Legislature(1999 - 2000)
04/13/1999 03:04 PM House HES
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
HB 168 - HEALTH FACILITY PAYMENT DECISIONS Number 2176 CO-CHAIRMAN COGHILL announced the next order of business as House Bill No. 168, "An Act relating to actions of the Department of Health and Social Services regarding certain health facility payments." Number 2164 JEFF LOGAN, Legislative Assistant for Representative Green, presented the sponsor statement for HB 168. He explained that the legislature has issued expressions of support for small and large businesses in the state. One way they did that a few years ago, was to provide a clear time line in which the state was supposed to pay businesses for services and goods that were rendered to the state. There was much discussion then that paying the state's bills on time was important. This bill is about paying the state's bills to health care providers, who are reimbursed for services covered under Medicaid. The issue is the reimbursement and the reimbursement rate, and specifically how to appeal that rate, if the business doesn't think it covers their expenses. MR. LOGAN explained that HB 168 accelerates the process through which providers appeal those reimbursement rates. This issue has been around for ten years. In March 1989 then-Governor Cowper issued Executive Order 72, which moved the rate setting and appeals process into the Department of Health and Social Services (DHSS). There was a bill in the legislature which tried to clarify what the governor had said and further specify what some of the timeliness were. The legislation was SB 431 in 1990. This has been a topic of discussion since then. MR. LOGAN told them that currently the process is that rate is appealed to a hearing officer, and the hearing officer renders a decision to the commissioner. He directed their attention to page 2, line 5 of the bill which is capitalized and says: THE COMMISSIONER MUST, WITHIN 30 DAYS AFTER RECEIVING THE RECOMMENDATION OF THE HEARING OFFICER, EITHER RENDER A DECISION IN THE CASE OR REFER THE CASE BACK TO A HEARING OFFICER FOR ADDITIONAL FINDINGS. The crux of HB 168 is found on page 2 on line 16 at (c) where it changes the capitalized language to: "The commissioner shall, within 30 days after receiving the recommendation of the hearing officer, render a final administrative decision in the case. If after 30 days the commissioner does not render a final administrative decision, the hearing officer's recommendation becomes the final administrative decision." There is no provision for the commissioner to send it back to the hearing officer. The commissioner has to make a decision in 30 days or the hearing officer's decision stands. That decision can then be further appealed to the superior court. The people who are providing these services came to the sponsor and said they needed some help. They are not getting their money back for the services they provide. It was agreed that providing some finality might be the way to take care of this. Number 1999 REPRESENTATIVE WHITAKER wondered if the rather large fiscal note attached to this bill was reasonable. REPRESENTATIVE GREEN explained that a couple of years ago he had a bill to adjust the procedure by which tax appeals were rendered. To set up two Administrative Law Judges, an office manager and a new office, the total would be $284,000 a year, as opposed to these people looking at $367,000. He submits it does seem disproportionate. REPRESENTATIVE WHITAKER concurred and said this isn't the first time in this committee that they have seen this sort of fiscal note. He commented that when he sees this sort of thing, it certainly jades his decision making process. In the future, those that do this should be aware of that. REPRESENTATIVE BRICE asked if the changes reflect strictly back on the Medicaid rate establishment. MR. LOGAN answered that is correct. It is the administrative procedure under AS 47.07.075 which deals with the reimbursement rates for those Medicaid procedures the state covers. Number 1879 DAN HOUGHTON, Chief Financial Officer, Alaska Regional Hospital, testified via teleconference from Anchorage in support of HB 168. They need a timely appeals process in place that allows them to bring to the table issues that have either not been resolved or disputed in the informal rate hearing process. In the appeals process, when the hearing officer renders a decision that the commissioner still does not feel comfortable with, the facility will have legal judicial review in place that they can appeal to a body outside the [DHSS]. He urged the committee to support HB 168. CO-CHAIRMAN DYSON asked what the time lag is between when they submit a bill to the time they get paid. Number 1808 MR. HOUGHTON answered that an interim payment on a current year bill is averaging 