On November 1, 2015 the Washington State Health Care Authority (HCA) made an 8 percent reduction in inpatient Medicaid payment rates. This reduction is a result of a limitation in the new rebased system for prospective payment hospitals under which aggregate payments for the new system cannot exceed payments that would have been made under the prior system by more than 1 percent. This reduction is termed a budget neutrality adjustment. WSHA and our member hospitals have been questioning the validity of this large reduction, which is based on available payment information as of October for claims and encounters paid for the period from July 1, 2014 to June 30, 2015.
There appears to be material errors in the November calculation. As a result of questions that WSHA raised, HCA informed us it discovered an error in the inpatient calculation related to how it priced payments for certified public expenditure hospitals. There also appears to be an issue with the adjustment calculation for outlier payments for certain high-dollar inpatient claims. We are working with HCA and encouraging them to make appropriate corrections for the next adjustment period, which starts on February 1. We are asking both that the errors be corrected from the prior period and that HCA compensate hospitals for amounts which should have been paid in the last quarter, the November through January time period.
HCA is cooperating with WSHA on a more comprehensive review of the budget neutrality calculations to ensure that the comparison of payment for services under the new and old payment methodologies is accurate. Analysis Group, Inc. and a few member hospitals are assisting with this review. If more issues are found, we will seek additional prospective adjustments to make up for any rate underpayments since the rebasing occurred. Because the budget neutrality adjustment process is a series of adjustments to ensure budget neutrality for the time period since July 2014, we believe there will be additional opportunities for HCA to make any needed adjustments as issues are identified.