COMMONWEALTH OF HOUSE OF REPRESENTATIVES HEALTH COMMITTEE

ROOM 2 05 RYAN OFFICE BUILDING

TUESDAY, JUNE 21, 2011 9:30 A.M.

PUBLIC HEARING ON HOUSE BILL 1480 - THE HEALTHCHOICES ACT

BEFORE:

HONORABLE MATTHEW BAKER, CHAIRMAN HONORABLE JOHN MYERS, CHAIRMAN HONORABLE RYAN AUMENT HONORABLE HONORABLE HONORABLE HONORABLE HONORABLE MAUREE GINGRICH HONORABLE JOHN LAWRENCE HONORABLE DAVID MALONEY HONORABLE KURT MASSER HONORABLE HONORABLE MARCY TOEPEL HONORABLE HONORABLE KEVIN BOYLE HONORABLE VANESSA BROWN HONORABLE MARK COHEN HONORABLE PAMELA DELISSIO HONORABLE JOHN SABATINA HONORABLE KEN SMITH HONORABLE RONALD WATERS

SONYA A. HOFFMAN REPORTER - NOTARY PUBLIC I N D E X

NAME

MICHAEL ROSENSTEIN, Pennsylvania Coalition of Medical Assistance MCOs 5

PAULA BUSSARD, SENIOR VICE PRESIDENT, Policy and Regulatory Services The Hospital & Healthsystem Association of Pennsylvania 36

RONALD BUTLER, PRESIDENT and CEO Laurel Health System, Tioga County 41

KYLE FISHER Pennsylvania Health Law Project ...... 51 P R O C E E D I N G S

CHAIRMAN BAKER: Good morning, everyone.

The hour of 9:30 having arrived, the Health Committee

hearing will commence. I appreciate all the members

coming together this morning to discuss House Bill

1480, The HealthChoices Act legislation that's been proffered by Representative Peifer.

And this is a hearing. We've allowed an

hour, hour and a half, if necessary. I doubt if it will take that long, but we'll see. I will at this

time allow and welcome really Representative Peifer to

make some introductory remarks about the Bill and then we'll start the hearing. Welcome.

REPRESENTATIVE PEIFER: Thank you, Mr.

Chairman. It's an honor to be here today. I

appreciate you holding this hearing on the expansion

of the MCOs across the Commonwealth, as was something

in the 1977 plan for the expansion to the whole —

whole state.

And obviously, there's -- you know, Medicaid

is -- is the country's medical care for some of the

poorest and extremely disadvantaged people of our

country, and obviously for the citizens of

Pennsylvania. The issue really has to do with access to a quality healthcare, and, obviously, the cost

containment of this healthcare. I really think this

legislation stems from -- I want to get the proper

wordage -- the Federal Patient Protection and

Affordable Care Act of the Federal Government. Now,

we have enrollees, we have the Federal government, we

have State government, we have doctors, we have

hospitals, and we have quality care. And we really

need to bring all these entities, individuals,

governments together to try to find out the best

possible solution. And I realize that that's not easy

and it is complex, so I appreciate you holding this

hearing today.

I look forward to the number of people who

are going to testify, and there are many experts. And

I'd really like to listen to their concerns as far as

the proper way to go. The expansion, as far as

numbers, hundreds of thousands of people could be

included in those rolls, the Medicaid rolls here in

the Commonwealth, which directly affects us. So we've

got to try to find out the most -- the proper way from

a cost containment, and then, like I said, quality and

access of care way of providing the best service that

we can. So that's what we're here about today,

Mr. Chairman. And I appreciate you giving me the

opportunity to say a few words. Thank you.

CHAIRMAN BAKER: Thank you, Representative

Peifer. As members recall, we have had an

informational meeting previously on this issue and

this concept. Since then, we've received lots of

comments, questions, concerns from all around the

Commonwealth; from individual hospitals, from the

Hospital Associates of Pennsylvania, and the MCOs, both collectively and individually, that have come to

my office.

So I think it's appropriate we have a little

vetting process, informational process and follow up

to that informational meeting that we had earlier.

And at this time, I'd like to welcome

Michael Rosenstein for his testimony. He represents

the Coalition of Medical Assistance MCOs. Good to see

you, Michael; welcome.

MR. ROSENSTEIN: Thank you, Mr. Chairman.

