Medicaid, poor, hospitals take hit

Summary: The new rule narrows the definition of outpatient hospital services to exclude those that could be provided and covered outside a hospital. (effective Dec 8,2008)

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New York Times
November 8, 2008

New U.S. Rule Pares Outpatient Medicaid Services

By ROBERT PEAR

WASHINGTON — In the first of an expected avalanche of post-election regulations, the Bush administration on Friday narrowed the scope of services that can be provided to poor people under Medicaid’s outpatient hospital benefit.

Public hospitals and state officials immediately protested the action, saying it would reduce Medicaid payments to many hospitals at a time of growing need.

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In a notice published Friday in the Federal Register, the Bush administration said it had to clarify the definition of outpatient hospital services because the current ambiguity had allowed states to claim excessive payments.

“This rule represents a new initiative to preserve the fiscal integrity of the Medicaid program,” the notice said.

But John W. Bluford III, the president of Truman Medical Centers in Kansas City, Mo., said: “This is a disaster for safety-net institutions like ours. The change in the outpatient rule will mean a $5 million hit to us. Medicaid accounts for about 55 percent of our business.”

Alan D. Aviles, the president of the New York City Health and Hospitals Corporation, the largest municipal health care system in the country, said: “The new rule forces us to consider reducing some outpatient services like dental and vision care. State and local government cannot pick up these costs. If anything, we expect to see additional cuts at the state level.”

Carol H. Steckel, the commissioner of the Alabama Medicaid Agency, said the rule would reduce federal payments for outpatient services at two large children’s hospitals, in Birmingham and Mobile.

Richard J. Pollack, the executive vice president of the American Hospital Association, said these concerns were valid.

“The new regulation,” Mr. Pollack said, “will jeopardize important community-based services, including screening, diagnostic and dental services for children, as well as lab and ambulance services.”

Herb B. Kuhn, the deputy administrator of the Centers for Medicare and Medicaid Services, defended the rule.

“We are not trying to deny services,” Mr. Kuhn said. “We want to pay for them more accurately and appropriately. Payments for some services were way higher than they should be.”

The rule narrows the definition of outpatient hospital services to exclude those that could be provided and covered outside a hospital.

Medicaid, financed jointly by the federal government and the states, provides health insurance to more than 50 million low-income people. Services can often be billed at a higher rate if they are performed in the outpatient department of a hospital rather than in a doctor’s office or a free-standing clinic. Hospitals generally have higher overhead costs....

“More and more people are coming onto Medicaid,” she said. “People are losing their jobs and running out of unemployment benefits. Some employers can no longer afford to provide health insurance to their workers.”

In the last 18 months, Congress has imposed moratoriums on six other rules that would have cut Medicaid payments. But the administration says Congress did not block the rule issued on Friday.

Larry S. Gage, the president of the National Association of Public Hospitals, said, “We will urge Congress to extend the moratorium to this rule, and we will ask the Obama administration to withdraw it.”