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State’s projected savings dwindle as Medicaid project is delayed yet again

Another delay in the start of managed care for Medicaid patients could leave a $16 million hole in this year’s budget as hospitals and mental health care centers dispute Medicaid reimbursement rates and question the quality of patient care under a new system.

The state’s pharmacies and solo practitioners have begun signing contracts with the three managed care companies hired by the state this summer to coordinate and oversee the state’s Medicaid program. That’s a key step because the state can’t move to managed care until there is an “adequate network” of health care providers and pharmacies on board for the state’s 140,000 Medicaid patients.

But most of the state’s hospitals and mental health care centers have yet to sign managed care contracts. Officials in both communities are raising concerns about doing so, especially because several New Hampshire hospitals are suing the state in federal court over current Medicaid reimbursement rates. The hospitals have said those rates are unacceptably low and that the managed care contracts will cut them further.

“Why would you entertain signing something to pay you less?” said Frank McDougall, a spokesman for Dartmouth-Hitchcock Medical Center, one of the hospitals suing the state.

Meanwhile, mental health care providers are raising concerns about the nature of contract discussions.

“Since mental health services were first folded into the plan a year ago, . . . we have consistently maintained that if managed care is going to be used for Medicaid in New Hampshire, it has to be done in a manner that protects consumers, improves quality, and offers innovation and creativity,” wrote Jay Couture, president of the New Hampshire Community Behavioral Health Association, to state senators in October. “To date, however, the process and the dialogue around the proposed plan have focused on cost and contracts.”

The state was scheduled to move to managed care in July. That didn’t happen because the state Department of Health and Human services asked for an extension.

“The state realized it was going to be impossible to make that deadline because there were too many pieces of the puzzle to be put together so that when we roll this program out, it’s done right,” said Kathleen Dunn, associate commissioner and director of the state’s Medicaid program. “We feel strongly that if it’s not done right from the beginning, and becomes a bad experience for Medicaid clients or providers, it could undermine the stability of the program.”

The start date was pushed to October and then to January. In his letter to state senators, Couture, of the state’s mental health care community, said the earliest start date now will be April. And he expressed doubt about an “adequate network” being in place by then.

“The uncertainty of when, or even if, this Medicaid managed care system will start up is creating administrative problems for (the community mental health centers),” Couture wrote. “The working assumption is that unless and until the major hospitals get some resolution on the Medicaid Enhancement Tax and (Medicaid reimbursement) issues, an adequate provider network cannot be developed.”

These delays are creating a financial shortfall for the state that is likely to get worse.

This year’s budget, which began in July, anticipated a $16 million savings from moving to managed care for Medicaid patients. Health and Human Services Commissioner Nick Toumpas told the Executive Council earlier this month that the delay has already cost the state $9 million in savings, according to the New Hampshire Business Review. And Toumpas said the state will lose $1.5 million each month of additional delay.

If the managed care companies don’t get the hospitals and mental health providers on board by April, the state would lose $15.5 of the $16 million in budgeted savings under Toumpas’s accounting.

Gov.-elect Maggie Hassan is aware of the budget shortfall and concerns surrounding managed care, her spokesman Marc Goldberg said by email.

“Hassan intends to move forward with establishing by executive order an Oversight Commission for the Medicaid Managed Care program to address concerns with the program, to oversee the contracts, and to ensure that taxpayers and health care recipients are protected,” he said. “As with other budget challenges, if the projected savings are not able to be realized, she will bring people together to make the difficult decisions needed to ensure a fiscally responsible balanced budget.”

The Executive Council approved contracts worth a combined $2.2 billion in May to have three private companies implement managed care for the state’s Medicaid program. The Republican-led Legislature and Executive Council predicted managed care would not only improve the quality of care by ensuring patients got treated early before they got seriously ill, but drop the cost of care enough to save the state $30 million over two years.

“This will mean that our Medicaid program will keep people healthy instead of paying for people who get sick,” said House Speaker Bill O’Brien in May. “At the same time, it will save state taxpayers millions as we focus on prevention and reducing the high overheard of our Medicaid program.”

New Hampshire was one of only three states without a managed care program when executive councilors approved the contracts in May. The others are Alaska and Wyoming. The first year – when hospitals, independent practices and pharmacies enrolled – was expected to go smoothly because so many other states have done this before.

The challenges were expected to come in the second year, when the state planned to add long-term care for the developmentally disabled. That’s not something other states have taken on to the degree New Hampshire will. But the challenges have been immediate.

McDougall of Dartmouth-Hitchcock said his hospital won’t sign a contract with any of the managed care companies until the Medicaid reimbursement rates improve – either by agreement with the companies or as a result of the pending lawsuit.

He said Dartmouth-Hitchcock lost $64 million in fiscal year 2012 treating 42,000 Medicaid patients because the state pays the hospital less than it costs for Medicaid care. In addition, the hospital paid $43 million in Medicaid enhancement taxes, he said.

“In a state that pays the lowest Medicaid (reimbursement) rates in the country,” McDougall said, “and taxes its hospitals like Dartmouth-Hitchcock that are nonprofit at 5½ percent of revenues, why would any hospital sign a contract that makes that horrible deal worse?”

Lakes Region General Healthcare, which owns the hospitals in Franklin and Laconia, is also a plaintiff on the lawsuit against the state. Henry Lipman, chief executive officer of LRGH, said he and his colleagues have met with the managed care companies. He said he’s not opposed to managed care and believes it can improve the quality of care while reducing the cost – but only if it’s done well.

Lipman has concerns about how the program is proceeding in New Hampshire. For one thing, the contracts call for a 20 percent drop in Medicaid payments to hospitals after the first year under the assumption that better coordination will mean that kind of savings. That’s an ambitious pace and not one tried elsewhere, Lipman said. And the managed care contracts do not anticipate the hospitals sharing in the savings, something that Lipman said would help hospitals improve care for all patients.

“Ultimately we want this to work for patients covered by Medicaid,” Lipman said. “And if it doesn’t work financially, the situation we find ourselves in with Medicaid now is that we are paying the state to care for Medicaid patients. To absorb further losses on that means it could take away from the care we provide other patients.

“We are trying to work constructively (with the state and the managed care companies),” Lipman said. “Some of these things will take time to work out.”

(Annmarie Timmins can be reached at 369-3323,
atimmins@cmonitor.com or on Twitter @annmarietimmins.)

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