Mr. Chairman, Members of the Health

Committee, Representative Peifer, I thank you all for

the privilege of appearing before you on behalf of the

Coalition of Medical Assistance Managed Care

Organizations. In speaking regarding this proposal to

expand HealthChoices in Pennsylvania, I represent the

Coalition, which consists of AmeriHealth, Mercy Health

Plan, Gateway Health Plan, HealthAmerica of

Pennsylvania, HealthPartners, Keystone Mercy Health

Plan, UnitedHealthcare of Pennsylvania and UPMC for

You.

I would like to present a brief background,

followed by a discussion of access, quality, special

needs and the cost effectiveness of the HealthChoices

program today; many of the items that Representative

Peifer, in his statement, alluded to.

Historically, this Legislature has had major

concerns regarding the cost, quality and access

healthcare for our citizens unable to afford that

care; primarily, the aged, the disabled and children.

The Medical Assistance program was created by Congress

and implemented at the State level to assure citizens

were not deprived of necessary healthcare services in

order to sustain and enhance their lives. The late

Governor Bob Casey, with the support of the General

Assembly, designed the HealthChoices Managed Care

Program. And it was former Governor Tom Ridge who began to phase implementation of the program.

This program of capitated managed care has consistently received the support of each of the four legislative caucuses, even during the past eight years when the executive created challenges for this delivery system, and we thank you. The mandatory managed care program by zones, the HealthChoices program, started in the southeast in 1997 and has been successfully phased into the southwest and the

Lehigh/Capital zones. The question before you is should this program be expanded to additional zones and Statewide?

Although, it is tempting for me to make the argument for statewide managed care exclusively based on the extraordinary cost savings this program has provided to the taxpayers of this Commonwealth, I prefer to brief you on a couple of additional reasons that are also compelling for the expansion of the

HealthChoices program.

First, impoverished citizens in need of health services have had extraordinary challenges in gaining access to the healthcare system. Some providers, due to low payments and delayed payments by the Department of Public Welfare, have had access problems and have been unable to get the care in some areas, or it has been extraordinarily difficult for them to gain access to healthcare. Managed care organizations provide full staffed provider relations

departments, and provide training and education to both providers and to recipients. This ongoing

process is not a once and gone. In many instances, we

pay higher rates than the fee for service system and

we always, always make timely payments.

We assist recipients and locate providers

and ease the access of gaining appointments when

necessary. Where barriers, due to culture, language,

or for whatever reasons, exist, we assure that

adequate healthcare services are provided. Our

emphasis often changes the incentives in the

healthcare system to promote preventative primary care

leading to healthier lifestyles, early intervention

and screenings.

In addition to access, our plans uniformly

adhere to high-quality standards. We use extensive quality measurements to gain feedback and implement

health-improvement strategies. Our plans are among

the highest ranked by the National Commission on

Quality Assurance, whose standards include on-site

reviews of clinical and administrative processes for

accreditation; HEDIS measurements for performance,

including but not limited to, immunization and

mammography screening rates. We do comprehensive surveys of recipients that are undertaken to assure consumer satisfaction in our competitive markets,

which is all of our markets.

Each of our managed care organizations have quality improvement plans and invest in areas such as

enhanced pediatric care, women's health, diabetes,

asthma, HIV, chronic obstructive pulmonary disease, as

well as congestive heart failure programs.

While talking about access and quality, it

is especially important that we spend a moment

focusing on those citizens with special needs. Case

managers are available to our clients. Our plans

invest in identification and screening for these

individuals to assure appropriate services are

provided. We analyze pharmaceutical and other claims

data so that we might coordinate care through our

integrated service structure and through case

management. In the most difficult services for the

most difficult clients, we assure the provision of

service is needed and the special needs population get

the benefit of those services.

Finally, I must talk about cost

effectiveness of the managed care system. As you know, we have competition within each of our regions,

which require that we provide quality, accountability, access and cost containment. The managed care

organization bears the full risk, thereby protecting

the Commonwealth and Her taxpayers. The predictable funding provided by a managed care has made difficult

-- a difficult task of balancing your State budget

considerably easier. I didn't say easy, but easier.

As many of the more senior members of this

Committee might recall, huge deficiencies in the

Medical Assistance budget used to be the norm. When

the programs lack stability, ends predictability.

Now, the MCO bears the risk, not the taxpayers.

