Medicare and Medicaid
Financing – Minnesota
CAH Conference, Duluth,
MN June 2009
Gregg Redfield, CMA
Vice President, Finance
Minnesota Hospital Association
651-603-3536
[email protected]
Used To Be A Simple Process
Patient sought medical treatment
Services were performed
Patient received a bill for services
Patient paid the bill
www.mnhospitals.org
Sources of Health Care
Payments
Self Pay – Patient responsible for entire bill
Governmental – Medicare, Medicaid, etc.
Large Insurance Payers/HMOs – Blue Cross,
Medica, Health Partners, Preferred One, etc.
Small Insurance Payers – literally hundreds of
them
Workers Comp, Auto Insurance, Homeowners,
etc.
Self-Insured Employers, Supplemental
Insurance
www.mnhospitals.org
Minnesota Hospital Payer Mix
Percentages are based on hospitals
total charges for 2007
Medicaid includes MA / GA / MNCare
Urban Payer Mix refers to hospitals in
MSA (in a county or group of counties
where one city is greater than 50,000 in
population)
Approximately 20% of hospitals are
Urban, but they account for
approximately 80% of the charges
www.mnhospitals.org
Statewide Hospital Payer Mix
Medicare
32.8%
Other
59.2%
Medicaid
8.0%
www.mnhospitals.org
Urban Hospital Payer Mix
Medicare
31.3%
Other
60.7%
www.mnhospitals.org
Medicaid
8.0%
Rural Hospital Payer Mix
Other
50.3%
Medicare
41.6%
Medicaid
8.1%
www.mnhospitals.org
Health Care Payment
Terminology
Gross Patient Revenue
(Deductions From Gross Revenue)
Net Patient Revenue
Coinsurance / Co-pays
Deductibles / High Deductible Plans
Health Savings Accounts
Up Front Collections
www.mnhospitals.org
Gross Patient Revenue
Gross patient revenue is 100% of what has
been charged for patient services
Majority of patient revenue based on charge
rates per the hospital chargemaster
Each procedure, test, visit, drug, etc. has a
price attached to it.
Entirely based on volume of services, as more
services relates to more gross revenue
www.mnhospitals.org
Deductions From Gross
Revenue
The difference between actual payments
received compared to actual gross charges is
considered the discount or allowance
The discounts/allowances are accounted for
based on the type of payment system each
patient falls under
Example would be when you receive an EOB
(Estimate of Benefits) form, which shows total
charges, what the provider receives, and what
the patient needs to pay
www.mnhospitals.org
Net Patient Revenue
Net amount of revenue received after
deductions
Amounts received from payers
Amounts received from patients
May include coinsurance/co-pays, $15 per office visit, $50
Emergency Room visit, for example (collected up-front)
May include deductible/high deductible
May include patient self-pay
www.mnhospitals.org
Types of Payment Systems
Four main types of payment methodologies:
Fee for service / fee schedule
PPS Payments
Cost Based Reimbursement
Percent of charge / private pay
Other types may include negotiated rates per
visit/procedure, charity care, etc.
www.mnhospitals.org
Fee For Service / Fee Schedule
Fee for service is you receive a specific pre-
negotiated rate for each procedure, visit, etc.
Fee schedule is set payment for service, rate
may be updated each year, may be variation of
Medicare Fee Schedule
These fees may be able to be negotiated or
adjusted every year, make sure to know what
the new rates are
www.mnhospitals.org
Fee For Service/Fee Schedule
Usually applies to physician payments
Can apply to lab tests, therapy services, etc.
Applies to Medicare ambulance services
May apply to governmental, large, and small
payers
May be for just a portion of a hospital’s
business, other payment methodologies may
apply depending on facility size, location, etc.
