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Lawmakers ask AHCA to tweak new Medicaid formula for hospitals

Saying they want teaching and safety net hospitals to come out as winners instead of losers, members of the Senate’s Health Policy Committee have asked to state to provide more options for implementing a new Medicaid payment system for hospitals.

The new diagnosis-related group payment model, or DRG, was developed by the Agency for Health Care Administration to replace the current cost-based system starting in July.

For-profit hospitals are the biggest gainers under DRG as it currently stands, and several senators said that shouldn’t fly.

Committee Chairman Aaron Bean, R-Fernandina Beach, said he wanted AHCA to run new simulations that redirects about $50 million in Medicaid spending so that is is once again funnelled to teaching hospitals. Gov. Rick Scott has set that money aside in his budget to be allocated to teaching hospitals separately, but senators said they want the money in the Medicaid formula because they worry a separate line item would be subject to the whims of future elected officials.

“That hits all of the safety net hospitals that incorporate teaching physicians how to be future doctors, which is important to everybody,” Bean said. “That’s the big one.”

But others asked for even more changes.

Sen. Oscar Braynon, D-Miami Gardens, wanted to see how hospitals would be affect if DRG included a formula adjustment based on wage disparities. Braynon said that would benefit South Florida hospitals he represents because wages are higher there.

For example, Braynon said, he would like to see Miami’s Jackson Memorial Hospital receive more under DRG. As it stands now Jackson stands to lose nearly $45 million.

Senators also asked to see how the governor’s proposal to reduce overall Medicaid spending by 2 percent would affect DRG allocations for each hospital under any scenario.

AHCA said they would tweak the formulas and provide new simulations as the senators requested. But a representative repeated his warnings that changes to benefit certain hospitals mean others will suffer.

Bean said the legislators’ main goal is to make the DRG system the best it can be by the July 1 start date. On that issue, he disagreed with representatives from the Florida Hospital Association and the Safety Net Hospital Alliance of Florida who are urging a one-year implementation delay.

“If delaying doesn’t solve the problem, that’s kicking the can,” Bean said. “If there was a way to fix it now, I would vote to fix it now because we’re going to have to fix it sometime.”

Tony Carvalho, president of the Safety Net Alliance, said he is glad lawmakers are listening but worries the Legislature won’t be able to come to an agreement on DRG in the roughly 90 days between now and their deadline to approve a balanced budget.

“This is a very complex, detailed issue,” he said. “I have some concerns that they will have time to adequately review and understand all of the issues. If they do, that’s fine.”