Tensions between providers, MCOs reaching ‘boiling point’ over Family Care rates

Long-term care providers say planned rate changes from a Family Care managed care organization serving northeast Wisconsin show the need for reforming the Medicaid program for the state’s frail elders and those with disabilities.

Lakeland Care Inc. said they have to “right size” what they’re paying providers, given a recent reduction in its capitation rate from the Department of Health Services.

The managed care organization’s rate changes for providers are planned for April 1.

CEO Sara Muhlbauer said that as the Family Care program has evolved, so has its rate-setting methodology. Lakeland said in a recent letter to providers that it’s historically paid based on a facility basis, rather than an individual basis, leading to rates higher than the state average in Family Care. They’ve identified “the best possible rate” they can offer while meeting financial needs.

“Part of what we’re doing now is trying to get our rates in alignment with what we’re being reimbursed,” Muhlbauer said. “We really needed to take some significant efforts … to make sure that we were sustainable as an organization.”

She said 273 providers are impacted, with 830 total locations. Sixty-nine percent of members are seeing a decrease in what Lakeland pays for their care and supervision, 26 percent are seeing an increase and 5 percent are not impacted.

Justin Cieslewicz, executive director of Homme Inc. of Wisconsin in Wittenberg, said that Lakeland’s initial proposed cut would have led to a $40,000 reduction in revenue over a year for 14 of their residents.

Under new rates proposed by Lakeland, Homme is now facing a cut of more than $26,000. Cieslewicz said they’ve asked for a rate freeze instead.

He said that if the change goes through, he’s unsure of how they’ll be able to retain their workforce and maintain the quality of care.

“We increased wages for our caregivers by about 15 percent in the last year,” he said. “In order for us to sustain these wages, we need to have the reimbursement come through.”

LeadingAge Wisconsin CEO John Sauer said other managed care organizations have frequently frozen or cut rates to providers in recent years.

“The tension is building between those who are actually providing the care and the managed care organizations,” he said. “This has gone on for a number of years, and I think it’s reaching a boiling point.”

Sauer said this is the worst time possible to cut rates, given the COVID-19 pandemic and what providers have had to do to attract staff.

David Griffin, CEO of ElderSpan Management in Madison, said they’ve seen a “dramatic shift” in the last few years, with MCOs offering lower rates and not negotiating.

He said that they had a recent situation where a person’s daily private pay rate at an assisted living facility was $170 before they joined Family Care. Inclusa, another MCO in the state, proposed a $70 day rate and hasn’t changed its position.

“Our only choice is to either supply a $100 a day discount, which is absolutely unreasonable,” he said. “Or we’re stuck with the only other option of giving that individual a 30-day notice, which we have done.”

Griffin says the current mechanism for developing rates in Family Care has been the same system for more than a decade.

“Costs continue to go up,” he said. “We’ve seen the state of Wisconsin’s reimbursement rate continue to decline.”

Department of Health Services spokeswoman Elizabeth Goodsitt said they require MCOs to ensure Family Care members are able to access necessary services, but they do not dictate specific rates provided to assisted living providers. She said DHS reimbursement to MCOs changes yearly, based on expected costs for the areas in which they operate.

“Projected costs can increase or decrease depending on factors such as changes in historic costs, member enrollment, and the complexity of the care that members need,” she said in an email. “Under federal requirements, DHS must set capitation rates that pay for projected costs and those capitation rates are certified by an independent firm to be actuarially sound.”

Gov. Tony Evers’ proposed 2021-23 budget would provide $77.8 million to increase the direct care and services portion of capitation rates DHS provides to managed care organizations in response to workforce challenges.

Evers’ budget also recommends directing DHS to develop a statewide rate band to establish “equitable and sustainable minimum rates” for home- and community-based long-term care supports. DHS would include a proposal to implement in its 2023-25 budget.

LeadingAge’s Sauer described the rate band as a “fee schedule.”

“I support that because when the MCOs go through and they do not negotiate and they are not paying the providers adequate rates, we’re losing our shorts,” Homme’s Cieslewicz said. “We need to keep up with wages, we need to keep up with inflation.”

Lakeland’s Muhlbauer said providers have the opportunity to have conversations with them. She said she’d like to see more information on how the rate bands would work, including what services they’d cover.

She said that direct care workforce funding and nursing home rate increases are “some great things to continue.”

My Choice Wisconsin CEO Maria Ledger said rate bands would set a minimum payment for providers, but they’re not a mechanism for bringing in more money.

“Rate bands in and of themselves don’t really address the funding issue,” Ledger said.

“A payment model won’t solve it if there’s no money in the payment model,” My Choice Chief Financial Officer Jim Hodson said. “The payment model, rate bands, does not solve the provider industry’s issue that they’re underfunded. There needs to be more money.”

Ledger said they’ve also asked for additional clarification around how Evers’ proposed increase works, saying the state’s previous budgets provided that money as a pass-through so MCOs sent it to providers for their workers.

“They weren’t maximized in a way that they could be if they were part of the capitation rate,” she said.

iCare and Community Care Inc. declined to comment on Evers’ budget. Inclusa did not return requests for comment.

Long-term care associations said they support Evers’ budget proposals. Disability Service Provider Network CEO Lisa Davidson backs moving to a new Family Care reimbursement methodology, calling the current system “opaque, dysfunctional and broken.” Davidson also called for adequate funding to help hire and retain staff.

Wisconsin Assisted Living Association CEO Mike Pochowski said providers have struggled with “devastating” stagnant and decreasing Medicaid reimbursement rates that “significantly limit” access for frail elders and those with disabilities. He called for more investment and new provider reimbursement methodologies.

Rick Abrams, CEO of the Wisconsin Health Care Association and Wisconsin Center for Assisted Living, said they’re talking with DHS and legislators about ways to roll back Lakeland’s planned cuts.

“We believe it’s time to revisit the Family Care program,” Abrams said. He praised the program for reducing county waiting lists for services and helping more people live in the community, but said it’s become more “about managing costs, not managing care.”

He said they support Evers’ funding increase and the rate band proposal, saying the latter is “a last resort to create a floor payment rate for providers.” He called for a broader conversation about the future of the program.

My Choice’s Ledger praised Family Care, saying everyone tries to do the best given financial limitations.

“It’s a really valuable program and it does an outstanding job of serving an extraordinarily vulnerable population, keeping people as independent as possible,” she said. “There’s always challenges to work through. There’s always going to be challenges.”

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