December 1996

Health Care Providers Express Concern about State Plan for Medicaid

By Lisa D. Baragar, Consultant for Health Policy

The anxiety caused by the months of waiting for the Michigan Department of Community Health (MDCH) to issue its request for proposal (RFP) for providers of capitated managed-care for Medicaid recipients has turned to distress for some of the more than 90 health care provider groups who had hoped to bid for the contract.

The RFP

The RFP is more than 75 pages and has 9 appendices. Not surprisingly, it covers a range of topics—from administrative and organizational requirements of bidders to how the state will compensate providers for covering the health services of eligible Medicaid recipients.

For the most part, providers agree that the state did a good job of communicating the intent of the RFP and, in preparing it, in seeking input and feedback from those who deal with health care issues. Charles Ellstein, group vice president for policy for the Michigan Health and Hospital Association, notes "The RFP was comprehensive—there were no surprises. There were some disappointments, though . . ."

And The Winners Are...HMOs?

Christine Shearer, chief of state government affairs for the Michigan State Medical Society (MSMS), and Ellstein explain that their primary concerns about the RFP relate to provisions describing who successful bidders likely will be. The RFP states that only providers that have certain organizational structures and follow very specific policies will be awarded contracts: The structures and policies almost exactly mirror those of health maintenance organizations (HMOs).

"We understood that physician organizations would be able to participate . . .. There was no clear understanding that physicians will lose their Medicaid patients unless they join HMOs that have been awarded contracts with the state to provide Medicaid services," said Shearer.

Members of the MSMS are particularly concerned by this, Shearer adds. "A lot of HMOs are telling physicians that they will lose their Medicaid patients unless they sign up now for the HMO’s provider panel [the group of providers with which an HMO contracts for patient care and other health services]. One even put an ad in [the September 18 edition of] Health Care Weekly Review that says, ‘The Department of Community Health will be ending the [Physician Sponsor Plan] program soon in five southeast Michigan counties. If you do not choose a managed-care plan, your Medicaid patients may be reassigned to a physician who is part of an approved plan.’ Physicians are in a panic, even though no RFPs have been awarded yet, and no one knows who will receive contracts from the state."

The only option that seems to be available to physicians, Shearer explains, is provider organizations that exactly resemble HMOs. Ellstein says that hospitals, clinics, and other provider networks also are discouraged, remarking that "Tables are tilted in favor of HMOs." He goes on to quote Medicaid chief executive officer Robert Smedes as saying that some of the best health plans in the country are physician plans, but successful respondents to the Michigan RFP will have to be organized like HMOs.

Racing the Calendar

Susan Garcia, deputy director of the Michigan Association of Health Plans (MAHP)—formerly the Michigan Association of HMOs—and Ellstein express concern about the time frame in which bids for contracts must be submitted to the state. The RFP was issued in mid-November, and bids are due on January 31, 1997. This gives potential bidders approximately 11 weeks—interrupted by holidays—in which to prepare bids and, in many cases, find ways to meet the structural requirements outlined in the RFP.

Garcia explains that the time frame limits the ability of many managed-care providers and others to file competitive bids. Garcia states, "Members [of the MAHP] wanted a ‘level playing field,’ but bids have to be submitted in 75 days. "There is not [enough] time for new or small systems to respond."

Moreover, Ellstein adds, "There is not enough time for many health care providers, including special care providers, to put together [the kind of] network required by the RFP."

Some also are concerned that the state may not have enough time to carefully evaluate the proposals and carefully choose providers that will best meet the needs of Medicaid recipients: The state has only approximately two months from when the bids are received until it must announce the award recommendations.

A Bumpy Transition?

Another concern of the health care community is the quality of care that Medicaid recipients will receive during the transition from a fee-for-service program to one of managed care. "I don’t want to see the Medicaid program lose its momentum during this transition," says Mark Bertler, executive director of the Michigan Association of Local Public Health. "This is a pragmatic shift by the state. . . it will be interesting to see how the state measures the quality of services offered by providers to beneficiaries of this new system."

Bertler worries also about the possibility of changes in Medicaid patients’ access to care. As an example, he suggests that "Managed-care organizations might not be used to going into new moms’ homes to provide child care. They will have to work out these issues." Shearer mentions transportation, pointing out that many Medicaid recipients go to the physician nearest them; if the doctor is not part of a plan that received a contract from the state, the recipient may have to travel farther in order to see someone who is.

Bertler notes that on the government level, public health officials also are concerned about how the new system will affect them. "Public health officials are interested in government’s role in moving Medicaid to a managed-care system. Will they be agents of managed-care organizations? Will they be watchdogs or patient ombudsmen?"

It’s Not All Bad News

Despite the uncertainty and concern expressed by some members of the health care community, many agree that some good has come from the RFP. As Garcia points out, the RFP signals the progressiveness of the state in moving to the managed-care forefront. She believes that the result is that health-care systems will experience more competition, and she hopes this will lead to savings that can be reinvested in the system.

Ellstein adds, "The state is focusing more on primary care and accountability. The plan is to make the [health care] system reach out to people, instead of making people come to the system."

Providers agree that the RFP has brought the health care community together to talk about issues as never before. Bertler noted that the RFP has generated a good deal of discussion, and he expresses his pleasure with seeing the MDCH "encourage collaboration and make sure that managed-care providers pay better attention to the needs of the community."