State Panel Approves Medicaid Rates for Hospitals Should NYPHRM Expire Without a Replacement

Albany, June 27 -- A temporary emergency plan to pay hospitals for caring for Medicaid and certain Blue Cross and HMO patients was approved today by the State Hospital Review and Planning Council. This plan would take effect if the current hospital reimbursement system, known as NYPHRM, expires at midnight June 30 without a replacement.

By a vote of 19 to 4, Council members recommended that:

  • The State should have a six-month transition period before changing to a negotiated-rate system for Medicaid on January 1, 1997.
  • The current basic reimbursement rate should be continued, with a 12 percent reduction. The basic rate excludes costs that had been funded through surcharges and add-ons authorized by the current reimbursement system, such as certain bad debt and charity care costs, public health initiatives and costs associated with health training programs, workforce demonstration projects, and merger, consolidation and acquisition projects.
  • Medicaid rates should meet the minimum federal requirements regarding the reimbursement of hospitals' charity care.
  • Rates for Blue Cross plans and managed care plans that are approved by the Health Commissioner should include payments for their proportionate share of charity care.
  • Reimbursement for Graduate Medical Education will remain in the Medicaid rates, at a 12 percent reduction.

State Health Commissioner Barbara A. DeBuono, M.D., said she has accepted the Council's recommendations. She praised the Council for taking action. "Through its vote today, the Council has ensured that hospitals can continue to be reimbursed for the cost of caring for Medicaid patients and for charity care provided to uninsured indigent patients," she said. "This is intended to be a temporary measure only."

Dr. DeBuono noted that the Council's recommendation incorporates the principles of the Department of Health's contingency rate plan announced on May 2: Medicaid rates should be negotiated, a temporary system to pay hospitals must be in place in case no replacement to NYPHRM -- is adopted before midnight June 30, adjustments in current rates are necessary, and a financing mechanism for hospitals charity care costs must be in place.

Negotiations continue between the Legislature and the Executive Branch on a replacement to NYPHRM. "I remain hopeful that an agreement can be reached before Sunday at midnight," Commissioner DeBuono said. "But if that does not happen, New Yorkers should be assured that their hospitals will continue to treat patients. The natural lag between the date of a hospital service and the date the bill is paid affords a small cushion of time. But the Pataki Administration recognizes that hospitals, like any other business, need to know how the State's action will affect their bottom lines. The sooner hospitals know, the better they can plan and adapt. That's why Governor Pataki proposed his Health Care Reform Act more than three months ago and has pushed for negotiations ever since."

Governor George E. Pataki has proposed legislation that would allow the State's Child Health Plus insurance program (worth $75 million) and the Regional Insurance Programs to function. "Child Health Plus provides 104,000 low-income uninsured children, from birth through age 14, with coverage for all health care costs except inpatient hospital care," Dr. DeBuono said. "About 8,000 people are enrolled in the Regional Insurance Programs, which subsidize health insurance costs of employees of small businesses. It is essential that this continuum of care not be interrupted because of the pace of negotiations."

NYPHRM expires without successor legislation adopted by the Legislature and signed by the Governor, the State would lose the authority to set hospital rates to be paid by commercial insurance carriers and workers' compensation or to require that they contribute to the funding pool that has reimbursed hospitals for bad debt and charity care costs. Instead, these payers will be able to make individual rate arrangements with hospitals. Blue Cross rates or formulas would still need to be approved by the Health Commissioner, and managed care plans would continue to have the authority to negotiate rates.

Significant to many hospitals would be the expiration of the State's authority to collect and pool dollars that had been used to fund certain public health priorities. They are:

  • The Bad Debt and Charity Care Regional Pool (worth about $582 million annually) and supplemental adjustments for major public hospitals ($149 million) and for public hospitals with the largest proportion of Medicaid patients ($236 million) to subsidize hospitals' costs for caring for indigent uninsured patients and uncollectible debts
  • Financially Distressed Pool, which provides further subsidies for charity care at approximately 20 designated financially distressed hospitals around the State ($120 million), and the Financially Distressed Capital Pool, which provides advance funding for the planning costs of construction projects ($17 million)
  • Child Health Insurance Program, which subsidizes non-inpatient health care from birth through age 14 for children of the working poor ($75 million)
  • Primary Health Care Service Grants, which encouraged the development of preferred primary care provider networks through grants to hospitals, diagnostic and treatment centers and private physician practices ($36 million)
  • Primary Care Education and Training Grants to medical schools and tuition subsidies to medical students, to increase the number of doctors in primary care ($15 million)
  • Mergers/Acquisitions/Consolidations Rate Adjustments to provide aid hospitals which have agreed to needed corporate restructuring ($3 million)
  • Hospital Collaboration Grants to foster development of shared-purchasing arrangements between hospitals to help cut their operating costs ($1 million)
  • Management Information Grants, which help hospitals without a lot of working capital to improve their computerized information systems ($1 million)
  • Rural Health Network Grants, which promote affiliations with hospitals offering specialty care not available locally ($3 million), Rural Hospital Rate Adjustments to provide additional funding to rural hospitals for unavoidable cost inefficiencies ($3 million) and Rural Network Grants, which spur the development of rural health clinics ($1 million)
  • Hospital-Based Grants to Fund AIDS Initiatives ($22 million) and HIV Services for Infants and Pregnant Women, which subsidize health care providers of these services ($5 million)
  • Emergency Medical Services to fund grants to local EMS operations ($16 million)
  • Health Personnel Recruitment and Retention, which provides $45 million to hospitals, clinics, nursing homes, home care providers and hospitals to recruit and train professional staff
  • Workforce Demonstration Projects, which provides $4.5 million to test and evaluate innovative approaches to redesign hospital services to improve productivity
  • Commissioner's Priority Pool, which funds critical emerging public health needs ($14 million)

6/27/96-80

OPA Contact: Claudia Hutton, Director, Public Affairs (518) 474-7354
New York State Department of Health Posted 7/1/96