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Illinois hospitals say they're not getting paid, question state's outsourcing of Medicaid

Chicago Tribune – March 11, 2019, 3:30 p.m. -- It was supposed to be a winning arrangement for everyone.

Last year, Illinois’ governor at the time, Bruce Rauner, revamped and expanded a program for paying for care for millions of Illinois residents, many of them poor. Called Medicaid managed care, the system — in which health insurance companies and organizations administer Medicaid benefits for the state — held the promise of improving care for patients and saving the state money.

One year later, the reality is far different, hospital officials say.

Payments from the companies are routinely late, and sometimes don’t come at all, hospital officials say. Sinai Health System, for example, which serves many low-income patients, has had to hire a consultant to help it get paid.

“At Sinai, where every dollar should go to patient care, we’re spending dollars on consultants to get money for care we already provided,” said Sinai President and CEO Karen Teitelbaum.

The expansion of the system has been “a bumpy ride,” said A.J. Wilhelmi, president and CEO of the Illinois Health and Hospital Association. “The program is not delivering.”

It’s a notion the Medicaid managed care organizations deny. There’s room for improvement, but things are not as dire as the hospitals claim, said Samantha Olds Frey, executive director of the Illinois Association of Medicaid Health Plans. Hospitals must do a better job working with the companies to ensure quick payments and better coordination of care for patients, she said.

“We’re not saying everything is perfect,” Olds Frey said. “But what we are saying is accountability needs to be shared.”

Illinois began moving large numbers of people onto Medicaid managed care around 2011. In Illinois, five companies and one Cook County-run organization now administer Medicaid benefits through the program on behalf of the state for about 2.2 million people.

The idea was that the companies would be more innovative and efficient in spending Medicaid dollars than the state, partly by keeping people healthier.

Under traditional Medicaid, the state pays hospitals and doctors for each service they provide to Medicaid beneficiaries. But under Medicaid managed care, the state pays the companies a set amount per member, regardless of how much care that member needs. In Illinois, about two-thirds of all people on Medicaid are in managed care, with the rest still part of the state-administered, traditional system. Medicaid is a state and federally funded health insurance program that serves many low-income people.

Medicaid managed care has grown more popular across the country in recent years, with states continually expanding their programs. Last year, the Rauner administration rebooted and expanded the Illinois program to every county in the state.

But hospital leaders say the promises of better care and lower costs are not being kept. Hospitals’ claims to the Medicaid managed care companies are being denied about 26 percent of the time, according to the hospital association.

It’s a major problem for a hospital like Loretto, where most patients are on Medicaid. The hospital has had to delay payments to some of its vendors and defer maintenance in some situations, said George N. Miller Jr., Loretto Hospital president and CEO.

“We’re going to have to reduce services, reduce staff and reduce our expenses when they don’t pay us,” Miller said.

Amita Health, which has 19 hospitals in Illinois, has hired more than 30 full-time workers to deal with the issue, said Mark Frey, Amita president and CEO.

“When you’re not being paid for the services you’re providing, it has an impact on the level of service you can provide, the number of staff you can employ,” Frey said.

Last year, the Illinois auditor general found that the state agency that oversees Medicaid, the Department of Healthcare and Family Services, failed to properly monitor more than $7 billion in payments made to and by managed care organizations.

The department said in a statement this month that it has implemented a number of upgrades and is evaluating its policies to “ensure efficient billing, payment, administration, and other systems.”

The Medicaid managed care association also defends the system, saying not all hospitals are having problems getting paid. The association points to state data showing an average denial rate of 10.6 percent — far below the figures cited by hospital leaders.

“There are hospitals that have 3 or 4 percent (denial rates) and then some with 40 percent,” Olds Frey said. “What that tells us, and tells me, is there are best practices out there.”

She said she hasn’t seen issues with insurers taking a long time to pay up, and rebutted hospital leaders’ assertion that Medicaid managed care hasn’t improved the quality of health care in Illinois. She pointed to successes such as high rates of immunizations for human papillomavirus, or HPV, among participants.

Medicaid managed care organizations have been more creative in helping patients than the state could be — such as by giving air conditioning units to patients with asthma during the summer to help prevent them from experiencing attacks, Olds Frey said.

As to whether the system is saving the state money, Olds Frey believes it is — though that can be difficult to prove.

In fiscal year 2018, the state spent nearly $20 billion in state and federal money on Medicaid, including nearly $11 billion on Medicaid managed care, according to the Department of Healthcare and Family Services. That was up from $17 billion spent on Medicaid, including nearly $9 billion spent on Medicaid managed care in fiscal year 2016.

That increase, however, is a function of rising health care costs, Olds Frey said. She believes the state would spend more than that without Medicaid managed care.

Studies about whether Medicaid managed care saves money, across the country, have had somewhat mixed results, said Robin Rudowitz, associate director for the Kaiser Family Foundation’s program on Medicaid and the uninsured.

Individual Medicaid managed care organizations also stand by their work.

Karen Brach, president of MeridianHealth, the largest Medicaid managed care organization in the state, said in a statement that the company is always working to improve its processes.

The state’s second-largest Medicaid managed care organization, Blue Cross and Blue Shield of Illinois, said in statement its “priority is to provide the highest levels of service and access to care to all our members.”

Those on both sides of the issue are working to address problems, partly through legislation. The Illinois hospital association is supporting several bills aimed at payment denials and delays.

“We have a broken managed care program in Illinois,” said Senate Majority Leader Kimberly Lightford, D-Maywood, who is sponsoring one of the measures. She said at a news conference that “billions of dollars have shifted from patient care to these for-profit companies.”

On the other side, the Illinois Association of Medicaid Health Plans is touting two bills, one targeting better coordination of care for patients and the other aimed at getting more hospitals to join Medicaid managed care organizations’ networks.

As for new Gov. J.B. Pritzker’s plans for the program? “The governor is committed to bringing stakeholders together to assess the challenges and opportunities in the managed care program and design solutions together,” said Jordan Abudayyeh, a spokeswoman for Pritzker, in a statement. The governor also has proposed a tax on managed care organizations to help cover the costs of the state’s Medicaid program.

Whatever the fate of the bills, few disagree that the system could be better. Wilhelmi, with the hospital association, said hospitals want to improve the system, “so at the end the of the day, Medicaid beneficiaries can be assured of access to the health care services they need.”

By Lisa Schencker, Contact Reporter at the Chicago Tribune

Twitter @lschencker