July 12, 2011
Ohio’s Budget and Its Impact on the State’s Health Care Industry
A Health Care Bulletin
On June 30, 2011, Governor Kasich signed into law Amended Substitute House Bill 153 (H.B. 153), Ohio’s budget for the 2012 and 2013 fiscal years. H.B. 153 is a historic state budget. It not only closes an $8 billion budget gap, but it also includes a number of fundamental policy changes in a variety of state programs. Many of these changes will have a significant impact on Ohio’s health care service providers.
In addition to experiencing significant cuts in state funding, Ohio’s health care service providers will also see transformational changes to a number of areas, including, but not limited to: long-term care services, the Medicaid system, and hospital franchise fee assessments.
A brief summary of some of the provisions that impact these three areas is provided below.
Long-Term Care: The budget makes a significant financial investment in Ohio’s long-term care service programs in an effort to allow seniors and individuals with disabilities to receive Medicaid home- and community-based services instead of having to go into a long-term care institution. The policy changes included in H.B. 153 will also impact long-term care services providers by:
- Creating a Unified Long-Term Care System Advisory Workgroup to advise on and evaluate the offering of a continuum of long-term care services;
- Creating the Nursing Facility Capacity Council to study and recommend actions for addressing nursing facility capacity in Ohio;
- Changing the Certificate of Need (CON) program, by allowing revisions to CON applications during a limited time period for reasons related to the location of project;
- Expanding the laws regarding a residential care facility’s ability to admit or retain a hospice patient who needs skilled nursing care;
- Changing the Medicare and Medicaid deficiency review process for nursing facilities and skilled nursing facilities;
- Revising the required notification for discharges and transfers from a nursing home or residential care facility;
- Restricting the type of Public Health Council rules that can be instituted for nursing home and residential care facilities;
- Establishing a franchise permit fee for nursing homes and LTACs at $11.47 per bed per day for FY 2012 and $11.67 for FY 2013 and forward and, similar to other long-term care programs, subjecting LTACs to the authority of and the fee for the Long-Term Care Ombudsmen program.
Medicaid Program. H.B. 153 includes a number of reforms to the state’s Medicaid Program, all of which are aimed at improving care coordination, integrating behavioral and physical health care, modernizing reimbursement rates, and probably most significantly, balancing the state budget. Specific provisions:
- Extend Ohio Department of Job and Family Services’ (ODJFS) window from three to six years following the date of service for ODJFS to make a coverage inquiry of the provider who rendered the service;
- Establish a suspension, hearing, and discipline procedure, consistent with the federal Affordable Care Act, regarding Medicaid provider agreements;
- Allow ODJFS to charge an application fee, similar to the Affordable Care Act provision relating to the Medicare program, to a provider seeking to enter into or renew a Medicaid provider agreement unless the provider is exempt under a federal regulation;
- Allow ODJFS to recover an overpayment to a hospital (such overpayment to be determined based on the Medicare cost report) if ODJFS notifies the hospital within five years of the year during which the overpayment was made or within one year of receiving the hospital’s audited cost report from CMS;
- Revise Medicaid reimbursement rates for nursing facilities, including calculations for quality incentives, and limit the payments for nursing facility services rendered to dual-eligible patients;
- Revise the process and procedures for the collection of long-term care facilities’ Medicaid debts;
- Require ODJFS to apply for federal approval of an amendment to the state Medicaid plan under which the Medicaid managed care organizations are provided funds to increase payments to hospitals under contract with the organizations;
- Require, for FY 2012 and FY 2013, the ODJFS Director to make additional Medicaid payments to children’s hospitals for inpatient services under a program modeled after a similar program in effect for FY 2006 and FY 2007
- Require ODJFS, no later than October 1, 2011, to enter into new contracts or amend existing contracts with health insurance companies to require them to include coverage of prescription drugs under the Medicaid managed care system; coverage of prescription drugs for Medicaid managed care participants must be provided through the health insurance companies in which they are enrolled.
Hospital Franchise Fee: H.B. 153 extends the Medicaid franchise fee on hospitals for an additional two years. The formula for the rate of the assessment was removed from the statute and, under the new law, will be based on an “applicable assessment percentage” of each hospital’s total facility costs. The “applicable assessment percentage” is to be established through regulations passed by ODJFS. Under the budget language, ODJFS may impose a 10% penalty on overdue hospital assessments and the agency may also offset the amount of a hospital’s unpaid penalty against Medicaid payments due to the hospital.
Other Reforms: In addition to the three major areas of reform discussed above, H.B. 153 also includes a number of other, more targeted reform measures, including reflections of health care delivery concepts being discussed at the federal level, insurance contract reform, and changes to the facility licensing rules by the Ohio Board of Pharmacy:
- Recognition of “health homes” in Ohio.1 H.B. 153 authorizes the implementation of the federal Medicaid option of providing coordinated care through “health homes” to Medicaid recipients with chronic conditions;
- Recognition of pediatric accountable care organizations (ACOs). ODJFS is required to adopt rules no later than July 1, 2012, that establish the standards necessary for an entity to be recognized as a pediatric ACO;
- Elimination of the use of most-favored nation clauses in health insurance contracts, including contracts covered by the three-year moratorium, and those entered into prior to June 25, 2008;
- Increase in the licensing fees charged to wholesale distributors of dangerous drugs by the Ohio Board of Pharmacy
Imposition of pharmacy licensing restrictions (with some broad exceptions) on pain management clinics.
- The term “health home” used in H.B. 153 is similar to the term “medical home” used in similar provisions of federal law.