Physician Supplemental Program

The State of Florida had a supplemental program that ended on June 30, 2014. Starting on July 1, 2014, SFY 2014/15, this program has been moved within the LIP program so that the supplemental payments could continue even though the volume of FFS recipients, and thus, the size of the UPL gap, has decreased. The program supports teaching physicians affiliated with a public university system medical school or a private medical school that had 50 percent of residents placed in a public hospital. As stated previously, supplemental payment programs governed by the rules of upper payment limits cannot exist in a managed care environment. Therefore finding options to continue the $204 million (total computable) program is essential to maintain current reimbursement levels to these providers.

Many other states struggle with this funding issue as they continue their transitions from traditional FFS delivery models to fully capitated Medicaid managed care models. The states of Texas and Washington are two where solutions are being sought to preserve, or even expand, this important funding stream. For example, Texas has an 1115 waiver designed to address this issue through an uncompensated care pool. The objective of the uncompensated care pool with the Texas 1115 waiver is to allow physicians to be reimbursed for the uncompensated care for Medicaid eligible beneficiaries and uninsured individuals. With regard to the changes to supplemental physicians’ payments in Texas, the Texas Health and Human Services Commission issued the following question and answers, which offer specifics about the program:198

197 _{Texas Health and Human Services Commission, Waiver No. 11-W-00278/6 entitled “Texas Healthcare Transformation}

and Quality Improvement Program,” Page 34.

198 _{Texas Health Care Transformation and Quality Improvement Program – FAQ (http://www.hhsc.state.tx.us/1115-}

Will HHSC still pay supplemental payments for services provided by physician practice groups under the 1115 waiver?

Uncompensated care payments under the waiver may cover the unmet cost of providing physician services to Medicaid patients and uninsured patients. HHSC will seek clarification from CMS as to whether payments out of the pool may be made to qualifying physician practice groups where appropriate.

Will the payments still be calculated based on 145 percent of the Medicare rate?

Uncompensated care payments under the waiver will be limited to the cost of providing services, and therefore the current physician supplemental funding methodology using 145 percent of the Medicare rate will no longer be used. However, HHSC will compute transition payment caps for the first year based on historical Physician UPL payments. The State of Florida could incorporate the existing $204 million program into the calculation of an uncompensated care pool as long as that option is deemed acceptable to CMS. Uncompensated care pools approved recently by CMS have been coupled with implementation of a DSRIP program. Similarly, CMS might require a DSRIP program to be implemented if it allows for an uncompensated care pool.

Given that the current Florida physician supplemental payment program is funded through the use of IGTs, the new program could still use IGTs for establishing the payments for physicians affiliated with a public university system medical school or a private medical school that has 50 percent of residents placed in a public hospital.

As another example, Washington Medicaid has established a professional supplemental payment program for University of Washington (UW) Medicine, which comprises two hospitals that are large state-owned and operated hospitals (University of Washington Medical Center and Harborview Medical Center) and a large physician practice group (University of Washington Physicians). Physicians who are a part of University of Washington Physicians are considered employees of UW Medicine, and therefore of the State, which enables the use of an IGT model for the physician supplemental payment program.

When this program was first implemented, funding was initially limited to the physician UPL gap associated with only services provided as part of the FFS program. Recently, Washington expanded the program to also take advantage of the “imputed” gap associated with the capitated managed care population - a program that was recently approved by CMS. This new expansion was also funded through the use of IGTs, whereby UW Medicine funds the state’s portion of an increase in the actuarially sound capitation rates paid to the Medicaid managed care plans that contract with UW Medicine. Although the State cannot direct how those plans contract with or otherwise pay UW Medicine for their enrollees, it is our understanding that,

with the cooperation and brokering efforts of the Washington State Hospital Association on behalf of UW Medicine, funds are being distributed by the plans to the hospitals in a way that is satisfactory to all parties involved.

Another option for maintaining supplemental payments to teaching physicians if the LIP program goes away would be to move these payments into the GME program. There is precedent for CMS allowing GME supplemental payments to continue as these payments are associated with the cost of teaching medical students, and not associated with the care of Medicaid recipients. Similarly, the teaching physician supplemental payment program helps offset costs of physicians instructing medical students.