HMOs are dumping Medicaid contracts. EDs worry about their finances
Large plans quit Medicaid. But will providers see a hole in their cash flow?
How important is your Medicaid managed care contract? Several emergency physicians are about to learn the answer to that question. Some of the nation's largest commercial MCOs are getting out of the Medicaid business after finding that states can be just as demanding as employers when it comes to lowering their health care costs.
Health plans are terminating their contracts with states such as New York and Ohio and dumping thousands of Medicaid enrollees on other plans. Meanwhile, they're leaving hospitals and physicians potentially holding the bag on reimbursements. "Emergency providers aren't likely to feel the impact at first. But if these Medicaid beneficiaries don't find another health plan soon, many emergency departments (EDs) are likely to become their next primary-care providers," says John Sheridan, a Cleveland, OH consultant who specializes in government payment programs.
Providers will have to alter patient information
Most states are required by law to transfer enrollees to other Medicaid MCOs. They can also hold health maintenance organizations (HMOs) to their contractual obligations of serving their enrollee populations to the end of their contact period. That should take the sting off the change initially, Sherman says. Nevertheless, emergency providers are going to feel the turmoil to some extent.
Their patient information systems will have to adapt as enrollees switch health plans or return to conventional fee-for-service Medicaid. If the payment terms revert to fee-for-service, providers may end up getting more dollars per patient but seeing a greater number of sicker patients crowding ED waiting rooms. The higher acuity could eat up any possible advantages of fee for service, Sheridan says.
Some patients may fall through the cracks and end up for a time as uninsured when they turn up at the ED for primary-care services. In this and the previous scenario, providers may wind up losing payments or holding half-spent capitation budgets they can't use or will have to refund to the plan, Sherman says.
Many patients who get left out of remaining Medicaid plans for a time may be sicker or less healthy than the overall beneficiary population. The likelihood of this isn't great, Sherman says. But the trend is already surfacing under welfare reform wherein healthier recipients are finding work and the least capable are remaining on Medicaid.
The Medicaid plans that do remain may not have a contract with the medical group or hospital. Many of these plans may be nonprofit, Medicaid-only HMOs, which may have tighter budgets and less flexible contracting terms. The upshot is that emergency providers may find fewer financial rewards in a smaller field of payers.
No effect to be felt at first
On the surface, hospitals aren't likely to see any difference. "Will they know that U.S. Healthcare just dropped out of the program? No," says Sarah Smith, director of managed care for the 175-member Greater New York Hospital Association in Manhattan.
But, if the exodus from Medicaid touches off a round of sudden departures among several plans in the same market, or if a single plan serves a particular community and it leaves Medicaid, then providers will notice a sudden change in reimbursements, says Smith and others.
Earlier this year, Aetna-U. S. Healthcare, based in Blue Bell, PA, terminated its Medicaid contract in New York and Connecticut. The insurer cited high administrative costs. Now, some health care industry officials worry that Aetna's departure may trigger a domino effect, which is already occurring in upstate New York.
Hospitals in Cleveland, OH, have yet to feel any harsh effects, although large HMOs there have served notice on providers of jumping ship on Medicaid. But for many emergency physicians, Medicaid managed care has not been the panacea the HMOs had claimed, says Nick Jouriles, MD, an emergency physician at MetroHealth Medical Center in Cleveland. The departure of plans such as Aetna U.S. HealthCare from Medicaid is in some ways a nonevent, Jouriles says.
The system was rife with payment delays, and EDs have taken the brunt of these problems, he says. Outright nonpayments have occurred regularly, and enrollees have continued to use the ED for primary care, despite the HMOs' primary care referral networks, Jouriles adds. "No, we aren't sorry to see them go," he adds. At least two lawsuits filed by local hospitals, MetroHealth and University Hospitals of Cleveland, were triggered by HMOs' refusal to pay on certain claims.
Why are health plans dumping Medicaid? "They're pulling out because they're not making any money," says Neva Kaye, a director who oversees Medicaid at the nonprofit National Academy for State Health Policy in Portland, ME. In New York, for example, the amount the state pays HMOs has dropped 10-20% per member per month (PM/PM) since 1995. PM/PM rates have fallen to about $121.92 from a high of $171.22, according to published figures.