www.mnhospitals.org
PPS (Prospective Payment
System) Payments
DRGs for hospital inpatients
Diagnosis Related Groups
Basically one payment for entire stay
APCs for hospital outpatients
Ambulatory Patient Classification
RUGs for SNF patients (includes CAH)
Resource Utilization Groups
One payment for each day of stay
www.mnhospitals.org
PPS (Prospective Payment
System) Payments
HHRGs for home health patients (includes
CAH)
Home Health Resource Groups
Rates may be adjusted yearly for inflation,
wages, and other factors
DRGs and APCs apply to Medicare payments
for Non-Critical Access Hospitals
Some may apply to Medicaid, large payers, and
small payers
PPS system based on averages, some rates
may be higher or lower than cost
www.mnhospitals.org
Cost Based Reimbursement
Mainly for Critical Access Hospitals (101% of
cost)
Cost related to care of Medicare patients
Cost per day payment for MC acute inpatient days
Cost per day payment for MC swing-bed days
Cost-to-charge ratio payment for all ancillary
services applied to Medicare charges
Intent was to improve reimbursement for
hospitals with low patient/procedure volumes
www.mnhospitals.org
Cost Based Reimbursement
This program/concept has allowed a great
number of rural hospitals to improve Medicare
reimbursement
Complications can arise due to hospital being
paid based on prior year’s cost and activity
This has led to some large settlements to/from
Medicare, due to increases/decreases in
patient days or revenues and expenses
All hospitals were cost reimbursed by
Medicare prior to 1983 and the PPS system
www.mnhospitals.org
Current Status of CAH
Facilities
CAH Facilities as of:
July 2001
Minnesota
North Dakota
South Dakota
Iowa
Wisconsin
Total
www.mnhospitals.org
April 2008
13
14
18
18
9
79
31
37
76
53
72
276
Percentage of Charge / Private
Pay
Mythically we could receive 100% of total
charges
Percentages usually negotiated with various
payers
Private pay issues include charity care, bad
debts, collection procedures, self-pay
discounts, etc.
Some current payer contracts may limit
amount of yearly charge increase a facility may
have
www.mnhospitals.org
Percentage of Charge / Private
Pay
Due to increases in prices as well as patients
being asked to cover more of the cost of health
care, some patients have started to “price
shop”
This is complicated by the fact hospitals have
charges/prices which are different from other
hospitals
Further complicating an accurate comparison
is the fact the procedure/service “package
price” at one hospital may be charged for
differently at another facility
www.mnhospitals.org
Medicare Advantage
As of June 2006, 120,400 MN residents were
covered by Medicare Advantage plans out of
711,500 Medicare eligible MN residents or 17%
As of April 2009, 276,000 MN residents were
covered by Medicare Advantage plans out of
759,000 Medicare eligible MN residents or 36%
www.mnhospitals.org
Medicare Advantage
Medicare Advantage plans in MN
by size (25 plans in MN in 2009):
UCare Minnesota
Medica Insurance
HealthPartners
Humana
Blue Cross/Blue Plus
Totals for the top 5
80% of the 239,000 in 2008
88% of the 276,000 in 2009
www.mnhospitals.org
2008 2009
49,340 66,520
43,944 76,510
35,876 38,762
35,499 34,428
25,984 25,767
190,643 241,987
Medicare Advantage
Medicare Advantage plans in MN
by size (removing 4 metro counties):
2008
Humana
Unicare
BC/Blue Plus
Medica Insurance
UCare
HealthPartners
Total
www.mnhospitals.org
25,928
24,006
20,263
14,515
13,287
7,429
105,428
2009
24,737
17,766
20,707
39,889
24,169
8,805
136,073
Medicare Advantage
Blue Cross products include:
BCBS North Plains Alliance – 15,446 enrollees
BCBS of Michigan – 150 enrollees
BCBS of Minnesota – 457 enrollees
Blue Plus – 9,864 enrollees
Other smaller plans include:
Aetna Life Insurance – 728 enrollees
Metropolitan Health Plan – 937 enrollees
Primewest Health System – 2,154 enrollees
South Country Health Alliance – 2,451 enrollees
Sterling Life Insurance – 430 enrollees
Pyramid Life Insurance – 1,538 enrollees
WellCare of Illinois – 393 enrollees
www.mnhospitals.org
Medicare Advantage
Interim payment rates are not
implemented, incorrect payments
Claims processing issues
Consumer confusion, co-pays and
deductibles
Not all hospitals accept out-of-state fee
for services products
Customer service problems, who to call
www.mnhospitals.org
Other Medicare Concerns
Medicare Recovery Audit Contractors (RACs)
are coming to Minnesota sometime in 2009:
Just because you provide a service, does not mean you
will get paid
Just because you submit a bill and get paid for it mean
that you will get to keep the money
Pilot program in 4 states in 2007, rolling out to all states
by 2009
Adequate documentation appears to be a key item
www.mnhospitals.org
Other Medicare Concerns
Claims submission/processing/payments and
Medicare Cost Report audits
New MAC/FI for Part A and B will be Noridian
Administrative Services
Cost report audits are becoming more and more complex
with interpretations of existing rules and new audit areas
becoming a concern
