Georgia’s hospital industry and state budget officials are breathing easier this week after a federal agency approved renewal of a financing mechanism for the state’s Medicaid program.
The wait for the Centers for Medicare and Medicaid Services (CMS) to approve the hospital provider fee had become worrisome for industry officials.
Approval from the feds had been expected in late June.
State officials said Friday that CMS has signed off on the Georgia provider fee for inpatient services, but that the portion for outpatient care has yet to be approved.
The four-year extension was first reported Friday by Tom Crawford in The Georgia Report.
The overall financing mechanism is designed to fill a nearly $500 million hole in the state’s Medicaid program.
Legislation to ease the renewal of the current hospital fee was fast-tracked through the Georgia General Assembly at the beginning of the year, with the active encouragement of Gov. Nathan Deal.
“We have found that the proposed reimbursement methodology complies with applicable requirements and therefore have approved them with an effective date of July 1, 2013,” said CMS Director Cindy Mann in a letter to Jerry Dubberly, chief of Georgia Medicaid.
Mann, though, warned in the letter that her agency may require the state Department of Community Health (DCH) to move to a different method of calculating the Medicaid provider fee.
Known among critics as a “bed tax,’’ the provider fee raises money from hospitals and returns funds to them through reimbursements. Individual hospitals get different amounts based on how much Medicaid business they do, so some hospitals come out ahead under the formula while others lose money.
One of the big winners is safety-net provider Grady Memorial Hospital in Atlanta, which nets nearly $10 million annually under the currently formula.
The provider fee “is really about access to care, and supports Medicaid patients having a place to go for care,’’ said Matthew Hicks, a vice president for government relations at Grady Health System.
Anti-tax activists early this year urged that the Georgia provider fee be eliminated, but they failed to persuade the state’s Republican leaders.
Almost all states use such assessments to help cover the costs of their Medicaid programs.
The previous provider fee ran out June 30, and Community Health continued to pay hospitals a related 11.8 percent additional Medicaid reimbursement, the same as under the old formula. The money came out of Medicaid and general funds, the agency said.
The CMS approval “is extremely positive financial news,’’ said Jimmy Lewis, CEO of HomeTown Health, an organization of rural hospitals in Georgia. The governor’s support “was instrumental in this process,’’ Lewis added.
Without the feds’ approval, he added, “there would be certain closure of some hospitals.’’
Georgia’s proposals to CMS have been split between a renewal of the old fee mechanism and a new provision that would help private hospitals that are financial losers under the previous formula.
The latter would help to even out the losses for organizations such as Piedmont Healthcare and Northside Hospital, two large health care systems.
The second part of the hospital fee will be submitted to CMS soon, DCH said recently.
Two-thirds of the provider fee money generated in Georgia goes to shore up Medicaid’s budget. The rest goes to increase Medicaid reimbursements to hospitals.
Medicaid, jointly financed by the federal government and individual state governments, covers about 1.6 million poor and disabled Georgians.
Tim Connell, DCH’s chief financial officer, told GHN recently that Medicaid programs expect greater financial scrutiny from federal officials. He cited a letter from the National Association of Medicaid Directors that says, in part, “states should be prepared for increased oversight in all aspects of their [Medicaid] programs, from financing mechanisms to managed care contracting to program integrity efforts.’’