Medicaid switch stirs grumbles Challenge to MCOs, and to providers


The switch of the state's medical assistance program to a managed care system has saved $40 million this year and will save $50 million annually in future years, state officials say.

At the same time, it has proved a challenge to the managed care companies as they struggle to absorb hundreds of thousands of new members, some of whom -- such as the homeless -- present problems they haven't seen before.

And the change has produced even more problems for clinics, hospitals and doctors, who complain about slower and lower payments. Some examples:

Jeff Singer, interim director of Health Care for the Homeless, says his organization is seeing the same patients, providing more care, and getting paid less. "We'll probably see a 50 percent reduction in Medicaid revenue," Singer said. Medicaid payments account for about 10 percent of his budget.

Patricia Cassatt, director of People's Community Health Center in Baltimore, said her clinic has laid off 11 employees, about 30 percent of its staff, while struggling to care for the same volume of patients. "I don't want to say we're cutting corners," she said, "but we're not as comprehensive as we used to be."

The Kennedy Krieger Institute experienced a 40 percent drop in patient volume for the first three months, although it is now close to normal, said Dr. Gary W. Goldstein, its president. The institute, which serves children with disabilities, usually operates with about a 2 percent profit margin, but will be in the red by percent to 3 percent this year, Goldstein added.

Medicaid receivables for hospitals -- payments for treatment due from Medicaid -- reached an average of 125.8 days in 1997, up from 70 days in 1995, according to the Maryland Hospital Association. All receivables, from Medicaid and other payers, were at 81.4 days in 1997, MHA said.

Dr. Martin P. Wasserman, state health secretary, said that while there have been some start-up problems and lower payments to providers, the disruption and financial problems should be temporary.

"Remember, this is the beginning of a process," he said.

By providing good preventive care, he said, health plans and providers can keep people healthier and still run at a profit.

The Medicare HMO program is aimed at controlling the state's spending on Medicaid, health insurance for the poor and disabled. Previously, the state Medicaid program generally operated under a traditional fee-for-service basis -- a system that saw state Medicaid spending jump 21 percent in five years, to about $2.3 billion.

By moving more than 300,000 Medicaid recipients -- mostly welfare mothers and their children -- into HMO-like plans called managed care organizations, or MCOs, the state instead pays a fixed monthly rate per enrollee, or capitation rate, designed to peg state spending at 90 percent of what it would expect to pay in fee-for-service payments.

Besides controlling costs, Wasserman said, the program, called Health Choice, should improve care by giving every patient a "medical home" and providing financial incentives for the MCOs to keep their members healthy.

The program's regulations, he said, specify required exams and timetables to make sure that Medicaid recipients get appropriate care.

"We have changed Medicaid from a bill-paying, passive organization to a system with a lot more oversight," Wasserman said. "I am asking for value returned on my dollar. I am asking the MCOs to give me what I pay for."

It is too early, he said, to determine whether care has met standards. Audits of care delivery are scheduled to begin next month.

Dr. Peter Beilenson, Baltimore health commissioner and a critic of managed care for Medicaid, said he believes that some categories of patients -- substance abusers, disabled children and mental health patients -- "are falling through the cracks."

So far, he said, indications of problems are "anecdotal," and he believes that the state should have moved more quickly and aggressively to track care.

The state began sending enrollment packets covering more than 300,000 people last June. Medicaid enrollees (excluding some categories, such as nursing home residents) were asked to choose among three HMOs that have traditionally enrolled some Medicaid patients and six start-ups, most sponsored by hospitals.

People who failed to make a choice were "auto-assigned" by an enrollment contractor, based on their previous doctor, if known, otherwise randomly. About 40 percent in Maryland were auto-assigned, according to Wasserman, who said that compares favorably with other states, where the figure has been around 50 percent.

The three traditional HMOs wound up with about two-thirds of the enrollees: 77,609 in FreeState (owned by Blue Cross Blue Shield of Maryland), 75,692 in Prudential and 55,237 in United HealthCare (Chesapeake), as of the end of last month.

The largest of the MCO start-ups is Priority Partners, owned by Johns Hopkins and a group of community health centers, with 34,711 enrolled. The other five had about 60,000 among them. But the start-ups were not necessarily looking to be large insurers.

"Our objective was not to go after maximum membership," said Peter B. Mongroo, president of Helix Family Choice, the MCO owned by the five-hospital Helix Health group. "It was to go after and retain the patients from our community hospitals and clinics."

In the beginning, "the enrollment process was awful -- people were on hold for hours" when they called for information, said Susan Garrett, clinical coordinator for Greater Baden Medical Services, which runs a health center in southern Prince George's County and another in Charles County.

Between early enrollment lags, directory errors, plan switches and other sources of confusion over the new program, health providers said they sometimes had difficulty finding out which MCO should be billed for which service. Or, they said, patients would show up with a card for an MCO with which the doctor or clinic did not have a contract. The result, they said, was an increase in unpaid care and delays in getting paid.

Wasserman said the state will impose penalties if payments are made more than 30 days after the MCO receives a complete bill. However, he added, when there have been complaints from hospitals and doctors, "every time somebody sent up a stack of bills, there were major problems in the bills. I can understand why the MCOs weren't paying."

Complicating the equation for the community health centers is a switch from an old reimbursement system, in which they received money based on costs, including such services as translators and patient transportation. Now, they have to negotiate rates with the MCOs, which are used to paying lower rates.

Many of the health centers receive capitation payments from the MCOs -- as little as $5 per month for some children, said Cassatt of People's Community Health Center. But the switch from fee-for-service to capitation makes it impossible to compare the rates directly, she said.

Her center, she said, made cuts in anticipation of the revenue loss. It has discontinued some services, such as providing transportation for patients, and there now is "a longer lag time to get an appointment," she said.

Goldstein said Kennedy Krieger, which gets fee-for-service payments as a specialty provider, is receiving rates that are about 75 to 80 percent of the payments it got before the switch.

And, Goldstein continued, it took time to get approvals for specialty care for patients newly enrolled in the MCOs. That, he said, is the reason Kennedy Krieger's patient load dropped so sharply the first few months.

Individual physicians who join MCO panels and treat Medicaid enrollees also feel they have lost some of their patients, said Dr. Lenox S. Dingle Jr., who has been active in Medicaid issues through the Monumental City Medical Society, a group of African-American physicians. "The patients are so confused that they're signing up for plans where their physician is not on the panel," Dingle said.

Wasserman said his department has made good progress in ironing these problems out. While providers complain about lower rates, the MCOs say it is too early to tell if the business will be profitable for them.

"We decided last April we were going to be in this business or not be in it," said Dr. Bernard J. Mansheim, chief operating officer of United HealthCare of the Mid-Atlantic.. "We need to be in for some semblance of the long haul. We're committed to be in it for a few years."

Pub Date: 5/03/98

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