Bill would require Medicaid managed-care firms to pay contracted fees for ER visits; Senate hearing targets two companies

This story has been updated with comments from Wellcare of Kentucky.

By Melissa Patrick
Kentucky Health News

FRANKFORT, Ky. -- Managed care is touted as a way to achieve value-based care in the Medicaid program, but hospital emergency rooms in Kentucky aren't finding much value in not being paid the contracted price for their services by two of the managed care organizations.

Officials of two Kentucky hospitals told the Senate Health and Welfare Committee Feb. 25 that Wellcare of Kentucky and CoventryCares of Kentucky are denying payment for as many as half of their emergency-room patients who seek care in their facilities, reimbursing the hospital a flat $50 "triage fee," less the patient's $8 co-payment, regardless of diagnostic tests performed in the ER.

Cheri Sibley, CEO of Clark Regional Medical Center in Winchester, noted that emergency rooms are required by law to screen patients with appropriate diagnostic tests to rule out an emergency condition if they come to the emergency room and ask for care.

Wellcare and Coventry are two of the five Medicaid managed-care organizations that oversee care for the state.

Wellcare said in an e-mail that it is required by the Department of Medicaid Services to "have an affirmative program to address the high cost of emergency room treatment for conditions that do not require this level of care." The company said the triage fee is just one measure it has taken; it said an "emergency room prudent layperson program" has helped "identify and sometimes prevent payments as much as 500 percent to 1,300 percent more in an emergency room as compared to a physicians office for common ailments such as ear aches and sore throats."

Sen. Ralph Alvarado, a physician from Winchester, has sponsored a bill that would require MCOs to pay the previously negotiated rate for emergency-room examinations and allow the ER doctor to determine whether a patient's condition is an emergency or not,.

"This bill is an attempt to keep our Medicaid managed-care organizations accountable," Alvarado said at the meeting. "MCOs have been shortchanging our providers and our hospitals -- and, I would argue, purposefully -- for the past three years. . . . MCOs are basically managing health-care cost by non-payments to providers."

Since the advent of managed care in 2011, hospitals have complained about late and denied payments and difficulty dealing with MCOs. "The problem has reached critical mass, threatening the survival and financial viability of our hospitals, and almost every legislature has been contacted by their local hospital provider regarding these (issues)," Alvarado said.

Kentucky implemented managed care as a way to save money. Basically, insurance company subsidiaries get a certain sum per patient and increase their profits by controlling costs. The Cabinet for Health and Family Services maintains that managed care focuses on quality and provides better accountability for care as opposed to the traditional fee-for-service model, but provider complaints about slow payments and rejections of claims have persisted since its inception.

Hospitals bill insurance and Medicaid based on the level of complexity of emergency-room care provided based on the symptoms the patient presents, regardless of the final diagnosis. Payment has typically been based on a fee that was pre-negotiated between the hospital and the MCO.

Wellcare and Coventry have since implemented a non-negotiated "triage policy," which allows these organizations to determine, after the fact, whether a patient had an emergency. If they determine that a patient was a non-emergency, regardless of presenting symptoms and cost of diagnostic procedures (X-rays, CT scans, lab tests, and so on), they only pay $50 minus the $8 co-payment, or $42. Wellcare implemented this policy in September 2012 and Coventry in April 2013.

The legislaure's Administrative Regulation Review Subcommittee found last May that the triage policies did not follow federal standards, according to Sibley and Alvarado.

"One side seems to be meeting their contractual obligation, while the other side seems to be deficient in meeting their contractual obligations," said Sen. Julie Raque Adams, R-Louisville, chair of the committee.

Hospitals can appeal MCOs' decisions, but "hospitals report that only a small number of these are overturned with no explanation of decision given," Sibley said.

Sibley gave an example of a claim that had been determined a non-emergency by one of these companies at her hospital: An 18-month-old girl was brought to the ER because she was blue in color, wheezing and short of breath. She had an X-ray, other diagnostic tests and a breathing treatment, but the hospital was paid $42 by the MCO plus the $8 co-payment, if the patient paid it.

"The two MCOs in question should not be deciding which patients are non-emergencies," Sibley said. "They should be abiding by their negotiated contract and paying the contract rate," 95 percent of allowed cost.

Sibley presented Kentucky Hospital Association data from 64 hospitals affected by these triage policies. The report found that during calendar year 2014, the hospitals reported submitting nearly 380,000 emergency room claims to Wellcare and Coventry, of which 140,000 were denied except for the $50 fee. The overall denial rate was about 37 percent; Wellcare's was 48 percent.

The KHA report said the difference in the flat fee and the contracted rate totaled $37.4 million, and that the more complex visits (and this likely the more expensive) were the ones most often denied payment.

"With one in four Kentuckians now on Medicaid, this problem is only going to get worse, if this is not corrected by this Senate Bill 88," Alvarado's legislation, Sibley said.

Georgetown Community Hospital CEO William Haugh said almost 30 percent of its ER visits in 2014 were Coventry or Wellcare clients. Wellcare classified almost 60 percent as triage cases and paid only $50 each. The hospital appealed 92 percent of those cases, with a success rate of 16 percent, or 285 patient encounters. Haugh said that amounted to a $334,258 underpayment, plus an estimated $40,000 cost for preparing and prosecuting the appeals.

Haugh said Coventry classified 26.4 percent of its clients' Georgetown ER visits as triage and paid only $50 each. The hospital appealed 94 percent of those and had a success rate of 36 percent, or 366 patient encounters. He estimated an underpayment of $148,000 plus $22,000 in labor for appeals, and said the overall financial impact to the hospital was $543,894.

Wellcare said its appeals process allows three opportunities for review, with at least two independent medical directors.

The state Medicaid program's chief medical officer, Dr. John Langefeld, said the emergency-room problems are not a "straightforward, easy issue," He said many patients go to ERs for reasons beyond medical care. The cabinet has said that some hospitals have relied too much on ER revenues.

Sen. Reginald Thomas, D-Lexington, said rural hospitals need to change their business models and wondered if the bill was an attempt to mask that problem. Meanwhile, he added later, there is "documentation that hospitals have benefited from Medicaid expansion" under the federal Patient Protection and Affordable Care Act, in a recent report from Gov. Steve Beshear.

Adams replied that Beshear says, ""It is great, and it's putting all this money back in the system," but in fact we are not seeing it on the provider level."

Alvarado said, "There is a difference between what actually happens and what the governor's office wants to show you. So when you have KentuckyOne [Health] coming out publicly declaring a $218 million dollar loss in one year, that is hardly a profitability for them based on the ACA."

Alvarado said Citibank reported the companies have made $155 million in profits off of Kentucky Medicaid. "I'd get rich, too, if I didn't pay my bills," Alvarado said. "It is an outrage."

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