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So far, Louisiana's community hospitals have avoided a proposed change to the Medicaid program that the providers estimate would cut their funding by as much as $65 million over a two-year period.

However, the standoff between the hospitals and state health officials over the Medicaid program's prior authorization system may soon be resolved. Louisiana Hospital Association (LHA) President and CEO John Matessino said his members expect to work out some sort of agreement with the Louisiana Department of Health and Hospitals and state Legislators.

Both sides agree that the state's prior authorization system, which has not been updated since 1995, could use tweaking. State Department of Health and Hospitals (DHH) projections show Louisiana taxpayers are coughing up $54 million a year for services that may not be medically necessary, Secretary Alan Levine said.

"Nobody wants us to do that. No taxpayer wants us to pay for something that is unneeded. It doesn't make sense," Levine said.

Levine said a 2007 report by the department's outside auditors found a number of problems with the system, including:

• All medical-necessity criteria and medical policy currently in use are extremely outdated and in our opinion are inappropriate for supporting medical management.


• Patients stayed in hospitals longer than they should have because there was no assessment of the patient's medical severity.


• RN case managers lacked the clinical information necessary to make medical necessity decisions.

"All I'm trying to do is bring us up to the current standards. That's something I have to be very clear about," Levine said. "I'm not cutting hospitals. I'm not reducing hospital reimbursement. I'm trying to avoid paying for things they're not entitled to be paid for."

For example, 10 to 15 years ago, a patient who had open-heart surgery could expect to spend as much as 10 days in the hospital, Levine said. Advances in medicine and the great work that hospitals do has cut that time to five or six days.

But a hospital using the old criteria would be charging the state for four extra days, Levine said. If the hospital had a per diem of $1,000, that would be $4,000 the state would pay when the patient shouldn't be in the hospital.

Matessino said the hospitals don't object to the higher standards because most hospitals have already implemented them.

"We don't object to that. We do object to that as a means to cut the budget," Matessino said.

The LHA feels that the Medicaid reimbursement rates should be raised if the new criteria are being used, which will lower hospitals' funding.

"It's like we're fixing one side and not the other," Matessino said.

That doesn't make sense either, he said. Health care costs have skyrocketed since the mid-1990s, yet only four times in the last 15 years has the state increased Medicaid reimbursements to community hospitals.

The community hospitals – not the rural hospitals and not those in the state's charity system – had a Medicaid shortfall of over $125 million during the 2006-07 fiscal year, Matessino said.

"That's how much they didn't meet costs. Not charges, costs," Matessino said.

Now, DHH wants to remove about $65 million from community hospitals' budgets over the next two years, Matessino said.

While the LHA and DHH agree that the system needs work, they appear far apart on what might seem fairly basic issues.

The department proposed updating the standards as part of an effort to address a projected $81 million budget deficit. The Joint Legislative Committee on Budget agreed to $58 million in cuts but not those affecting community hospitals' funding. During the last legislative session, DHH was given $2 million to update the prior authorization system.

Matessino said the LHA has questions about whether there actually is a budget shortfall.

DHH made that projection based on one month's data, and the department has not shared that information or the methodology used to arrive at the projection, with the LHA, Matessino said. In the past, DHH has been wrong more often that right in its budget forecasts.

"A projection is a projection," Matessino said. "But when you're trying to make a budgetary projection off of one or two months' data, there probably is some pretty good room for error, I don't care how good a statistician you are."

Meanwhile, Levine said an LHA letter that stated DHH finished the last fiscal year with a $254 million surplus was just wrong.

The $254 million figure is "a phantom number" and represents the spending authority — not cash — the Legislature gave the department, Levine said. The department had the authority to spend that money if it had the claims to back up the expenditures; there is no surplus."

"The only surplus we had was $25 million and that money was rolled into this year's budget," Levine said.

Levine said the failure to update the prior authorization system could expose the hospitals and the state to millions in federal takebacks or disallowances.

The federal government typically takes Medicaid money back if the state pays for services that are not provided or services that are not medically necessary, Levine said. At present, the federal government has told Louisiana it owes $771 million for other disallowances.

Tags:

Alan Levine, Department of Health and Hospitals, John Matessino, Louisiana Hospital Association, Medicaid

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