Illinois Medicaid paid physicians too slowly, state audit says

But doctors are applauding the state's efforts to speed up payment.

By — Posted June 16, 2008

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An audit of Illinois' Medicaid program concluded that a $1.5 billion financial shortfall led to delayed physician, hospital and nursing home reimbursements in recent years. But physicians report that the state is processing claims more quickly today, and hospitals soon may see more timely payments as well.

For years, Illinois physicians have been accustomed to the Medicaid pay cycle lagging near the end of the state's fiscal year on June 30, then picking up speed with the influx of new state funding in the summer. It was not unheard of for physicians to wait more than 200 days to get paid, said Vincent Keenan, executive vice president of the Illinois Academy of Family Physicians.

The audit, which covers fiscal years 1999 to 2007, was released May 13 by Illinois Auditor General William G. Holland. It found that although the state processed Medicaid claims quickly, it was slow to send them to the Illinois State Comptroller for payment. For example, in fiscal 2006, the state took an average of six days to process claims but 57 days to submit them to the comptroller.

The state potentially owes $81 million in interest payments to doctors, hospitals and others caring for Medicaid enrollees, the audit found. That's because state law requires interest to be paid when Medicaid claims take longer than 60 days to process. Of that total, so far the state has paid $21.8 million in interest for claims submitted between 1999 and 2007.

But despite the ongoing program deficit, the state now is paying physicians' Medicaid claims for ambulatory care within 30 days for child patients and within 60 days for adult patients, said Barry Maram, director of the Illinois Dept. of Healthcare and Family Services. Doctors who treat a significant number of Medicaid patients are paid more quickly, he said.

The audit documents the program's previous problems, but the "reimbursement lag time has improved for many physicians in the current fiscal year," stated Shastri Swaminathan, MD, president of the Illinois State Medical Society.

Steven Knight, MD, president of the Illinois Academy of Family Physicians, agreed. "They've actually done a very good job, over the past six months, of correcting a lot of the problems this report does show," he said. In 2006, the state owed $1.5 million in Medicaid payment to his 10-physician practice in Harrisburg, Ill., with about $500,000 to $600,000 of those claims older than 90 days, he estimated. Now the state owes $412,000 in claims for his office, with just $5,084 older than 90 days.

"Looking at these numbers -- that's a heck of a turnaround," Dr. Knight said.

Likewise, Amar Davé, MD, a pediatrician in Ottawa, Ill., and president of the LaSalle County Medical Society, said that in the last few months, the state began paying his error-free Medicaid claims for children's care within the 30-day goal. He used to wait up to three months or longer for payment at certain points of the year.

The Illinois Dept. of Healthcare and Family Services expects to finish fiscal 2008 with $1.7 million in Medicaid bills due, although half of that amount will be less than 30 days old, said spokeswoman Annie Thompson.

While speeding payment, the state also saved $34 million as of late April by better managing care for public health program enrollees, according to Illinois Gov. Rod Blagojevich. By November 2007, Illinois had fully implemented both Illinois Health Connect, its Medicaid primary care case management program, and a companion disease management program called Your Healthcare Plus.

About 1.7 million people in state health care programs -- including Medicaid -- have signed up for a medical home as part of Illinois Health Connect, according to the Dept. of Healthcare and Family Services. The program pays physicians care management fees of $2 to $4 per enrollee per month. Also, 220,000 of those enrollees are in Your Healthcare Plus, which provides more intensive care coordination for frequent emergency department users, patients with asthma and disabled adult Medicaid enrollees. The ISMS and the IAFP support the use of medical homes.

Hospital, nursing home pay lags

Hospitals and nursing homes face longer Medicaid payment cycles than physicians, but a provision in the state's fiscal 2009 budget could change that for hospitals, if it survives the politically charged environment in Springfield.

Hospitals received mixed news about Medicaid payment at the end of the Illinois Legislature's regular 2008 session on May 31. Lawmakers approved a fiscal 2009 budget that would reduce hospitals' average Medicaid payment cycle from 98 days to about 90 days by boosting Medicaid funding by $483 million. But on June 2, Blagojevich said the overall budget was $2.1 billion out of balance and called on legislative leaders to produce a compromise version.

Last year, state leaders needed a four-month-long special session to craft a fiscal 2008 budget, but this year Blagojevich hopes to finish the fiscal 2009 budget by late June.

In late May, the Legislature also unanimously approved a bill reauthorizing a hospital tax. The state will use the resulting money to generate $640 million a year in federal Medicaid matching funds for five years. This amount would be enough to reimburse hospitals for more than 90% of their Medicaid costs, compared with 64% before the tax, which initially took effect in 2004, said Danny Chun, spokesman for the Illinois Hospital Assn.

Blagojevich is expected to sign the measure, which also needs approval from the Centers for Medicare & Medicaid Services.

Some nursing homes, however, face longer Medicaid payment cycles than hospitals. This creates additional financial stress and affects the quality of care they can provide, said Melvin Seigel, director of the Illinois Nursing Home Administrators Assn. and director of the Illinois Council on Long Term Care. Nursing homes with large Medicaid populations usually are paid within 75 to 90 days. "But you never know month by month if they're going to [pay on time] or not," he said. Homes with smaller Medicaid populations see their payment cycles swing from as low as 60 days to as high as 180 days, Seigel said.

The Legislature's fiscal 2009 budget bill would provide an additional $50 million for nursing homes, increasing their Medicaid reimbursement from 75% of costs to 85% of costs, Seigel said.

The pace of Medicaid reimbursement for nursing homes is making it difficult for them to find physicians, Seigel said. "Doctors, because of the slowness of payments, are becoming very, very reluctant to serve Medicaid patients in nursing homes," Seigel said. The IAFP's Keenan agreed.

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Payment problems

Illinois' Medicaid program consistently delayed payment for physicians and hospitals because the program is underfunded, according to a state audit of fiscal years 1999 to 2007. The report found:

  • On average, the state carried $1.5 billion in unpaid medical claims into the next fiscal year in 2005, 2006 and 2007.
  • The delayed payments meant that the state accumulated a total of $80.6 million in interest owed to physicians and others treating Medicaid patients between July 1999 and November 2007 under the Illinois prompt-payment law. The state had paid $21.8 million of that interest as of November 2007.
  • In fiscal 2006, it took the state an average of 87 days to notify physicians and others treating Medicaid patients that their claims had been rejected. That figure does not include those treating large numbers of Medicaid patients and whose claims are expedited.

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