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Florida proposes new Medicaid reimbursement system for hospitals

Making good on promises made during the 2012 legislative session, the Agency for Health Care Administration has come up with a new plan for reimbursing hospitals that treat patients on Medicaid. The new "diagnosis-related group" model would categorize Medicaid patients based on the type and severity of their illness and pay hospitals accordingly.

That is similar to how the statefederal government already reimburses health care providers under the Medicare program for the elderly. In the existing Medicaid payment system, hospitals are generally paid a flat rate for each day that a patient is in their care. But each hospital has a different Medicaid reimbursement rate, with those that serve the sickest patients usually getting higher payments.

Converting Medicaid to DRG will make hospitals more efficient and improve quality, AHCA said, and in turn ensures that taxpayer dollars are being protected.

“The Agency is thankful for Governor Scott’s leadership in helping us put forward a roadmap for transforming the way hospital inpatient services are paid for in Florida,” said AHCA Secretary Liz Dudek via a news release.  “Converting to a DRG system promotes quality—it’s designed to reward high value, quality-driven health care services.” 

The conversion to DRG, and a speedier timetable, is a result from pushback from hospitals who have complained that consecutive years of cuts in Medicaid reimbursement rates were hurting their bottom lines. Hospitals and lawmakers also rejected a proposal from Gov. Rick Scott last year to group similar hospitals together into "rate bands" and pay them similarly under Medicaid. Advocates complained that Scott's proposal drastically decreased funding for  "safety net'' hospitals that provide the most care for poor people.

Instead, the Legislature cut Medicaid rates by about 6 percent for the 2012-2013 fiscal year, which reduced hospital funding by $303 million. But members also set aside money to aid with the DRG planning process.

A final meeting will be held tomorrow to discuss the DRG recommendations from AHCA, and the agency hopes to start using the new payment system in July.

Learn more about the new DRG payment system here.