are all facing financial pressures, the consequences of the newest cut will be determined by the situation of each hospital.

Baystate Health spokesman Ben Craft told WWLP news the reimbursement cap is a cause for worry. "We don't have a sense yet of specific impact, but it is certainly concerning at a time when Baystate Health is already experiencing about $40 million a year in losses due to underpayments through Medicaid services, added to the fact that we just had a $23 million hit from the wage data issue," he said.

The wage data issue Mr. Craft mentioned stems from math errors related to wages at Nantucket (Mass.) Cottage Hospital, which is owned by Boston-based Partners HealthCare.

Under hospital payment rules, Medicare is required to reimburse employee wages at urban hospitals at the baseline set at rural hospitals in the state. Nantucket Cottage Hospital typically sets the floor for wages at hospitals across Massachusetts because it is the only rural hospital in the state. Last year, when the hospital provided data that underestimated its wages, it dragged down payments for hospitals across the state.

Massachusetts hospitals will lose an estimated $84 million total due to the math errors. 

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