Hospital Payment Change Sparks Debate
Around the State
State lawmakers raised questions last week about a plan that will overhaul the way hospitals get paid to care for Medicaid patients, pointing to potentially steep cuts for teaching and children's hospitals.
Some members of the House Health Care Appropriations Subcommittee and leaders of two influential hospital groups said they don't think the state should completely shift to the new payment system July 1, as required by law. Instead, they called for a transition period that could take up to a year.
"It is inconceivable that a change like this … can be done in one day,'' said Bruce Rueben, president of the Florida Hospital Association.
But state Medicaid director Justin Senior told members of the panel that he thinks the changes -- which will make the Medicaid payment system more like Medicare -- will be ready to take effect as scheduled.
"We believe we can get it right on July the 1st,'' Senior said.
The highly complex changes, which lawmakers authorized last year, will shift to a payment system known in the hospital industry as "diagnosis related groups," or DRGs. The changes will replace a longstanding system that involves calculating per-diem rates -- a system that includes wide differences in how much hospitals get reimbursed.
Broadly, the idea of DRGs is to classify patients based on factors such as their diagnoses or types of treatments. Those classifications are used to calculate payment amounts designed to more closely reflect the costs of treating patients than a per-diem rate would.
The controversy, however, stems primarily from the fact that moving to a DRG system would redistribute money within the hospital industry, effectively leading to winners and losers.
Among the biggest losers are teaching and children's hospitals, such as Jackson Memorial Hospital in Miami, Shands at the University of Florida, Tampa General Hospital and All Children's Hospital in St. Petersburg. Jackson, for example, is projected to lose about $44 million.
Many other hospitals would gain money through the changes, including for-profit hospitals operated by companies such as HCA and Health Management Associates. Senior said, in part, that DRGs better reward efficiency by hospitals.
But Rep. Janet Cruz, a Tampa Democrat who serves on the House subcommittee, said she is worried about "devastating" cuts to hospitals that train doctors, serve large numbers of children and treat complex medical conditions.
"I see the for-profit hospitals are going to be the big winners at the expense of the teaching hospitals,'' Cruz said.
Carrying out the law, the state Agency for Health Care Administration and consultants drew up details of the DRG system. Lawmakers this spring could tweak that plan if, for instance, they want to add a transition period or help funnel more money to facilities such as teaching or children's hospitals.
Tony Carvalho, president of the Safety Net Hospital Alliance of Florida, which represents teaching, public and children's hospitals, told the House members that the issue goes beyond how much money each hospital will receive. He said teaching hospitals need to be able to train physicians to meet the state's future medical needs.
"It's not just about the numbers -- who's winning, who's losing,'' Carvalho said.
But any changes aimed at shifting more money to groups such as teaching hospitals ultimately would pull money away from other hospitals.
"We have a finite budget we're working with, a finite pool of money,'' said Malcolm Ferguson, a consultant with the firm Navigant Healthcare who played a key role in putting together the plan.
Officials from the Florida Hospital Association and the Safety Net Hospital Alliance of Florida said they support moving to DRGs, a version of which has been used in Medicare since the 1980s. But Rueben said the new system needs time to be tested and validated, and some lawmakers appeared to agree.
"I need to hear more justification for no transition period,'' said Rep. John Wood, R-Winter Haven.
Health Care Appropriations Chairman Matt Hudson, R-Naples, said the current per-diem system of paying hospitals "doesn't make a great deal of sense." But he did not take a stance about whether lawmakers should include a transition period for the new system.
"Frankly, that is a decision we will make as we hear more information,'' Hudson said.