Community Clinics Say Delayed Payments Threaten Their Survival

Andrew Kitchenman | September 19, 2014 | Health Care
Federally qualified health centers win support of legislators in long-running dispute with state over how Medicaid payments are calculated

Mark Bryant of CAMCare Health Corp., Linda Flake of Southern Jersey Family Medical Centers, and Joan Quigley of North Hudson Community Corp. Health Center testify before the Assembly Health and Senior Services Committee yesterday.
Community health center officials say their ability to function is being threatened by delays in resolving a long-running dispute with the state over how the centers should be paid.

A federal district judge has ordered the state to change how it calculates Medicaid payments to federally qualified health centers, which serve as primary-care clinics for low-income residents. The centers sued in 2012 over changes that state officials made in how payments are determined, saying they thought the FQHCs were being overpaid.

But while the courts have ruled in favor of the clinics, state officials recently asked for more time to respond to the judge’s order.

Meanwhile, New Jersey’s 20 FQHCs say the payment changes are costing some facilities more than $1 million per year, making it impossible for them to cover their costs.

“For the first time in 20 years, we had to go into our reserves to meet payroll,” said Linda Flake, CEO of Southern Jersey Family Medical Centers, describing the effect on FQHCs of payments that have been reduced and delayed payments as a result of the dispute. “If this continues unabated, even your strongest health centers will not be able to survive indefinitely.”

The issue has drawn the attention of legislators, who have expressed support for the centers. The Assembly Health and Senior Services yesterday passed a resolution asking Gov. Chris Christie to take all necessary steps to ensure state agencies comply with the ruling.

The dispute centers on a complicated system for determining Medicaid payments. Under the current system, Medicaid patients are insured through managed care organizations. These MCO insurance companies pay FQHCs amounts that are similar to what they pay other providers.

However, these payment amounts are sometimes less than what FQHCs are entitled to under the federal Medicaid law. In addition, there are times when MCOs, under their contracts, can deny entire claims for services that patients were entitled to under Medicaid, such as when a doctor other than the patient’s regular primary care doctor fills in because the regular doctor is sick. When this occurs, the state must pay the difference between the MCO reimbursements and the payment that the center was untitled to under the federal Medicaid law.

Under a system in place before 2011, the state determined how much it would pay based on information submitted by the FQHCs themselves.

But in 2011, the state started requiring the centers to report whether they had been paid by the MCOs. The state began to use whether the MCO had accepted a claim as the basis for determining whether to pay the difference between the MCO payment and the full Medicaid-entitled payment. The centers then sued.

In 2012, U.S. District Court Judge Joel A. Pisano determined that the state could not use decisions by MCOs on the validity of claims as the basis for determining whether a center was entitled to a Medicaid payment. A panel of judges for the U.S. Court of Appeals for the Third Circuit in 2013 upheld this part of Pisano’s decision, although it struck down several other determinations by Pisano.

Interestingly, the appeals court noted that another appeals court had allowed Maryland to give MCOs the authority to determine whether claims were valid under Medicaid.

But this was different from what New Jersey did, since it never gave MCOs this authority, but only used the MCOs’ decisions on whether claims were valid under the MCOs’ own contracts as the basis for determining if they were valid as Medicaid claims. This could cause a problem when the MCO contract standards differ from Medicaid requirements.

It remains to be seen whether the state could develop standards like those used in Maryland that would pass legal muster but could lead to reduced payments to FQHCs.

A group of FQHC executives appealed to legislators for help at yesterday’s hearing.

Flake said the state owes her centers, which serve Atlantic, Burlington and Salem counties, $2.6 million in accumulated missed payments.

Mark K. Bryant, president and CEO of Camden-based CAMcare Health Corp., said his organization could go bankrupt if it doesn’t receive the payments.

“We’re entitled to be paid 100 percent of a reasonable cost,” Bryant said. “We’re being denied that payment.”

North Hudson Community Joan Quigley, president and CEO of North Hudson Community Corp. Health Center, said the missed payments amounted to 15 percent of what the centers were entitled to. She noted that Christie has emphasized the importance of FQHCs, saying they can provide women with services previously provided by health centers that closed due to funding cuts he made.

“If an MCO doesn’t process a payment fast enough or correctly enough, the state washes its hands of responsibility for paying anything to anyone,” said Quigley, a former state assemblywoman.

The centers drew bipartisan support from the committee, with three Republican joining five Democrats in voting to release the resolution, ACR-172/S-2425, for a vote by the full Assembly. Assemblyman Erik Peterson (R-Hunterdon, Somerset and Warren) abstained, saying that it raised ethical concerns for the Legislature to take a position on a court case before it’s resolved.