Healthcare Reform Changing How NJ Will Receive Medicaid Dollars

Beth Fitzgerald | April 19, 2012 | Health Care
O’Dowd says health agency is working on new reimbursement formulas for graduate medical education and Hospital Relief Subsidy Fund

New Jersey hospitals will see major changes in funding regulations in 2014, when the federal government plans to change how it delivers Medicaid dollars. Funding will be distributed based on how efficiently hospitals deliver care and the quality of that care. Initially up for grabs is the $128.3 million in annual federal Medicaid matching dollars for two programs — graduate medical education, which helps fund residency programs to train doctors, and the Hospital Relief Subsidy Fund, which subsidizes costly programs such as HIV/AIDS and tuberculosis care.

These changes don’t involve the $635 million charity care fund, which provides state and federal funds to hospitals for uncompensated care they deliver to the poor and uninsured.

State Health Commissioner Mary E. O’Dowd, testifying before the Assembly Budget Committee on Wednesday, said the old rules remain in place for fiscal 2013, when the state expects the same federal Medicaid matching dollars it received this year: $45 million for graduate medical education, and $83.3 million for the Hospital Relief Subsidy Fund. These federal funds match state funding dollar-for-dollar for a total of $256 million.

O’Dowd is working with the hospitals and the Centers for Medicare and Medicaid Services (CMS) to devise a new formula to allocate the federal matching funds for graduate medical education and the Hospital Relief Subsidy Fund. The formula must change because New Jersey is transitioning its entire Medicaid program from fee-for-service to managed care, and the old formula only applies to fee-for-service Medicaid programs.

O’Dowd said the goal is to reward hospitals that are “focused on delivery system innovation and change, quality of care and population health.” The new reimbursement formulas are being devised across the country as states continue to migrate away from fee-for-service Medicaid programs and into managed care.

The new CMS reimbursement rules have yet to be promulgated, but hospitals leaders said they are up to the challenge.

Betsy Ryan, chief executive of the New Jersey Hospital Association, said the new CMS formula would require hospitals to demonstrate performance and quality improvements to be eligible for funding. “We have done a lot of work on this and we think our hospitals will be up to it — but the devil is in the details.”

This is the 10th anniversary of the NJHA Quality and Patient Safety Institute, whose quality collaborative brings hospitals together to create programs that reduce avoidable hospital readmissions and improve patient outcomes. Ryan cited a 70 percent reduction in bedsores that came from this work. “If CMS is looking for performance improvement, I think our hospitals are well-equipped to jump into that fray because they have been working on it for years.”

The federal government will work with New Jersey to develop a funding formula “that incentivizes hospitals to provide more effective and more efficient care, and many of my hospitals are already doing those things,” said Suzanne Ianni, president of the Hospital Alliance of New Jersey, whose members are the urban safety net hospitals that serve a disproportionate share of poor and uninsured patients.

A well-known example is the Camden Coalition of Healthcare Providers, led by Dr. Jeffrey Brenner of Cooper University Hospital, who brought all the hospitals and many of the physicians in the city together to improve care for chronic illnesses like diabetes and cardiac disease, and reduce unnecessary emergency room visits.

Ianni said once the new formula is in place in 2014, New Jersey may qualify for more funding than it gets now, if it can more accurately document the uncompensated care its hospitals provide, and if the hospitals can make the case that they are providing cost effective care in the best possible delivery system.