Supplemental appropriations are solely the result of

the eligibility increases; not as it once was, the

increases in the volume of service or the cost of the

services provided.

The Lewin Group, a nationally recognized

health research organization found that taxpayers have

saved over $5 billion as a result of managed care in

the last 11 years; $5 billion in Pennsylvania. These

savings will grow to an additional $2.9 billion over

the next five years according to the Lewin

projections. In State dollars, the Lewin Group

estimated that the expansion to statewide managed care

would save Pennsylvania taxpayers an additional

$375 million over the next four years. These savings include fraud, waste and abuse

avoided as a result of the state-of-the-art detection

and prevention programs used by the managed care

organizations. According to CMS in a recent audit,

the error rate in the fee for service system is

4 percent. The error rate in managed care is .19

percent. I'm not justifying any fraud, abuse, waste.

However, you can see that for every dollar not

well-spent in the managed care system, $20 or more is

not well-spent in the fee for service system. The

difference converts to tens of millions of taxpayer

dollars lost without benefit to your constituents who

might be our subscribers.

In summary, as you know, the National

Healthcare Reforms, as Representative Peifer

indicated, are estimated to increase our existing 2.2

million Medical Assistance recipients by an additional

500,000 to 700,000 Pennsylvanians. For our existing

caseload ends for this expansion, Pennsylvania needs

the most accessible, high quality healthcare system

possible for those whose healthcare needs are to be

paid for by the taxpayers. We respectfully believe

that the healthcare system that protects taxpayers,

while assuring accessible high quality care is the

managed care system called HealthChoices in Pennsylvania.

Mr. Chairman, I again want to thank you and

the Committee for your willingness to allow me to

testify on behalf of the MCOs. And with your

permission, I will attempt to respond to whatever questions you or members of the Committee might have.

Thank you.

CHAIRMAN BAKER: Thank you very much,

Mr. Rosenstein. I appreciate your testimony, the good

work of the seven managed care organizations, their

mission, their role, their good work.

One of the issues, the most salient seminal

issues that I've been hearing about repeatedly,

particularly from the hospital community in this

Legislation is Section 7 of the legislation as it

relates to the payments to hospitals. I've heard that

that particular section really isn't needed, it should

be deleted, it should be not that specific in the

legislation. And, in fact, I think we were close to

an agreement with the legislation if that section were

to be deleted.

I would appreciate hearing your concerns,

comments about whether that section should be deleted

or not.

MR. ROSENSTEIN: Thank you very much, Mr. Chairman. I think that really is a question that

gets to the heart, I think, of the concerns expressed

about House Bill 1480.

I tried to frame my presentation on cost quality accessibility to healthcare. Section 7 -- and

please correct me if I'm wrong, Section 7, as I

understand it, is the section that says that managed

care organizations will use the Medical Assistance

rate as the default rate if a healthcare provider

chooses not to participate.

Now, what does that mean? That says that

under the current system, if a hospital provides

service, they will get the rate that the Department of

Public Welfare gives to them under their fee schedule.

Under Section 7, the managed care organizations will

not give -- will not give 10 cents less than that

hospital would receive today under the fee for service

system; not 10 cents less. It allows us to negotiate

a higher rate, but it establishes a floor of your fee

for service rate.

Now, why do we need that in the legislation?

Quite frankly you, I respectfully suggest, need that

in the legislation. We will continue to provide

access, we will continue to provide quality; but

absent Section 7, we cannot guarantee cost containment. We cannot give you the savings that you need to balance your budget. In order to build a network of providers, we need, particularly in rural areas, access to what might be the only facility in a region. And so we will guarantee them no less than they currently receive for fee for service, but we cannot allow them to hold us, and through us, you hostage. They could charge us their charges, which far exceed their cost of the delivery of service in a healthcare facility.

Now, I'm not going to get into a long discussion, unless, of course, you want me to, about the difference between hospital costs and hospital charges. But I think you know if we are compelled to contract with a facility and have no backup in terms of what the floor is going to be, we can be held hostage and we then must pass those costs on to the taxpayer.

So Section 7 is really a protection for you and for the taxpayers of Pennsylvania, while guaranteeing that no facility will receive less than the current fee for service system for those people that they serve. And that's a long answer, but I think that really cuts to the crux of it and I hope that's helpful. CHAIRMAN BAKER: Thank you very much, Mike.

Shifting to MCO Gateway, if I may.

