If the state shows that it has taken corrective actions to comply with federal law, the hearing and the penalties may be postponed, according to a letter sent to state officials (PDF).
If a hearing does take place, and the two parties are unable to resolve their differences, the CMS will reduce federal funding for the state's administrative Medicaid operations options by 10% starting the next fiscal quarter after the hearing. The withholding percentage will increase by 5% every quarter in which the state remains out of compliance, up to a maximum withholding percentage of 100%.
Federal records show that Florida receives just more than $20 million on average each year from the federal government to cover administrative costs. These funds make up the lion's share of its managerial funds each year.
In an effort to cut the budget, Florida in August 2012 reduced the number of ER visits it would cover. It sent the CMS a proposed amendment to the coverage provisions of its state Medicaid plan on Sept. 14, 2012. The CMS denied the amendment on Dec. 13, 2012, indicating that the limitation on outpatient services was not consistent with federal law. Despite the red light, the state has continued to enforce the six ER-visit rule, according to the CMS.
As a result of the policy, hospitals were not reimbursed for $22 million worth in ER visits in fiscal year 2012-13, state records show.
The request for a hearing comes after more than a year of correspondences between the CMS and state officials in which the federal agency continued to deny allowing the policy to be formally added to the state's Medicaid plan.
“We were surprised by the preliminary denial because other states have implemented similar initiatives,” said Shelisha Coleman, press secretary with the Florida Agency for Health Care Administration.
More confusing to the state is that a meeting between state officials and the CMS to discuss the policy was already on the books for this fall before the letter came.
“We are concerned that CMS is prejudging this matter by seeking to impose administrative penalties in advance of its own September 2014 hearing to determine the approvability of the initiative,” Coleman said.
Hospitals in the state question the relevancy of the conflict between the federal agency and state officials. The six ER-visit rule applies only to beneficiaries who receive their Medicaid benefits on a fee-for-service model. However, the state is slowly moving its more than 3 million Medicaid enrollees into managed-care plans, a transition it hopes to have completed by August 2014, according to state records.
With managed care, “there is a requirement for network adequacy, so Medicaid recipients have access to primary-care physicians who are concerned about their health status and helping them manage their chronic conditions, which should result in less need to go to the ER over and over,” said Bruce Rueben, president of the Florida Hospital Association.
Despite Florida's claim that other states have similar limits on ER visits, a CMS spokeswoman said none have policies that withhold funding for less than 12 medically necessary ER visits. In 2011, there was an attempt by Washington state to limit Medicaid beneficiary visits to three a year, but doctors in the state launched a successful lawsuit that blocked the policy.
The last time the CMS threatened to withhold federal Medicaid funds from a state was in 2010, after the agency became concerned that Missouri was not covering home health services for beneficiaries who were not confined to the home.
Follow Virgil Dickson on Twitter: @MHVDickson