Hospitals see rise in denial of Medicaid claims since KanCare

09/21/2013 5:49 PM

08/08/2014 10:19 AM

Since the state turned Medicaid over to private insurers in January, it’s the hospitals that have been in pain.

Executives at Wichita’s two big hospital systems say they have seen huge spikes in the number of Medicaid claims denied by the three companies that manage care for much of the state’s poor and disabled populations.

Having to appeal those denials has delayed payments and increased administrative red tape for the hospitals – the opposite of what was promised when Gov. Sam Brownback shifted the system from government to largely private control.

“It’s clearly created significant financial pressures on us in 2013, and we’re questioning what our financial position will look like later in 2013 and 2014,” said Hugh Tappan, chief executive at Wesley Medical Center in Wichita.

“We take care of a substantial number of the Medicaid and uninsured in our community. But we have to have a flow of revenue we can anticipate and make sure expenses can be adjusted accordingly. It creates some sustainability questions.”

Via Christi Health, Wichita’s largest hospital network, is reporting similar problems.

Cindy Samuelson, of the Kansas Hospital Association, said similar complaints have been coming in from hospitals statewide.

“This is not just in one pocket of the state,” she said.

Officials of the Kansas Department of Health and Environment, who oversee the privatized Medicaid program called KanCare, have consistently labeled problems as growing pains and said they’re working to solve them.

“I understand that providers are frustrated by transitional issues that remain,” KDHE Secretary Robert Moser said in an e-mail. “KDHE remains focused on solutions, and we have directed the plans to take a more proactive role in engaging providers in the process of resolving outstanding issues.”

But Matt Leary, Wesley’s chief financial officer, said the number of denials and the dollars involved have risen as the year has gone on.

“There was very little activity for the first couple of months, but the past three months, we’ve averaged approximately 400-plus thousand dollars a month in denials,” he said. “So far, year to date, the KanCare providers collectively have denied $1.6 million of our charges through July.”

The dollar figure represents denied charges for 560 patients, Leary said.

“The same period last year, through traditional Medicaid, we only had 263,” he said.

Via Christi declined to share specific numbers, but David Hadley, its chief financial officer, said since the beginning of the year, the hospital system has seen a nearly 48 percent increase in Medicaid claim payments more than 90 days in arrears.

“So despite the ongoing communications and efforts being made by all parties, it continues to be a struggle to get timely and accurate payments for Medicaid accounts,” Hadley said.

‘Monumental change’

KanCare is designed to save money for the state by paying three managed care insurance companies a capped rate per covered consumer, rather than having state government pay the hospitals, doctors and other service providers directly. Medicaid is jointly funded by federal and state dollars.

About 320,000 Kansans are covered by KanCare. The program covers low-income children, their parents, pregnant women, people with disabilities and some seniors in conjunction with Medicare.

While hospitals struggle under the new system, the state government has been seeing savings.

Last week, Moser, Brownback and Lt. Gov. Jeff Colyer, a doctor, held a Capitol news conference to announce they are shifting $37 million from KanCare savings to provide home- and community-based services to 650 people – 400 with physical disabilities and 250 with mental disabilities – who have been on waiting lists.

Rep. Jim Ward, D-Wichita, is a member of a new legislative committee appointed to oversee the implementation of KanCare. He attended a recent presentation by Tappan at Wesley and said he’ll bring up the hospital’s complaints when the committee holds its first meeting Oct. 8.

But he said he’s concerned because the committee has been scheduled to meet for only two days.

“I hope we don’t just have the dog-and-pony show from the (Brownback) administration,” he said. “I saw the lieutenant governor’s been going around saying implementation has gone better than expected. I guess not if you’re a hospital or doctor or one of the other providers.”

He said he’s not surprised by the complaints since it’s to managed care organizations’ advantage to deny and delay payments.

“Managed care HMOs (health maintenance organizations) in the ’80s and ’90s did the same thing,” he said.

Rep. David Crum, R-Augusta and co-chairman of the oversight committee, also attended Tappan’s presentation and said he has been hearing mixed reviews.

“There are those who are concerned about denials on claims and slow payments, but then also a lot of the same folks who tell me that say they’re working through the issues and they feel very optimistic that those issues are going to be resolved,” he said.

He said he plans to ask the committee chairwoman, Sen. Mary Pilcher-Cook, R-Shawnee, to put the issue on the agenda for the Oct. 8 meeting.

“I think what folks have to understand is that this is a huge, monumental change in the way we’re doing business and we’re a little over six months into the program,” Crum said. “We obviously have to make sure these issues are resolved. I don’t know that it’s totally surprising that we’re going through some of these growing pains.”

KanCare is run by three managed care organizations: Amerigroup, UnitedHealthcare and Sunflower State Health Plan, a subsidiary of Centene.

Spokespersons for all three companies declined requests for interviews and data and referred questions to the state.

United sent a statement saying: “We are committed to working closely with our enrollees and providers through our advocacy teams and transparency tools.”

And Amerigroup sent one saying it values “the care and services our network of hospitals and professionals provide to our Kansas members and we will continue make strengthened provider experience and relationships a top priority.”

ER visits

Hospital officials hoped that KanCare would create more medical homes, where Medicaid recipients would see a primary care provider more often and seek more preventive care, avoiding costly trips to emergency rooms.

But Tappan said that isn’t happening.

The hospital is seeing increased emergency room visits for those who qualify for Medicaid, he said – more than 15,800 total since KanCare began.

Tappan and Leary said that shows that patients aren’t accessing primary care providers for smaller ailments and instead are coming to the emergency room.

“So any effort to think that KanCare was going to help move people out of the ER into medical homes, more primary care access, for the first six months we haven’t seen that on the hospital side,” Leary said. “And then on top of that, we continue to see a significant amount of uninsured.”

So-called “charity” emergency room cases, where the hospital provides free or discounted care to low-income people who can’t qualify for Medicaid, have gone from 250 last year to 659 so far this year, Leary said.

Health care providers say increased use of emergency rooms often leads to higher costs of care for everyone.

The transition has also led to an increase in administrative overhead, including filing of claims, and the medical center has added about 20 full-time employees because of it, Tappan said.

“We do believe that KanCare can work, but today we’re not seeing the behavioral transitions, the medical home placement that KanCare promised,” Tappan said. “What we are seeing is an increase in Medicaid volume in our ER. We’re seeing an increase in uninsured and an increase in charity cases.”

Tappan said he remains hopeful.

“I am choosing to believe at this point that (the problem) is primarily moving to three managed care companies and the speed at which we tried to push three managed care companies,” he said.

“I choose to believe that we will see this ultimately resolved, but our short-term experience is that the hospital has been disadvantaged through KanCare.”

Incentive to pay promptly

Samuelson, of the Kansas Hospital Association, has created an advisory group with its members and officials of KDHE and insurance companies to focus on systemic issues.

“The KDHE has been responsive and the MCOs (insurance companies) in some cases have not been as responsive” to the complaints, she said. The delay in payments causes cash flow issues and eats up staff time, she said.

One of the issues is that the managed care companies are not subject to Kansas’ prompt payment laws, Samuelson said, which generally require payment of health insurance claims in 30 days.

However, Kari Bruffett, KDHE director of health care finance, said the companies have an incentive to promptly pay claims because 3 percent of the state’s payments to the companies are withheld unless they pay out “clean claims” within 20 days, according to the company contracts with the state.

Those withholdings are only paid to the companies at the end of the year, so it’s too early for estimates on what the companies will receive, Bruffett said.

“When you consider the extent of the contracts overall, it’s a considerable incentive for them to process those claims promptly,” Bruffett said.

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