Hospitals thought they’d get $450M in extra money this year. They’re actually getting much less.

by Devna Bose, Mississippi Today
March 9, 2023

Mississippi hospitals, many on the precipice of closure, will be getting much-needed additional money this year.

But the amount they receive might be much lower than expected.

The Mississippi Division of Medicaid proposed changing the way it calculates some additional funding hospitals in Mississippi receive called “supplemental payments.” One of the funds, called the Mississippi Hospital Access Program payments, gives hospitals the difference between what Medicaid actually paid for services rendered and what Medicare would have paid for similar claims, offsetting losses incurred by standard Medicaid payments being too low.

But on Feb. 15, the Mississippi Division of Medicaid submitted a request to the Centers for Medicare and Medicaid Services to change that model to pay hospitals the difference between Medicaid rates and what an average commercial plan’s rate would have paid.

The goal was to generate more money for hospitals.

Tim Moore, president of the Mississippi Hospital Association, said the original estimate hospitals received from the Division of Medicaid for supplemental MHAP-generated funds after the change was around $450 million.

The most recent calculation, however, is $40.2 million.

“The preliminary estimates from last fall were subject to change based on Mississippi-specific data, and those estimates were not submitted to CMS,” said Matt Westerfield, communications officer at the Division of Medicaid.

Currently, Mississippi hospitals have two sources of funds called “supplemental payments” — the MHAP and disproportionate share hospital, or DSH, payments. These funds are a combination of federal and state money.

Since it was created in 2015, MHAP has yielded half a billion dollars to Mississippi hospitals, or about 8.3% of Medicaid spending in the state.

The problem with using average commercial reimbursement rates for a new calculation for MHAP payments is that Mississippi’s insurance reimbursement rates are so low, said Moore.

And that’s not all: Because of a complex rule about hospital funding limits, hospitals will receive $95 million less in the second type of supplemental payment (DSH) this year.

For hospitals that mostly serve patients from low-income backgrounds, DSH payments help hospitals recoup the cost of providing care to patients who cannot afford to pay. The total amount for Mississippi hospitals averages around $230 million each year, according to Moore.

“It’s a swap, in order to maximize dollars,” Moore said. “There’s not one lever you pull that doesn’t affect anything else.”

So, after accounting for the decrease in DSH funds, additional MHAP payments and one-time pandemic emergency relief funds, hospitals could net a total of $96 million in extra funds.

Lawmakers are also currently considering a bill that would give an additional $80 million in federal COVID-19 relief funds to hospitals.

Earlier this year, the Association projected that Mississippi hospitals would need a total of $230 million in additional funding to fill their financial gaps and sustain operations. Even with the grants, Mississippi hospitals are about $60 million short.

But the money’s got to come from somewhere, Moore said. Over a third of rural hospitals are on the brink of closure and need desperate help.

“Hopefully, the Legislature will increase the $80 million to a higher number,” Moore said.

Lt. Gov. Delbert Hosemann and Speaker Philip Gunn did not respond to questions about whether lawmakers would consider appropriating more money to hospitals by Wednesday afternoon.

And even if hospitals do get enough from additional supplemental payments, it’s possible that small, rural hospitals most in need of help will get the least funding.

Under the new proposed MHAP supplemental payment model, the payments are adjusted based on average commercial insurance rates. But that’s not a statewide average — that’s an average for each hospital.

So, a hospital’s extra MHAP payment will depend on how much it gets reimbursed on average by commercial insurers. And according to Mike Chaney, state insurance commissioner, that isn’t always equal.

“There are some hospitals, especially in the rural part of the state … that do not get paid on the same level that urban hospitals get paid for health care,” he said.

Currently, Medicaid is waiting on CMS approval for the change to MHAP payments.

“Medicaid has pushed for a rapid process, if there is such a thing,” Moore said. “They’ve impressed upon CMS the urgency of getting this done.”

But he stressed that if Medicaid was expanded, Mississippi’s hospitals wouldn’t be in this state.

“It doesn’t fix all the problems, and we’ve never said it would … but our hospitals wouldn’t be in as big a deficit as they are today,” he said. “The hole has gotten bigger and bigger and bigger. And now you’ve got to have money to fill the hole.”

This article first appeared on Mississippi Today and is republished here under a Creative Commons license.

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