Hospitals and managed care organizations in Rhode Island are set to take reimbursement cuts under the governor's proposed budget -- an untenable position, some say, as Medicaid expansion brings them more patients.
To help close a $150 million budget deficit for the 2015 fiscal year, Rhode Island Gov. Lincoln Chafee wants to eliminate hospital's Medicaid upper payment limit (a program compensating for lower rates), freeze their inpatient and outpatient rates at 2013 levels, and reduce the annual growth rate in reimbursement for managed care organizations.
For hospitals, those changes translate into a $19 million reduction in direct payments, an amount that could "further destabilize fragile hospitals," Edward Quinlan, president of Hospital Association of Rhode Island, said in a media release.
"Hospitals posted a negative operating margin in 2013, a unique occurrence that has only happened once before (FY11) and highlights financial struggles our organizations are already facing," Quinlan said. Direct payments to hospitals under Chafee's budget would be $88.5 million, down from $107.5 million in the current fiscal year.
For the state's two managed care organizations, the nonprofit Neighborhood Health Plan of Rhode Island and UnitedHealthcare of New England, the governor's budget increases payments by more than $100 million, to $565 million, but that's coming with another 50,000 beneficiaries expected to gain Medicaid coverage under the federal eligibility expansion.
Almost all of the Rhode Island's Medicaid beneficiaries -- estimated to number 220,000 by the end of the year -- are covered through managed care, and the governor's budget reduces managed care organization's annual growth rates by 2.9 percent. He expects that will save an estimated $10.8 million from the state's general fund.
Chafee, a Democrat, former senator and first-time governor, is proposing spending a total of $1.9 billion on Medicaid in the 2015 fiscal year, with more than $1 billion coming from the federal government.
He's also recommending eliminating a rate increase for nursing homes scheduled to take effect in October, which would save $3.7 million, and, like other governors, he's banking on a new program for Medicare-Medicaid "dual eligibles" to save spending on high-cost beneficiaries.
Last November, the state launched the Integrated Care Initiative for about 28,000 Medicare-Medicaid eligible Rhode Islanders, offering them two new programs. One, called Rhody Health Options, is a capitated managed care program for long-term and disability care. The other, Connect Care Choice Community Partners, is a primary care case management program aimed at integrating primary, acute and long-term care services.
Those and other program changes for what Chafee's budget calls "high-cost utilizers" could save $8.2 million in FY 2015.