HCA Proposes $42 Million Cut to Hospital-Based Clinic Payments: Your Action Needed

October 31, 2014

Background:  The state has begun its process to develop a budget proposal for the upcoming biennium, state fiscal years 2015 to 2017. The process starts with agency recommendations to the Governor, for his proposed budget, usually released in December. The Health Care Authority’s (HCA’s) recommendations to the Governor included a cut to the Medicaid payment rates for hospital-based clinics of $42 million over the two year period. (See a hospital-specific estimate of the impact of this cut.)

While we do not know if the Governor will include these in his budget, the agency’s recommendations mean they are likely to be discussed seriously during the upcoming session.

Currently Medicare and Medicaid pay a differential rate for services provided in clinics licensed and operated as hospital outpatient departments.   HCA is proposing to cap payments for office visits (with billing codes 99201-99215) performed at hospital-based clinics to the amount paid as office overhead under the Medicaid fee schedule to freestanding physician offices. The change would reduce the total Medicaid payments for hospital-based clinics office visits by 65-75%. The proposal in its current form does not apply to rural health clinics operated by hospitals or to clinics of critical access hospitals, though we are concerned about the future policy implications of such a change.

Action Needed:  Please contact your local legislators and urge them to tell the Governor not to include this cut in his budget proposal. Let them know how important these payments are to your ability to provide care in your community, and that the cut would be very detrimental to access to care for Medicaid patients, especially specialty care.

More Information:

  • These cuts are not reasonable without an understanding on the impact to care. The reductions will reduce access to primary and specialty care for Medicaid enrollees, at a time when capacity must expand to serve increased numbers of Medicaid enrollees needing care under the Affordable Care Act. Many of the clinics providing this care are specialty clinics and the care is distinct from that available through physician offices.
  • Medicaid Fee Schedule payment rates are significantly less than the cost of providing care and are not adequate to sustain organizations that provide significant amounts of primary care and specialty care to Medicaid enrollees. Medicaid fee schedule office visit payment starts at less than $11, with payment for the most common office visit at about $38 dollars. Federal regulations recognize certain provider types that serve high-Medicaid populations by requiring they be paid their cost of providing care, with the average cost of for a Medicaid office visit in a clinic setting calculated at about $150. Hospital clinics, because they also serve high proportions of Medicaid enrollees, need adequate payments to ensure there is care available for Medicaid enrollees. Many of the hospital-based clinics subsidize the physician’s salaries so that care can be provided.
  • The low rates are especially problematic at clinics seeing a significant number of Medicare and Medicaid clients.  Hospital-based clinics typically serve high proportions of Medicaid patients and often provide costly, specialized services that are otherwise unavailable in the community. Because Medicaid pays significantly less than the cost of care, it takes several commercial patients to offset financial the loss for each Medicaid patient, making it difficult to shift the cost. Many private offices have either terminated their Medicaid contracts or severely limit the number of Medicaid patients they see, but hospital-based clinics typically do not do this.
  • Hospital-based clinics must meet stricter and more costly regulations than freestanding physician offices.
  • Medicaid costs may actually increase with these payment cuts, if patients turn to emergency departments for care when it becomes difficult to get access in the local community. 

Next Steps:  WSHA will be engaged with political leaders to support adequate payment for hospital clinic services to protect access to services for Medicaid patients. To help us in this effort, we will be collecting additional information in order to show the impact of care in your community. You will see a survey from us shortly.
For more information, contact Andrew Busz, Policy Director, Finance (206) 216-2533 or andrewb@wsha.org


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