70 to 75 days per payment. In the appeals process, they are most concerned about when they do not agree with the rate that has been given, and they do not feel that their costs are being covered, they need to have a timely process in place to resolve the issues. CO-CHAIRMAN DYSON asked if they get paid during an appeal or are the rates suspended. MR. HOUGHTON replied if the hearing officer rules in their favor and the commissioner agrees, the rate will be adjusted per that decision back to whatever year they are actually appealing, and there is an incremental payment given to the facility. Or vice versa, there would be a money withheld from future payments to that facility. Number 1688 LARRAINE DERR, President, Alaska State Hospital and Nursing Home Association (ASHNHA), came forward to testify. The association supports this legislation. There are appeals outstanding from 1994, and there is any where from $10 to $25 million dollars in the pipeline. It has been a problem for some time. She had a letter dated October 3, 1994 that Representative Gary Davis sent to the DHSS from which she quoted: It is my understanding that imposing a deadline on the hearing officer's proposed decision was the legislature's intent when it passed Senate Bill 431 in 1990. It seems one of the concerns addressed by SB 431 was the backlog of medicaid appeals. In several cases, health facilities have waited, or are waiting, for more than two years for a decision to be proposed. Again, this does not seem to be fulfilling the legislation's intent. I hope the department will consider the inclusion of a deadline for a proposed decision within these proposed regulations. MS. DERR noted five years ago they were talking about some sort of a deadline to give some finality to the process. Number 1598 GARTH HAMMOND, Chief Financial Officer, Bartlett Regional Hospital (BRH), shared their experience related to a current appeal. In December 1993, BRH installed a magnetic resonance imager (MRI). Eighteen months later in June 1995, the department conducted an audit and concluded, among other things, to disallow costs associated with the MRI; there were other issues in that audit. Twelve months later, the hearing officer of the department issued a decision that was partly in their favor relating to the MRI. They had not, in fact, exceeded the cost up to the threshold to be allowed. In December of 1997, the commissioner sent the appeal back to the hearing officer with instructions to require more information about this Certificate of Need. Eight months later in August 1998, a decision was issued by the hearing officer on the Certificate of Need issue; and they still don't have a resolution to that question. The MRI was installed in December 1993. Now it is 1999, and there has been no decision on that issue. The department takes a long time. The fact that the decisions take too long costs money, as they have consultants and attorneys involved. Since they have an open appeal rated to their fiscal year 1994 audit, their 1996 rate; then it has become necessary for them to appeal subsequent rates, and they pile up. MR. HAMMOND noted that in July 1998, they made their final payment on the MRI. Now they are considering whether they need to upgrade or replace that equipment since technology changes so quickly. They are still waiting for a decision from the state as to whether they will pay them for the services provided to all patients, including Medicaid patients, which they pay for since the time the equipment was installed. There will be times when they will disagree, but there is no way to get resolution and move on in the process. The hearing is hung up waiting for whatever is next. REPRESENTATIVE BRICE asked what the level of complexity is involved in the issues at Bartlett. Number 1440 MR. HAMMOND replied that the Medicaid rate system is a complex system, but the hearing officer moved along in making recommendations on it. They went through a two week hearing, and he has a box of paper; attorneys and consultants were involved on both sides. The hearing officer has made a recommended decision a couple of different times on the issues. The issues are complex, but five or six years is a long time. REPRESENTATIVE GREEN asked if there would have been a quicker resolve had there been some impartial way or fact that could say the MRI charges are valid or not, and then allow them to get on with the process. Since they are in limbo, they have no recourse, except to try and get it rendered before they can go beyond that. Number 1381 MR. HAMMOND commented that it could look like the hearing officer is not impartial since she works for the department, but she has ruled in their favor, and they still cannot get a decision out of the department. REPRESENTATIVE GREEN noted that Ms. Derr was commissioner of the Department