Mississippi Gov. Phil Bryant (R) signed two laws that pave the way for the Mississippi Hospital Association to form its own insurance product to participate in the Medicaid program as well as reform the state's upper payment limit formula, or UPL, for inpatient hospital services.

Senate Bill 2441, signed by the governor April 20, allows Mississippi health-care providers, including hospitals and physicians, or an industry group representing in-state hospitals and physicians, to form an insurance product to participate in the Medicaid program. Senate Bill 2588, signed April 22, creates a mechanism, pending approval from the Centers for Medicare and Medicaid Services, for bridging the gap between inpatient Medicaid diagnosis-related group payments and Medicare DRG payments.

“These bills qualify non-for-profit groups as an insurer, and they will have to accept risk, but they will also be comprised by and led by hospitals and doctors,” Elizabeth Mann, partner at Mayer Brown in Los Angeles and cohead of the firm's Health Care practice, told Bloomberg BNA. “There aren't many of these. It creates a laboratory.”

Traditional insurance companies receive the premiums and contract the care to hospitals and doctors, Mann said. As long as hospitals and doctors do their job, they get paid by insurance companies.

“The two entities are not aligned; they're not in the same economic pot,”Mann said. “The two statutes together allow hospitals, …the greatest source of money spent in the U.S. health care system, to align economic incentives.”

Provider-Sponsored Health Plan

The Mississippi Hospital Association has been working with stakeholders for the past two years on this plan, Shannon Coker, Director of Advocacy and Communication for the MHA, told Bloomberg BNA.

S.B. 2441 sets up a framework for a provider-sponsored health plan (PSHP), Coker said. “It's up the Division of Medicaid to accept this plan, this will just set up the opportunity,” she said.

In 2010, the state established the Mississippi Coordinated Access Network, know as MississippiCAN, under which the Legislature authorized Medicaid to start using managed-care companies. Two private insurance companies, United Health Care and Magnolia Health Care, began enrolling patients under the program in 2011 (19 HCPR 136, 1/24/11). The program didn't include all Medicaid patients. For example, the Legislature didn't allow patients who used inpatient hospital services to enroll.

In 2017, MississippiCAN will allow the inclusion of inpatient hospital services, Coker said. If the Division of Medicaid accepts a PSHP plan by the Mississippi Hospital Association, it will essentially create a third player in the program, the two pro-profit insurance companies and the nonprofit one set up by the MHA or other non-profit provider groups.

S.B. 2441 also allows for government hospitals to provide funds for the establishment and operation of the PHSP and provides protections against antitrust laws. The law also states that the PSHP would have to meet the same requirements as an insurance company or health maintenance organization and it will have to comply with Medicaid contracting requirements. The law becomes effective July, 1.

Consumer advocates are leery of the plan because initially it included $30 million of start-up money from the state, Roy Mitchell, executive director of the Mississippi Health Advocacy Program, a consumer advocacy group, told Bloomberg BNA.

“How will they manage to compete against the pro-profit plans?” Mitchell said. “There's been a lack a transparency by the MHA.”

He also expressed concern that the law states that the Insurance Department will set the minimum reserve requirements instead of the $1.5 million reserve set in Mississippi Code for other health management organizations.

Mann said, “I cannot fathom whoever is the head of the department of insurance in Mississippi is going to say that I'll have United Healthcare have reserve margin of $1.5 million but have this new non-for-profit insurance only have half a million dollars of reserves.”

If the provider plans and hospitals are part of the same family and they don't run their economics properly, they will not get paid, Mann said.

“I've talked to hospital executives from around the country,” Mann said. “At the end of the day, they all want to do the right thing. I don't think letting the head of the department of insurance setting the reserve requirement will be the end of the world.”

Hospital Access Payment Program

Senate Bill 2588 authorizes the Division of Medicaid's managed care contractors to pay for inpatient hospital services and creates a hospital access payment program to provide needed funding to Mississippi hospitals, Coker said. The changes implemented by this law will need CMS approval.

“This bill finds an alternative method to preserve the reimbursement levels to providers,” Coker said.

The hospital access payment program, pending a CMS approval, would be a mechanism for the Legislature to agree to raise the UPL Medicaid DRG rates for inpatient services to the Medicare DRG rates.

Medicaid payments for a hospital service are generally less than Medicare payments for the same service. Prior to the law, Mississippi had been paying hospitals from the state's general funds to make up some of the difference, Mann said.

“If they get the CMS waiver, then some of the cost is shifted to the federal government,” Mann said. “Mississippi also pays more. It creates a stable source of funding [for hospitals]. Right now, the hospitals are vulnerable. They are providing [these services] at the low Medicaid rate and then they're hoping that they can apply to the Medicaid department, which will have money and will give it to them.”

The new law provides that managed care will pay no less than the Medicaid rate, but it does allow for alternative payment arrangements upon mutual agreement between the managed care organization and the provider.

Another important part of the law is that it recognizes the participation of the PSHP in the MississippiCAN program, Coker said.

“If your hospital has a more stable source of income then being a Medicaid managed care provider and a hospital or a group of hospitals at the same time is a really good economic place to be,” Mann said. “It could be a very successful, efficient business. You could see why a hospital association would want to do this.”

Reproduced with permission from BNA's Health Care Policy Report, 23 HCPR 681 (May 4, 2015). Copyright 2015 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com