As Predicted … Medicaid Therapy Reimbursement War Shifts to Medicaid MCO Landscape

Last year (2015), we had predicted that because the TxHHSC was finalizing the shift from Medicaid Fee-for-Service to near 100% Managed Care Medicaid per the Legislature’s mandates, the reimbursement wars would likewise shift from TxHHSC rate reduction proposals to MCO-contracted discount rate policies. TxHHSC is in the midst of a landmark injunction against its latest rate reduction proposal with a more-than-likely final trial period set for April 25-29, 2016. This trial, so far, has not gone well for TxHHSC. Repeated appeals from TxHHSC have been vehemently denied by the presiding judge. In a reimbursement strategy that appears to endeavor to circumvent legal requirements, the Texas contracted MCOs, including now, the largest Medicaid MCO, Superior, have proposed to dramatically reduce the effective reimbursement rates for many Texas Medicaid therapy operations to come in line with the range of 75% of the prevailing Medicaid rate (PMR) for office settings (OPT/CORF/independent clinics) and 70% of PMR for therapy home health.

Effectively, if one has an operating MCO contract that reimburses above 75% (for office settings) or above 70% (for therapy home health) of the PMR respectively, discount rate reductions are being proposed to put current rates on par with the 75% (70%) of PMR range. For those that have contracts reimbursing below those figures, no change upwards is forthcoming. It appears, therefore that Superior (and other Texas Medicaid MCOs) is targeting to contract Texas therapy providers in the range of 49% to 70% of PMR for therapy home health and 50% to 75% of the PMR for therapy office settings (ORF/CORF/independent clinics) since the smallest contract discount rates we have observed have been 50% of PMR. It remains to be seen if all contracted Texas Medicaid MCOs will follow suit as many have had a policy of larger reimbursements, but harder to obtain authorizations and slower follow through with smaller networks and therefore, closed networks to new providers entering the market in most Texas HHSC regions.

Additionally, in an attempt to distinguish the usage of personnel who do render therapy care, the new policy requirement of special coding for therapy assistants’ work in treatment billing, the assistants’ work will be reduced a further 70% of those new contracted rates. The irony of such circumstances is that these reductions for assistants will be far worse than the reimbursement proposal of 10/1/2015 from TxHHSC that is currently being blocked by the injunction – the equivalent of 49% (52.5%) of the PMR respectively for home health (office settings) for those to be at 70% (75%) of the PMR for regular billing. For those already below those contract rates, say at a discounted rate of R% of the PMR, assistants’ work will be reimbursed at 70% of those rates or (0.7)R% of the PMR.

There may be a double irony here as well. MCOs who contract with the TxHHSC (and the Texas taxpayer) are obliged to keep access to care open and clear for Medicaid recipients in Texas. This is partially achieved by having adequately sufficient provider networks and coverage throughout Texas and to provide Medicaid recipients with the quality of care and access to it with sufficient education towards that end. However, by dramatically reducing provider reimbursement, MCOs endanger access to care by the threat of reducing the size of those provider networks through unreasonable reimbursement contracts. The question of adequate access to care was at the center of the arguments in the current injunction proceedings. Will this argument then be shifted to the apparent apparatus being proposed by Texas Medicaid MCOs’ reduced reimbursement contracts?

This new potential argument becomes confounded by the state requirement that a contracted MCO cannot profit beyond a certain net margin (2%) with a simultaneous ceiling on administrative overhead. If the TxHHSC’s intention was to shift the burden of therapy services overhead back to the provider, despite any potentially favorable outcome of the injunction towards the provider, through the actions of the MCO, then that action may represent a usurping of that injunction. How is managed care power displayed by the anti-business effects on providers from instantaneous MCO contract adjustments balanced fairly by the market and our social safety net of Medicaid rules?


The plaintiffs in the injunction have amended their suit to now enjoin (added as a co-defendant) Superior. The presiding injunction judge will be hearing arguments to this amendment next week. It appears through various interviews with providers and others, but not proven conclusively, that Superior may have taken their cue from the TxHHSC’s insistence on lowering therapy reimbursements rates in exchange for continuing their state contracts as a Medicaid MCO. Additionally, there is anecdotal evidence and personal discussion that Superior may have been informing therapy providers that TMHP had told them to lower their reimbursements in conjunction with the roundup of new policies that would include the new modifier code for utilizing assistant therapists.

The two allegations against Superior sighted above, if true, may point to a collusion to circumvent the current injunction. While presently, these allegations are unsubstantiated from lack of clearly written and oral evidence from Superior, TxHHSC, and TMHP, they would, nonetheless, represent a grave legal usurpation of the injunction and subsequent development in the Medicaid therapy reimbursement struggle in Texas.

Additionally, the flat 70% discount rate for utilizing therapy assistants seems to be a uniform change among all new participating MCO contracts. It remains to be clarified if the 70% discount is towards any new reduced contract rates or to the PMR. We have received conflicting information on this interpretation. This is an important distinction since the difference between these two interpretations could be up to 22.5% of the PMR for therapy office settings and 21% of the PMR for therapy home health at the 75% (70%) new rates respectively. For those at the lowest contracted rate of 50% of the PMR, the new assistants’ billing will be at (.7)(.5) = .35 (35%) of the PMR. This lowest reimbursement would be one of the lowest Medicaid rates, if not the lowest rate, in the nation and substantially lower than the Medicare rate, in any event. It would, in all likelihood, represent not only an unreasonably low reimbursement for the therapy business but a clear indication of an intent to endanger access to therapy care, that is a crucial concomitant treatment for children, for Medicaid recipients in Texas.