of Revenue at one time and asked her if, at that time, there was an intermediary in tax appeal cases. MS. DERR concurred there was a mediation step. REPRESENTATIVE GREEN asked her if she thought something like that would be helpful in this case. Number 1325 MS. DERR agreed there has got to be something better. CO-CHAIRMAN DYSON asked Mr. Hammond if they borrow against their accounts receivable. MR. HAMMOND answered no they do not. CO-CHAIRMAN DYSON asked what it costs them to have outstanding money due them. Number 1291 MR. HAMMOND said BRH is in reasonable financial shape. They borrowed on the MRI at about 5 percent; they earn 5 to 6 percent on their investments. There are hundreds of thousands of dollars for them each year these appeals are outstanding. Each year there is the opportunity cost of not having that money for operations. The back interest is not paid so they don't have the money, and there is no interest coming when there is a settlement. CO-CHAIRMAN COGHILL asked for clarification on the process of appeal. MR. HAMMOND explained that a rate is established, which in the hospital's case is a percent of charges. When there is a dispute or disagreement about that rate being too low, they appeal that rate. If the department sets a rate at 65 percent of charges, they are paid at that rate, and what is in dispute is the other 10 percent the hospital thinks it should be. The hospital is paid at the lower rate; that is the cash they receive. They appeal and, pending a settlement, then the additional 10 percent will be computed and forwarded on. CO-CHAIRMAN COGHILL asked about the nature of the disputes and the reason they are declined. Number 1164 MR. HAMMOND explained it is a complex issue. The kinds of appeals are varied. In their case, the appeal on the MRI was that they had signed a contract for the unit to be installed for less than $1 million, which is the ceiling threshold on a Certificate of Need. There were some unforeseen costs, and the bill was over $1 million, so then the department disallowed all costs for that, saying BRH should have obtained a Certificate of Need. There is a complicated year-end conformance calculation; there are allowances or disallowances disputes over whether certain kinds of costs should be allowed or not. MR. HAMMOND cited an example in the Medicare program. They make an adjustment each time that disallows the cost of a telephone or television in a patient's room. Most people take those things for granted, but the Medicare program doesn't allow those costs. It is disputes over what kinds of costs are allowable and the kinds of adjustments that are made to allowable costs to compute the payment rate in the facility. Number 1001 JAY LIVEY, Deputy Commissioner, Department of Health and Social Services, came forward to testify. He explained that DHSS is concerned about this bill because they believe it directly affects their ability to control the Medicaid budget. The facility's portion of the Medicaid budget is about 40 percent of total expenditures. The primary method they have to control facility costs is how they set the reimbursement rate. In hospitals, they set up a percentage of charges, and in nursing homes they set a per day rate. That rate is set once a year for each facility. That rate is challengeable by the facilities, and that becomes the nature of the appeals. MR. LIVEY explained that every bill they get from BRH, they pay at 65 percent (or whatever the rate is), and that rate applies for the rest of that year. The nursing homes are paid a per day rate, and hospitals are paid a per procedure rate, which includes supplies, drugs, lab tests, x-rays, and so on. CO-CHAIRMAN DYSON asked Mr. Livey what the hospital would be contesting. Number 0754 MR. LIVEY explained the way the rate system works is: The department pays the facilities based on their cost of providing service to Medicaid patients. The facilities fill out a cost report, which tells the department what all their costs are, and the department audits the cost report. Then they will say there is a misallocation of square footage to Medicaid. When the hospital submits the bill to the department, they don't take the cost of televisions for Medicaid patients out of their bill, but the department takes them out. Once those costs are taken out, then the cost basis left becomes what the rate is calculated on. They are arguing about the costs that the department has taken out of the bill, but the department pays the facilities the rate percentage of each bill throughout the year. They set up the rate at the beginning of the year; every time the hospital submits a bill on behalf of a Medicaid patient, they pay that rate. CO-CHAIRMAN COGHILL asked if it is true during the appeals process that the department pays in the 70 to 80 day period. Number 0485 MR. LIVEY