DENVER — Several converging factors could make the next few years especially complicated for state Medicaid systems, with the potential for new cost-setting strategies to affect providers from coast-to-coast.

Martin Allen, senior vice president of reimbursement policy for the American Health Care Association, cautioned providers Tuesday to advocate for themselves as states tackle routine rate rebasing, convert from therapy-based payment systems to case-mix versions more in line with Medicare, and also look to adjust to new federal regulatory requirements.

“We have to be very careful about the dollars associated with the next rate cycle and case-mix indexes associated with that as well,” Allen told providers at an educational session at the AHCA/NCAL annual meeting Tuesday.

“The general theme is acuity levels are still high and people coming into our buildings are still sicker, even though we’re not dealing with [significant] COVID diganoses anymore,” he added. “From a Medicaid perspective, we want to make sure those themes get built into  any rebasing process.”

Nearly half of states rebase per-diem rates annually, and the recent MDS transition will throw an extra wrench into the process for many states in 2023 and 2024. Gone with the old MDS system is Section G, which many states used to calculate clinical reimbursement on the Medicaid side. As of 2019, 34 states were still using a RUGS-based system to capture acuity, according to MACPAC data cited by Allen. 

Some states that were unable to transition to their own Patient Driven Payment Model-like models in time for that have frozen case mix while they develop a new standard. Others are using an Optional State Assessment that can be used to convert to old RUGS-based scores, but they will still need to work toward a permanent replacement.

“We have to be engaged in the process of revision,” Allen said, noting that AHCA is offering states feedback in addition to audits typically being led by accounting firm Myers & Stauffer.

One key will be for states to add measures that accurately reflect the needs and conditions of Medicaid long-stay residents, since PDPM is geared toward short-stay patients.

“We want to have adequate time to make the changes both from a cost standpoint and a rate standpoint,” Allen added. “With a hard transition … your risk of winners and losers can be very great.”

A phase-in would instead allow state Medicaid systems to catch problematic factors. So far, in states working on transitions, providers are asking for “hold harmless” provisions. Those can limit deep cuts, but they also limit higher payments to providers who would pick up significant acuity-based payment increases, Allen explained.

It’s important that states recognize a technical conversion shouldn’t be used to clawback money from providers, especially if cost-reporting information might be used simultaneously to adjust rate methodology or rates.

He said that states tackling both efforts at the same time could “muddy the water” and threaten providers’ livelihoods, and in turn, force providers to reconsider their approach to Medicaid patients or close units or buildings. That could be worsened by cost data that is skewed by COVID-era government support that temporarily helped providers counter higher costs.

“This shouldn’t be an opportunity for the states to pull money out of the Medicaid program,” he added. “Budget neutral or better. We need to hold states accountable to make sure there are no changes.”

In a LinkedIn post Tuesday, reimbursement expert Marc Zimmet cautioned providers against that “better” standard.

“Operators anticipate significant rate increases per pre-transition modeling, but without additional funds, we  end up exactly where we were under the old system,” the Zimmet Healthcare Services Group president and CEO wrote. “Invariably, the same operators with high scores in one system have the highest scores in the new one because CMI is often as much about reimbursement management as it is patient acuity.”

“When all is said and done, the state wasted valuable resources, providers wasted valuable resources, all to rearrange the same deck furniture,” he noted. “I asked this question when CMS effectuated the PDPM recalibration: What was the point?“