We’re hearing this morning from our contact at the White House that CMS has approved the state Medicaid plan amendments submitted by the Health Care Authority.  We have not yet had this confirmed by the state of Washington.

Those plan amendments raised concerns – and drew a lawsuit – from rural providers, particularly the FQHCs.  The nub of it?  Well, it turns out the new Medicaid plans allow the state to go back to 2009 to “reconcile” payments made to providers, in other words taking back what the state calls an “over payment.”

The details are far more troubling, however.

The state has claimed that CMS was requiring them to change the rural provider reimbursement model, moving from a c0st-based model (cost of care divided by number of episodes equals a reimbursement rate) to a prospective payment model.

The prospective payment model was instituted in previous years, and exists in an analogous, but substantively different form for Medicare.  The original purpose of the prospective payment system (PPS) was two fold:

—  Prepare a forward looking payment model that allows providers to know with certainty their reimbursement for care.  This allows providers to build care coordination infrastructure to better manage patient care.

—  Provide a model wherein providers could not make claims against the state for back payments.

Interestingly, the new PPS model will both severely undermine care coordination and be a vehicle for the state to take back previously approved reimbursement from physicians.

This is different than overpayment collected from reconciliation.  This is changing the rules of the game in mid-stream, and using a new methodology instituted after the fact to collect payments made up to three years ago – in this case back to 2009.

The implications for states in fiscal crisis is unheralded.

Apparently, according to my contact working this issue in Washington DC, “California did this previously and triggered some issues that allowed CMS to disallow their amendment but Washington State learned from that and did things in order.”

As far as the White House knows, this is the first time in the country that such an amendment by the state — one that can be used to make a claim for back payments under a previous methodology — has ever been allowed by CMS.

The consequence is that rural physicians in clinics and health centers now owe often well in excess of $100,000 per physician to Medicaid under this newly approved methodology.