January 17, 2018

OPM: Medicaid rate appeals could imperil hospital tax deal

Matt Pilon
Matt Pilon
Ben Barnes, OPM secretary

The state's top budget official warned lawmakers Wednesday that a slate of recent Medicaid rate appeals from two dozen hospitals could put the state at risk of "significant financial harm."

Benjamin Barnes, secretary of the Office of Policy and Management, wrote that the appeals amount "to a repudiation of the hospitals' agreement with the General Assembly."

Connecticut lawmakers and hospitals reached a deal last year that increased the state's provider tax in order to make the state eligible for additional federal funding. In exchange, hospitals were promised $554 million in supplemental payments and Medicaid rate increases. That deal needs the approval of CMS, a process that could be hindered by the appeals, Barnes wrote.

"I fear that these appeals may hinder the state's pending application before [the federal Centers for Medicare and Medicaid Services], putting the state at risk of significant financial harm," he wrote.

Barnes said the appeals are "especially disheartening," given that the Connecticut Hospital Association had negotiated the provisions of the deal with lawmakers.

The appeals, which challenge inpatient and outpatient Medicaid rates, arrived earlier this month from nearly every hospital in the state, except for Connecticut Children's, Sharon, and UConn Health's John Dempsey.

Barnes wrote that lawmakers may want to reconsider the previously approved rate hikes as it tackles deficits projected for this fiscal year and next.

Hospitals are downplaying the situation.

The Connecticut Hospital Association released a statement Wednesday evening saying it continues to support the deal reached last year and characterizing the appeals as "hospitals going through a standard process to protect their rights."

"We didn't renege on the agreement. We stand by the agreement and, in fact, filed documents with the state, with a copy to CMS, supporting the state plan amendments," CHA said.

Senate leadership was not impressed though. Senate Presidents Pro Tempore Martin M. Looney (D-New Haven) and Len Fasano (R-North Haven) called the appeals "thoroughly disappointing and shocking."

"We consistently have supported Connecticut hospitals; however, today we learned that the Connecticut Hospital Association did not even have the respect or the courtesy to come to the legislative leaders to explain why they would contemplate going back on their agreement," their statement said. "We fear this about-face by the members of the Connecticut Hospital Association and betrayal of the agreement will endanger federal reimbursements and hurt the viability of our smaller hospitals."

The appeals all read similarly. Hospitals wrote that they are aggrieved by the Department of Social Services' late December decisions for Medicaid rates starting Jan. 1 and are requesting administrative rehearings on the matter.

Appellants appear to disagree with DSS' rate calculations, contending the agency is using outdated data and failed to correct what hospitals see as "fundamental deficiencies" in rate methodology.

The deal reached last year provides a nearly 32 percent increase in inpatient rates and a 6.5 percent increase to a conversion factor used in calculating outpatient rates.

[Editor's note: This story has been updated to include comment from the Connecticut Hospital Association and Senate leadership.]

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