Hospitals in Illinois are complaining that slow payments and unnecessary denial of claims from the state’s privatized Medicaid system are putting both hospitals and their patients at risk, and they are asking state lawmakers to do something about it.
At issue is the state’s privatized Medicaid system known as HealthChoice Illinois, which uses private insurance companies known as managed care organizations, or MCOs, to coordinate each patient’s care by making sure they receive regular exams, follow-up treatment and specialist care when needed. The companies also process claims from health care providers for reimbursement.
The idea behind the system, which was expanded statewide in 2015 and now covers about two-thirds of all Medicaid patients in Illinois, was that by hiring private companies to manage and coordinate each patient’s care, patients would receive better, more comprehensive care. In addition, the state would ultimately save money – and the companies would earn their profit – by reducing unnecessary expenses for things like emergency room visits and hospital readmissions.
Instead, the hospital association argues, the new system has produced only bureaucratic delays that make it more difficult for hospitals to get paid, and for patients to access the care they need.
“The state’s Medicaid managed care program, which now covers more than 2.2 million Illinoisans, has failed to realize the promise of increased care coordination, improved patient outcomes, greater efficiencies and lower costs,” A.J. Wilhelmi, president and CEO of the hospital association, said in a news release. “Instead, the program has been crippled with increasing administrative burden, lack of standardization, lack of uniformity of rules, and insufficient oversight – putting extreme financial pressure on hospitals, jeopardizing Illinoisans’ access to care.”
IHHA spokesman Danny Chun said in an interview that the problem is especially hard on small, rural hospitals, known as “critical access” facilities, where Medicaid payments often make up half or more of the hospitals’ entire revenue.
“Many of these were struggling before managed care,” he said. “Many were already losing money.”
Since the change to the managed care model, Chun said, about 26 percent of all hospital claims have been denied after the initial submission. Before managed care, and for the limited group of patients who still have traditional fee-for-service Medicaid coverage, the denial rate is typically around 5 percent.
That difference, Chun said, adds up to hundreds of millions of dollars in revenue for some hospitals. And while there are processes in place that allow hospitals to appeal a denial, that process can drag on for months, and the process is different for each of the six MCOs participating in the program.
Often, he said, claims are denied because of administrative paperwork delays, such as when a new provider is added to an MCO’s network, but the MCO is slow to update its own roster, resulting in bills from that provider initially being denied.
Other times, he said, MCOs will withhold payments, but they will take weeks, or even months, to send follow-up questions to clear up the delay.
In response to concerns raised by hospitals and other health care providers in the Illinois Medicaid system, lawmakers have introduced three pairs of bills, with identical versions in both the House and Senate.
One pair of bills, Senate Bill 1697 and House Bill 2715, would require all MCOs to use standardized processes for a number of different functions, such as determining whether a service is medically necessary.
It would also put a time limit on how long MCOs have to request additional information, and it would further require them to update their rosters more promptly and to reimburse providers under contract, regardless of whether their roster has been updated. Those bills are sponsored by Sen. Heather Steans, D-Chicago, and Rep. Robyn Gabel, D-Evanston.
Another pair, Senate Bill 1703 and House Bill 2814, would allow providers to appeal claim denials to an independent, third-party reviewer. Those bills are sponsored by Sen. Don Harmon, D-Oak Park, and Rep. Bob Morgan, D-Deerfield.
And a third pair, Senate Bill 1807 and House Bill 2814, would require, among other things, that MCOs reimburse critical access hospitals and safety net clinics on an expedited schedule, similar to the schedule the state uses for non-managed-care patients at those facilities. Those bills are sponsored by Sen. Kimberly Lightford, D-Maywood, and Rep. Camille Lilly, D-Chicago.
None of the bills have been referred to a committee, although Senate President John Cullerton recently established a Special Committee on Oversight of Medicaid Managed Care, which will likely have jurisdiction over the Senate bills.