Healthcare News & Insights

New Medicaid rule will change how hospitals get paid

Big changes are coming to the Medicaid program, thanks to a final rule published by the Centers for Medicare & Medicaid Services (CMS). And they’re in alignment with the growing focus on value-based reimbursement in health care. 

GettyImages-503399356The final rule, available on the Federal Register, covers managed care for both Medicaid and the Children’s Health Insurance Program (CHIP). As stated in a fact sheet from CMS, it’s the first significant update to the regulations for these programs in over a decade.

According to the Department for Health and Human Services (HHS), the goal of the final rule is to improve Medicaid patients’ access to care while cutting costs and improving quality. Ultimately, the new guidelines are designed to:

  • support states’ efforts to promote care improvements for patients who receive Medicaid or CHIP
  • improve the consumer healthcare experience
  • strengthen program integrity by improving accountability and transparency, and
  • align rules across all federal health insurance programs.

In addition, the final rule will create the first ever quality rating system for Medicaid. States will be able to enter into contracts that pay Medicaid plans for meeting quality benchmarks or participating in alternative payment models. There will be more payment transparency, with the feds making data public about how rates are determined.

The rule also has provisions to make enrollment and care coordination easier for patients – and it expands coverage for many essential services, including short-term mental health services.

Potential effects on hospitals

These changes may be beneficial for hospitals in some areas, especially those regarding consistent payment guidelines across all insurance programs and expanded coverage for treatment.

But they’ll also make reimbursement more dependent on providing top-quality care. In the past, states have given supplementary “pass-through” payments to hospitals caring for Medicaid patients to boost their compensation. The final rule strips states of this power, instead directing them to pay hospitals based on performance and quality.

So making sure your hospital is capable of meeting value-based payment standards will be more important than ever.

The good news is that facilities have a bit of time to get ready: The new rule will be implemented in phases over a three-year period, beginning on July 1, 2017. And according to a news release from the Hospital & Healthsystem Association of Pennsylvania, the Medicaid quality-based payment structure will be gradually phased in over a 10-year period.

With that in mind, it’s a good idea to start exploring what your hospital can do to improve the care it provides to disadvantaged patients with Medicaid coverage.

One helpful idea: Look into building close working relationships with clinics and other community organizations focused on people’s general health and well-being.

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