Missouri hospitals lobby for changes to new Medicaid payment system


(Missouri Independent) – Missouri lawmakers must finish work on the fiscal 2022 budget by Friday. 

And while the biggest spending issue of the session, Medicaid expansion, is off the table, there are other big issues to resolve in the state-run health care program.

One of the largest is whether to provide a cushion for hospitals that will lose revenue when the Department of Social Services changes the way it pays for some services on July 1. The Senate spending plan includes $50 million to smooth the transition to what the department calls the Outpatient Simplified Fee Schedule, money that does not appear in the House version of the budget.

The new payment method is based on the way Medicare pays for outpatient services, with a set fee for each type of service. Currently, the department pays a percentage of the fees charged by the hospitals.

The change will promote fairness in reimbursements, Rebecca Woelfel, spokeswoman for the department, wrote in an email.

“Today, different hospitals are paid very different amounts for the same or very similar care to similar patients, as payment is based on the charges submitted,” Woelfel wrote. “With the new fee schedule methodology, hospitals will be paid the same for the same service as the payment is based on the procedure code being billed.”

The change could be made fairer, said Daniel Landon, senior vice president of governmental affairs for the Missouri Hospital Association. When implemented, hospitals expect to receive $60 million less for the same services in the coming year. 

“We are not averse to the nature of the proposed reform,” Landon said in an interview with The Independent. “We are opposed to a payment methodology that is a cover for budget cuts.”

The state plan is to pay about 90 percent of the amount Medicare pays, Landon said. The change would be more acceptable if the percentage was about 93 percent.

The new system will reduce complexity in the state Medicaid program and reward efficiency, Woelfel wrote. 

“It is currently very difficult to understand how much (Mo Healthnet Division) is paying for specific types of outpatient services,” she wrote.

Providers will know how much they will receive for a particular service. The new process will be sustainable for the long-term, Woelfel wrote.

“If a hospital improves efficiency, it will benefit from savings,” she wrote.

The extra funds included in the Senate budget plan would be distributed to hospitals that show a loss in revenue due to the change. Whether the item makes it into the final budget is up to the conference committee that will be appointed this week to resolve $3.1 billion in differences between the chambers.

The main reason for the large gap in the $32 billion plan approved in the House and the $35.1 billion Senate version is that the Senate had time to include new federal aid from COVID-19 relief bills passed by Congress in December and March. 

Those items include $707 million for public schools, with $184.6 million for screening and testing programs for schools to reopen; $185.1 million for child care; $324.6 million for rental assistance, and $150 million for mortgage assistance.

Other significant changes made by the Senate include:

  • An extra $24.2 million for higher education institutions, including a 3.7 percent increase in aid to four-year universities;
  • $48 million to cover the state share of unemployment overpayments made when hundreds of thousands of Missourians were thrown out of work by COVID-19.
  • $3 million more for the Office of Public Defender to eliminate waiting lists for indigent people charged with crimes. In February, Circuit Judge Will Hickle ruled that making defendants wait for representation is a violation of their civil rights.

Lawmakers are trying to complete work on 15 spending bills by Friday — 12 that fund the operations of state government and three capital spending bills that allocate funds for building repairs and new construction.

No item in this year’s budget will be deleted because of a lack of funds. The general revenue fund is expected to hold a surplus of more than $1 billion on June 30, the state has saved more than $500 million in supplemental federal Medicaid funds and the American Rescue Plan bill passed in early March has $2.8 billion for Missouri.

The budget conference could keep the entire $50 million for transition payments or none since the House budget does not include it. Lawmakers could also choose any number in between.

The services covered by the new payment system do not require hospitalizations and include things like laboratory tests, radiological exams, ambulatory surgeries, and telehealth consultations.

Not every hospital will see a decline in revenue under the new payment system, Landon said. The hospitals that lose revenue will lose about $117 million, he said, while those that gain anticipate $58 million more. 

“According to our data, about 45 percent of hospitals get at least some gain in the outpatient fee schedule and 55 percent at least some loss,” Landon said. “For those that lose, some lose a lot.”

The heaviest impact is on hospitals serving children, he said.

The hospitals would prefer the increase in the percentage of the Medicare rate, rather than transition payments, to mitigate the lost revenue, Landon said.

The timing and size of transition payments are unclear, he said. A rule setting the percentage would be permanent.

And there’s no permanence in an appropriated payment, he added.

“What is clear,” Landon said, “is that appropriations are good only for one year.”

Rudi Keller


Rudi Keller covers the state budget, energy, and the legislature. He’s spent 22 of his 30 years in journalism covering Missouri government and politics, most recently as the news editor of the Columbia Daily Tribune. Keller has won awards for spot news and investigative reporting.

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