Virginia Commission Recommends State Revise Medicaid Reimbursement Formula

A report presented to the Virginia Joint Legislative Audit and Review Commission recommends that the state Department of Medical Assistance Services submit a plan to the House Appropriations and Senate Finance committees to "eliminate their policy reducing [Medicaid] payment rates to hospitals by 2003," the AP/Richmond Times-Dispatch reports. The report states that this year, 99 Virginia hospitals are expected to be reimbursed $177 million for Medicaid inpatient care, instead of the $225 million that would cover 97% of their costs for inpatient care, the AP/Times-Dispatch reports. Before 1996, state hospitals were reimbursed for Medicaid patient care based on the number of hospital days each patient spent in the hospital. However, in 1996 the state implemented a reimbursement system based on "severity or complexity" of illness, an estimate of its cost to the hospital and other adjustments. Wayne Turnage, a chief legislative analyst with the joint commission, said that at that time, the hospitals "supported the change." However, as a result of the formula, hospital reimbursements since 1996 have dropped an average of 21%-38%. But Dennis Smith, director of the state Department of Medical Assistance Services, said that adjusting the reimbursement formula would cost the state $84 million, including reimbursements for psychiatric and rehabilitation services, more than the $48 million reimbursement difference that now exists (AP/Richmond Times-Dispatch, 11/19).