Many of these concerns are looking back at money
already received and the possibility of recoupment
www.mnhospitals.org
Medicaid Concerns
Medicaid Financing:
Medicaid is about 8% of a hospitals revenue
Medicaid traditionally is one of the lowest net revenue
payers for hospitals (actually payment below cost of
performing services)
State of Minnesota is currently in a huge budget deficit
Makes it very difficult for obtaining inflationary increases
each year for Medicaid payment rates
Medicaid rates will be reduced again for 2009
www.mnhospitals.org
Medicaid Concerns
Medicaid Financing:
Health & Human Services, K-12, and higher education
account for the majority of the state budget
Health & Human Services expenditures continue to grow
due to volume
Areas with the highest expenditures are always
vulnerable when there are large deficits and anticipated
cuts need to be made
Current proposal includes approximately $55 million in
cuts to MN hospitals and potential $380 million impact of
GAMC program ending in 2011
www.mnhospitals.org
Medicaid Concerns
Medicaid Financing:
Medicaid payments are already ratably reduced by 1115%
Medicaid traditionally has delayed re-basing of cost based
payments, currently 2002 is used
State of Minnesota receives a 50/50 match (on most MA
expenditures) from the federal government
Temporary FMAP increases match to 61/39
Additional DSH, MERC, 16 Rural DRG monies are always
in jeopardy
www.mnhospitals.org
Medicaid Concerns
Medicaid Financing:
Certain taxes on providers are used to help pay for
Medicaid
MinnesotaCare 2% provider tax is used to fund the Health
Care Access Fund and the MinnesotaCare program
Medicaid Surcharge of 1.56% is used to supplement the
payments in the Medicaid program
In huge deficit years, increasing taxes is always an option
Sales, gas, liquor, and income taxes are other options
Governor will unallot another $1 billion from somewhere
www.mnhospitals.org
Medicaid Concerns
Medicaid Financing:
Due to the current economy, more and more individuals
are qualifying for and utilizing Medicaid, General
Assistance Medical Care, and MinnesotaCare
As these products increase in utilization, the payments
that are less than the cost to treat patients continue to
grow at the same time
Discontinuing the GAMC program would have severe
financial consequences to hospitals
www.mnhospitals.org
Other Concerns
Uninsured / Underinsured:
Numbers in Minnesota are low compared to other states
Currently 7-8% uninsured, but numbers are increasing
Reasons include employers not able to afford, employees
choosing not to participate, layoffs, extended periods
between jobs
Most of these bills will end up as bad debts, or they may
qualify for charity care programs
www.mnhospitals.org
Other Concerns
Hospital Acquired Conditions (HAC), Present
on Admission (POA):
HAC viewed by CMS as acquired in hospital and will not
be recognized for payment, or a lower payment
POA screening to ensure if patient had a condition prior to
entering the hospital
Eight types of conditions currently recognized including
infections, pressure ulcers, etc.
Currently only applies to PPS hospitals, not Critical
Access Hospitals
www.mnhospitals.org
Other Concerns
High-Tech Imaging Consultations, Pre-
Admission Notifications:
Currently the three largest health plan in MN require
referring physicians participate in a “consultation process”
prior to CAT Scan or MRI procedures being performed
There is discussion similar requirements may be enacted
for Medicare and Medicaid patients
Any of these requirements add more staff time, patient
wait times, and billing complexity to proper reimbursement
Medicare and Medicaid are looking at similar initiatives
www.mnhospitals.org
How Can Hospital Staff Be
More Involved?
Be aware of the basics of how your hospital is
reimbursed (small or large)
Monitor where costs seem to be a problem
Understand what impact staffing concerns may
have
Be more observant of the “bigger picture” and
understand how incremental state, federal, and
health plan changes may affect your facility
www.mnhospitals.org
How Can Hospital Staff Be
More Involved?
Awareness of the budgeted goals and
outcomes of the facility to best approach net
incomes or losses incurred during the year:
Are there plans for new staff, practitioners, or space?
How will increases to fixed expenses (i.e. salary
increases/freezes) be paid for in future years?
Should we purchase or lease new capital equipment?
Contingency plans to accommodate a net loss
rather than net income in the current year.
www.mnhospitals.org
Key Processes To Focus On
Front-End processing
Capture all revenue
Chargemaster maintenance
Back-End processing including
denials and A/R
Awareness of payer contracts
www.mnhospitals.org
Summary
Sources of health care payments
Health care payment terminology
Types of payment systems
Medicare and Medicaid issues
How the hospital staff can be involved
Key processes to focus on
Increased volumes and higher
reimbursement may be a thing of the
past
www.mnhospitals.org
Questions
Q&A
www.mnhospitals.org