Hospital CEO’s assured governor on Medicaid payments

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As Gov. Rick Scott considered budget vetoes last week, some of the state’s best-known hospitals feared he would slice $65 million that lawmakers had set aside to help the industry move to a new Medicaid payment system, reports Jim Saunders of the News Service of Florida.

So hospital chief executives from across the state sent nearly identical letters to Scott that offered an assurance: If he approved the $65 million for the upcoming 2013-14 fiscal year, they wouldn’t come back next year and ask for similar money.

“Since these funds are intended to mitigate the costs of transition (to the new Medicaid payment system), I will request elimination of the recurring appropriation in the 2014-15 state fiscal year, if you approve the funding for the upcoming state fiscal year,” said a line that appeared repeatedly in the letters.

The assurances apparently worked. Scott decided against vetoing the money — and even took note of the hospitals’ pledges in a letter Monday that explained a laundry list of budget decisions.

“Because the new payment system will encompass virtually all hospitals and inpatient services, and because it will mark Florida’s first large-scale experience with prospective payment in Medicaid, I do hereby approve of the $65 million in transitional payments to further assist with the implementation of this important reform,” Scott’s letter said. “In addition, we have received commitments from the recipient hospitals that they will not request or accept these funds for the 2014-15 state fiscal year to ensure that the transitional payments are truly transitional.”

At least 16 hospital and health-system executives sent letters to Scott giving the assurances, according to copies released by the governor’s office.

The hospitals and health systems included prominent industry players such as Jackson Health System in Miami-Dade County; Broward Health and Memorial Healthcare System in Broward County; St. Mary’s Medical Center in Palm Beach County; Orlando Health; Tampa General Hospital; and the Gainesville-based Shands HealthCare. Also, some letters came from executives of smaller hospitals, such as Weems Memorial in Franklin County.

The issue stems from a 2012 legislative decision to move to a Medicaid payment system known in the industry as “diagnosis related groups,” or DRGs. The system, which takes effect July 1 of this year, involves a complicated formula that replaces a longstanding system of calculating per-diem rates for Medicaid inpatient care.

Broadly, the idea of DRGs is to classify patients based on factors such as their diagnoses or types of treatments. Those classifications are used to calculate payment amounts designed to more closely reflect the costs of treating patients than a per-diem rate would.

But the change has been controversial, at least in part, because the DRG system will redistribute money within the hospital industry, creating winners and losers. The $65 million in the new budget is aimed at helping cushion the losses, including at hospitals that serve large numbers of Medicaid patients.

Tony Carvalho, president of the Safety Net Hospital Alliance of Florida, which includes teaching, public and children’s hospitals, said his group hopes the state will make adjustments to the DRG formula next year to alleviate potential losses. That could be done without the state setting aside money similar to the $65 million.

Carvalho said his group would like to see changes to the formula to take into account what he described as “indirect medical education” costs borne by teaching hospitals. As an example, he said operating rooms are expensive to maintain, but they get backed up in teaching hospitals because of the time involved in training surgeons.

“That’s our preference, is to fix the (DRG) model,” Carvalho said.

Peter Schorsch is the President of Extensive Enterprises and is the publisher of some of Florida’s most influential new media websites, including,,, and Sunburn, the morning read of what’s hot in Florida politics. SaintPetersBlog has for three years running been ranked by the Washington Post as the best state-based blog in Florida. In addition to his publishing efforts, Peter is a political consultant to several of the state’s largest governmental affairs and public relations firms. Peter lives in St. Petersburg with his wife, Michelle, and their daughter, Ella.