Medicaid payment bundling sparks controversy in Ohio

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Medicaid payment bundling is emerging as a key topic in national healthcare reform. As part of their research on bundling, federal lawmakers should pay attention to what is happening in Ohio.

In July, the state included payment bundling for skilled nursing facilities in a last-minute addition to its budget package. (That already should tell you something.) While it only has been fully in place since September, it already is causing heartburn for the field.

Under the program, skilled nursing facilities receive an extra $3.91 in Medicaid per resident per day. That is to handle ancillary services, such as durable medical equipment, oxygen, and ambulance services. Previously, facilities would charge the state for these additional services.

The result is that those providers that specialize in special needs residents, such as paraplegics or those on dialysis, are feeling short-changed.

“If you have a lot of that, your costs are going to be much higher than a facility that doesn't do any of that,” said John Alfano, president and CEO of the Association of Ohio Philanthropic Homes, Housing and Services for the Aging. “The bundling is a fixed flat price. There's no provision for those that are outliers.”

Some providers say they do not have enough money to replace or buy specialty wheelchairs with the fixed cost, or to send residents to dialysis. There are also stories of providers who have turned away higher acuity residents because of the expense.

While he's still in a wait-and-see mode, Alfano said he expects more of this, as well as facilities going out of business.

 “If you are a provider with no specialty needs, you are going to be better off than what the governor originally proposed,” Alfano said. “For our members, we don't see anything positive for the nonprofit providers.”

Big hits

Of course, bundling is only part of an overall Medicaid hit that skilled nursing facilities have taken since the state budget took effect in mid-July, Alfano asserts. The state has doubled the franchise permit fee, also known as the bed tax. It also is moving to a price-based system and away from a cost-based system. The bundling program was thrown in at the 11th hour to help the budget and receive enhanced federal matching dollars, he said. To compound the funding problems, there also has been a Medicare reduction.

The bundling is “one more issue, one more dagger that our members are dealing with,” says Tim White, director of communication and public relations with the association.

But not everyone in the provider community is focusing on the downside of payment bundling. Peter Van Runkle, president and CEO of the Ohio Health Care Association, notes that bundling helps draw down more federal matching dollars, which, in turn, help fund skilled nursing facility Medicaid costs.

The program also encourages efficiency because providers have to work with a fixed amount of money, he says. Another positive is it is creating greater competition among services such as transportation, and, as a result, driving down costs.

“In the past, [facilities] didn't care how much [the services] cost for Medicaid patients because states were paying directly,” he explains.  

But even Runkle acknowledges that the program is hard on facilities that serve higher acuity populations.  

“To pay everyone the same amount really hurts those facilities and those patients,” he says.

His association is working on a way to tweak the system, he says.

“There are potentially many different ways of adjusting this, but there is a growing consensus that some sort of adjustment is needed,” he said.

Changing the payment for those facilities that have more acute residents is one answer. Meanwhile, Alfano believes in a system that pays per diagnosis.

Either way, the program and the way it was introduced may serve as a cautionary tale for other states, or even the federal government. The payment bundling plan in Washington would involve hospitals and post-acute providers.

“This was a last-minute budget deal," Runkle says. "It was put in at the 11th hour. A lot of the details weren't really thought about or discussed. If any other state was going to do this they ought to take some time to get it done correctly ... rather than throwing something in."


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