A public hospital in Fort Worth, Texas, is accusing state health officials of cramming a managed-care Medicaid system down the throats of providers without federal or state legislative approval.
The board of JPS Health System, a tax-supported public hospital, last week hired legal counsel to sue the state of Texas over the matter.
"There is major unrest in the urban areas where the state is trying to implement this," said Marion "Tim" Philpot, JPS' president and chief executive officer. The 360-bed hospital has not yet filed suit but will meet with lawyers this week on the details.
Philpot and others charge that the state may be circumventing a new Medicaid system approved by the Legislature last year. The new law allows the state to apply for a federal waiver to implement a system of county block grants to distribute $9 billion in Medicaid funds (June 19, 1995, p. 86).
Because the Medicaid program receives matching federal dollars, states must receive waivers to implement major changes. A "section 1115(a)" waiver allows broad, statewide changes. A "section 1915(b)" waiver allows a state to implement pilot projects.
Last August, Texas applied for a 1115 waiver. A few months later, HCFA sent back the request with questions. It was never resubmitted.
However, the state has previous 1915 waivers for two pilot Medicaid managed-care projects, and Mike McKinney, M.D., the state's commissioner of the Department of Health and Human Resources, is expanding that effort to four markets. In August and September, Medicaid pilot projects will begin in Austin, Fort Worth, Lubbock and San Antonio.
The state is preparing to roll out the program in 16 other cities.
While McKinney's office contends it is carrying out the Legislature's mandate for a Medicaid managed-care system, the question is how.
"Were they really told to do additional 1915 waivers, or were they instructed to do the 1115 and that's it?" said Joe DaSilva, the Texas Hospital Association's senior vice president.
Interestingly, the state already has selected HMOs to be Medicaid providers in each of the four areas proposed for 1915 waivers. However, it has not yet applied for those waivers. McKinney declined to return calls.
Philpot and other JPS officials met with HCFA representatives last week in Washington to discuss their concerns. Philpot contends the plan will disrupt continuity of services and the hospital's family practice residency program. The hospital receives about $50 million, or 25% of its budget, from Medicaid.
Officials at the public hospital in Lubbock, University Medical Center, had not yet decided whether to join JPS' suit. The state already has selected two HMOs for the Medi-caid project there, which will start Sept. 1.
So far, only one of the HMOs has approached University with rates, and "it's not a very pretty picture," said James Courtney, University's president and chief executive officer.
Some hospitals are worried that the Medicaid HMOs, intent on making a profit, will play hospitals against each other to get the lowest prices. Public hospitals, which care for the indigent, will have an indigent care burden that could make their care more costly.
Courtney said indigent care isn't addressed in the 1915 waiver project. If the state had received a 1115 waiver, as set out in state law, one-fourth of the state's 4 million uninsured would have been covered by Medicaid.
Also important to public hospitals was that they would have had a 51% vote on Intergovernmental Initiatives (IGIs) that would determine how the local Medicaid funds would be spent.
Public hospitals had successfully argued that they should have some control because they contribute funds to the state health department that are used as a match for federal Medicaid disproportionate-share funding.
In 1995, the state's 10 public hospitals contributed $288.4 million for matching purposes. In turn, they received $492 million in Medicaid disproportionate-share money.