replied that that is what the gentleman from Alaska Regional Hospital testified, and he was actually surprised; he thought they paid the bills faster. In the Medicaid program, they pay bills electronically, and he believes they pay almost all of their bills within ten days. Hospital bills must be treated differently, he is not questioning Mr. Houghton, but they pay on a regular schedule. The percentage that BRH gets goes into the computer when the bill comes in, and the bill is cleared, then they just pay it. They don't have to argue over every bill that comes in. CO-CHAIRMAN COGHILL asked if their auditing process happens after the fact. MR. LIVEY answered yes. When they are ready to set a rate for a facility, and if the facility has a July 1 fiscal year, they will set a rate that starts their new fiscal year on July 1, 1999. They will have taken a look at all of their expenditures in their fiscal year 1996. The facility does a cost report for the DHSS; they tell the department all their expenditures related to Medicaid for the year 1996. The DHSS then audits those 1996 costs; they inflate those costs by two years, because there are two years in between, and that becomes their 1999 rate. They are arguing over the cost that is located in the cost report. If the DHSS doesn't take those costs out, then they will roll into 1999 and into future years. Being able to audit those cost reports is critical. CO-CHAIRMAN COGHILL asked if the time frame on those might require a history search of two years. MR. LIVEY answered any appeal that is filed, for example, if they set a facility rate in July 1999, that rate will be appealing the 1996 audit. There is a history then of going back and reviewing the costs, and the cost report that went into setting that 1999 rate. Number 0295 CO-CHAIRMAN COGHILL asked how long the hearing officer has to review that before forwarding it on, and if there is a time frame for the hearing officer. Number 0285 MR. LIVEY answered there is language in AS 47.070.075 that the hearing officer has to schedule a hearing within 120 days, unless there is good cause for her not to do that. In the past, they have assumed that good cause meant that they couldn't get hearings scheduled. They have one hearing officer and limited attorneys on the state side to do this work. There are a couple of attorneys on the facility's side that do most of this work, and so the reality is, it takes a year and a half to even schedule a hearing. In one proposed decision from the hearing officer for the DHSS to review, the decision itself was 200 pages. The transcripts that they were sent to review in that case had 1,500 pages, and that didn't include all the depositions. These are very complicated cases. CO-CHAIRMAN COGHILL agreed all that paperwork would take a long time to go over, but also there should be some finality. He wondered if they put more than a 30-day limit would that give the department more latitude. Number 0074 MR. LIVEY agreed a longer period of time would make them feel comfortable. He agrees that it takes too long to do appeals. He thought Ms. Derr's suggestion of setting up a mediation process is a good idea. Once they get in to the appeal, and they are under the Administrative Procedures Act, then they are into depositions and evidence and formal hearings, post hearing briefs, and so forth, which takes a lot of time and costs money. They need to set up a process to short circuit the appeals, or reduce the number of issues that go forward. TAPE 99-36, SIDE A [Due to recording malfunction, the following testimony was reconstructed from log notes.] CO-CHAIRMAN DYSON asked Mr. Livey why the department hasn't done anything about this problem sooner. MR. LIVEY answered that they have had other things take priority for their time and money. It hasn't been at the top of their list, but now it is. CO-CHAIRMAN DYSON asked if it was because they don't have enough people. MR. LIVEY answered that they only have one hearing officer. CO-CHAIRMAN DYSON asked if there has been any discussion on paying interest. MR. LIVEY would have to check on that; it may be a legal issue. CO-CHAIRMAN DYSON asked how long would it take them to improve the process. MR. LIVEY answered it will take time to find the resources, but he believes it will take at least a year to see a reduction in time. CO-CHAIRMAN DYSON asked him if they could work out the mediation aspect. MR. LIVEY agreed they could work on that. REPRESENTATIVE GREEN hopes they can find a real workable solution and he is amenable to that by next Thursday. Time is of the essence for the businesses, and he hopes they can move toward a resolution that represents both sides. CO-CHAIRMAN COGHILL announced they will take this up again a week from Thursday. [HB 168 is held over.]
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