In 1995, Florida cut its payments to HMO by 14%. Meanwhile, the plans have not been able to hold down utilization, a key piece in making Medicaid managed care work for states. Utilization rates have not gone down despite risk-sharing between HMOs and providers. The reasons are due partly to generally poor health factors in the overall Medicaid population.
States have worsened HMOs' lot
But states have also enacted tougher restrictions on mastectomy surgery and maternity hospital stays that have driven up inpatient days. "The plans have always known that to make this work they had to be able to manage utilization," Sherman notes. But that hasn't happened, say many experts.
A study of Medicaid managed care in New York supported these views on utilization.1 Researchers found that access to providers by HMO enrollees was as good if not better than that of non-Medicaid managed care patients, and patient satisfaction was also higher. But, the frequency of visits to providers including EDs didn't vary significantly. "There is no indication that managed care differs from conventional Medicaid in overall use and associated costs of resources," the study stated. (For information on recent trends in Medicaid managed care, see the chart on this page and the chart on page 64.)
The biggest surprise that resulted from the study was the high level of patient satisfaction with Medicaid managed care. "Compared with beneficiaries in conventional Medicaid, managed care enrollees in general gave higher ratings of satisfaction." However, the report went on to say that while "enrollees had significantly greater odds of being extremely satisfied," it was difficult to gauge levels of extreme dissatisfaction.
The patient satisfaction issue is relevant to emergency medicine if health plans pull out of Medicaid managed care in large numbers, which no one has yet predicted, says Kaye. With more plans getting out of Medicaid, both enrollees and providers may find a different environment.
In a 1993 editorial published in the Annals of Emergency Medicine, a panel of emergency medicine professionals voiced concerns with Medicaid managed care in the emergency setting.2 The group included Larry Bedard, MD, who later became president of the American College of Emergency Physicians in Irving, TX, and Georges C. Benjamin, MD, who is now a state health official in Maryland.
Among the concerns the group had with Medicaid managed care were: 1) difficulty in patients' obtaining timely authorization from gatekeepers, 2) delays in obtaining timely and appropriate specialist consults, 3) the transfer of unstable patients to contracting facilities in violation of federal anti-dumping laws, 4) problems in determining the medical necessity of emergency services under managed care guidelines.
Medicaid HMOs have their defenders
In retrospect, the concerns appear to be aimed not so much at Medicaid as with the managed care system at large. But the system has its defenders.
"What's happening with the commercial HMOs doesn't mean that Medicaid managed care isn't a good idea," Sherman argues. The problems involving the plans' apparent refusal to pay claims in Cleveland, for example, isn't a function of Medicaid but of management problems within the organization, Sherman adds. As the ground shakes out, physicians and hospitals should assess the value of their Medicaid contracts and adjust their revenue expectations, Sherman and other experts say. For example:
· Meet with the plan administrators immediately to determine what preparations were made to handle the transition of enrollees to another plan. Don't assume that the patients will return to conventional Medicaid, says Kaye.
· Consider a Medicaid-only HMO in the future. These plans were originally licensed by states to specifically serve the Medicaid community. Although many also serve commercial beneficiaries, their primary constituents are Medicaid enrollees. Therefore, they are more likely to stay around and even prosper when the for-profit plans leave the market, Kaye says.
· Assess what proportion of a plan's total enrollment comprises Medicaid, says Smith in New York. The information will yield clues to how big of a hit an HMO's departure will be on the market. Although some 20 HMOs and in the city contract for Medicaid enrollees only about 23,000 of some 400,000 total covered lives in the area are Medicaid.
This means the average number of Medicaid enrollees per health plan is relatively small. Therefore, the loss of that contract isn't likely to have a great impact on providers financially in the short run, and virtually no effect when those enrollees are absorbed by another plan, Smith believes.
These conditions, however, are hypothetical reactions to current events, says Kaye of Maine. "It's too soon to say what will really happen," she states.
Reference
1. Sisk JE, Gorman SA, Reisinger AL, et al. Evaluation of Medicaid managed care-satisfaction, access and use. JAMA 1996;276:50-55.
2. Benjamin GC, Taliaferro EH, Bedard L, et al. Medicaid managed care and emergency care. Ann Emerg Med 1993;22:1746-1748.
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