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Legislative panel discusses mounting Medicaid reimbursement costs Friday, Feb 24, 2006 By Wesley Brown Arkansas News Bureau LITTLE ROCK - Arkansas hospitals providing care to the state's Medicaid population racked up more than $64.1 million in losses in 2004, a consultant and hospital representative told a Legislative panel Thursday. Members of the Arkansas Legislative Council's Hospital and Medicaid Study Subcommittee also briefly discussed the $1.8 billion sale of Beverly Enterprises Inc., but made no recommendations concerning the recent deal. Lawmakers focused mainly on the state's Medicaid problems. Bo Ryall, executive vice president of the Arkansas Hospital Association, and Susan Miller, a consultant with BKD Healthcare Group, painted a troublesome picture for lawmakers concerning the state's Medicaid reimbursement program, which the Legislature has been studying since 2002. "Medicaid losses are mounting," Ryall told the panel following Miller's presentation showing losses for the federal-state medical insurance program have nearly doubled since 2002. "These numbers are going to jump quite a bit for 2006, and that is going to put the hurt on a lot of rural hospitals," Ryall said. Miller's 12-page report showed that, on average, the Arkansas Medicaid program paid less than 77 percent of costs incurred by hospitals in fiscal 2004 for treating Medicaid patients. Miller said inpatient care totaled $205 million at 63 Arkansas hospitals in 2004, but that the hospitals were reimbursed $140 million under traditional Medicaid reimbursement rules. After receiving some supplemental federal dollars from Medicaid's Upper Payment Limit fund, losses still amounted to $24.1 million, she said. Outpatient care at 59 Arkansas hospitals included $71.7 million in expenses versus $31.7 million in reimbursements from the federal government, she said. "These hospitals are significantly underpaid for inpatient and outpatient services to these recipients," said Miller, whose company is the largest CPA firm in the state. Both Miller and Ryall said Arkansas hospitals are losing money because the state uses an outdated reimbursement method that imposes an absolute per-day cost limit of $675 in place since 1996, along with a 24-day cap on Medicaid payments. Also, the federal formula for costs covered by Medicaid have not kept up with the rate of inflation, Miller said. "Unfortunately, Medicaid recipients are typically indigent and usually not able to pay the hospitals for this extra care," Miller said. If losses incurred by hospitals after 24 days was included in the study, Miller said, the additional expenses by Arkansas hospital would jump to $26 million or more. The BKD consultant said that changes made to the UPL benefit last year will also change the ownership classification of some Arkansas hospitals from public to private. She told the legislative panel that medical facilities that do not qualify as non-state public hospitals receive much less in supplemental payments under the UPL program. Both Miller and Ryall, whose association commissioned the report, recommended that the Legislature raise the $675 inpatient per diem amount to $889 per day as quickly as possible to account for inflation over the last 10 years. If the cap were set at $1,579, then the state per diem limit with equal the federal standard set in 1996, she said. Other changes the state should consider include possible revisions to the state's plan for participating in the UPL program and increasing the allowable costs for outpatient care. Miller also said the state should draft detailed Medicaid cost reports and distributed them to hospitals statewide to insure they are accurately filing Medicaid expense reports each year. After the discussion on Medicaid, the panel briefly questioned nursing home officials on the recent sale of Beverly Enterprises. Last week, shareholders approved the $1.8 billion sale of the Fort Smith nursing home giant to California-based Pearl Senior Care Inc. for about $12.50 per share. Beverly Enterprises expects to complete the deal by March 15, subject to the satisfaction of the closing conditions set forth in the merger pact. Most members of the panel agreed that the Legislature should not get involved in blocking or questioning the sale. Sen. Barbara Horn, D-Foreman, a vocal supporter of the nursing home industry, championed the deal and urged lawmakers to forego questioning the sale. Jim Cooper, president of the Arkansas Healthcare Association, the nursing home lobby, told lawmakers they should welcome the new California owner and the hundreds of millions of dollars the company is spending to take Beverly private. He told lawmakers that BEI's soon-to-be new boss, Ron Silva, has raised questions about the "unfriendliness" of the state's legislature and courts. "It has been our contention that the purchase of Beverly by a private entity is the business of business, not the business of government," Cooper said. Rep. Stephen Bright, R-Maumelle, a frequent critic of the state's nursing home industry who has held several legislative hearings to protest the Beverly sale, did not attend Thursday's meeting. |