MR. ROSENSTEIN: Yep.

CHAIRMAN BAKER: It's my understanding that

Gateway was providing services to a number of

counties, in excess of a dozen, at one point, and many

of those counties were rural; they pulled out. And

I'm a little concerned that if Gateway had to pull out

of a rural area, how do we know for sure that ruling

out statewide rural implementation of this, what is

embodied in this legislation is going to work?

MR. ROSENSTEIN: Yeah. I'm delighted you

asked that question because I think that that is an

issue that a number of people are concerned with, and

properly so. If we can't respond adequately, you have

an obligation to protect your constituents in rural

areas. So let me try to address that.

Managed care exists in rural areas

throughout Pennsylvania and throughout the nation,

perry, Adams, Armstrong, Butler, Fayette, Green -- I

can go on and on -- Lawrence, Washington and a whole

range of rural counties in Pennsylvania where we have

managed care; and it is succeeding, you are saving

money, we are providing access and quality. I can go

through, nationally, a whole range of states where they are rural areas of your neighboring New York, as well as states like Texas and Arizona and South

Carolina, and throughout this nation where there are rural areas where managed care is working.

So, one, I want to put to rest the fact that managed care cannot work in a rural area. Two, let me then address your specific question regarding Gateway.

They made a good business decision for Gateway, as they should. This system will only work if you deal with competent people who make good decisions. But that good decision for Gateway, in fact, proves the viability of the design of the HealthChoices program in Pennsylvania where you have a multiplicity of zones with multiple providers competing in each one of those zones.

And if one of the providers cannot compete successfully, what happened? Others filled the void and the residents are still receiving services, the providers are still being paid, and we still have a viable situation that works as it relates to access to care for every one of those constituents, who should be our primary concern.

We have provided access and quality and cost containment. And if one provider chooses not to participate because they made a business decision, there are others filling the void. That's the beauty

of the design of this system. That, in my mind, is an

example of how it should work. We're not guaranteeing

these managed care organizations a living; they've got

to earn it, and they've got to earn it in every zone

that they participate. And if they can't, they should

get out and others will fill the vacuum. That's what

happened, and I think that's a success story.

CHAIRMAN BAKER: So if this legislation were

implemented and signed into law and rolled out, and

there were similar circumstances experientially that

Gateway had, what would happen then to those areas?

MR. ROSENSTEIN: I think exactly what

happened in the Gateway circumstance; every provider

was paid; every recipient, every subscriber is

serviced. And the State continues to have a viable

system that, in fact, has saved you money while

delivering quality accessible services to your

constituents. That's what happened in that instance.

And quite frankly, that is what we believe would

happen in every instance in this Commonwealth.

CHAIRMAN BAKER: Last question and then I'll

open it up for the other members. Today I received a

letter from the Department of Public Welfare

concerning this legislation. And as you know, they could do this now if they wanted to roll out more

implementation, and they have concerns with the Bill.

And I'd just like to quote the Acting Deputy

Secretary:

"The Department supports the concept of

expanding the HealthChoices program; however, has

substantial concerns that the legislation does not

provide the Department with the necessary flexibility

to effectively manage its Medical Assistance program.

The department currently has the authority to expand

the HealthChoices program and is already conducting

analysis to support possible expansion."

And the letter does go on to explain itself.

But it seems to me that at this point in time, they're

not wildly enthusiastic about this legislation. They

have substantial concerns, in quoting the Deputy

Secretary. What -- and regrettably, DPW could not be

here to testify, but how would you try to persuade and

assuage those concerns?

MR. ROSENSTEIN: First, Mr. Chairman, I have

not seen that letter, so I'm at somewhat of a disadvantage, but let me try to respond. One -- and

you indicated it's a letter signed by the Deputy

Secretary. I've had a number of conversations with

the secretary who's indicated he is supportive of statewide managed care. And as I recall, he even, at

the latter part of your briefing on this issue, made

an appearance. Second, the fact that the bureaucracy

doesn't believe that the General Assembly ought to

have a role in the delivery of a system of healthcare

or in establishing the parameters for a system of

healthcare, does not surprise me, and quite frankly,

should not surprise you. The question is whether the

legislature believes they ought to have a role in

designing this major program and want to see it go forward or not.

I am told that the Secretary is supportive

of the concept of statewide managed care. If they

have specific concerns with respect to the provisions

of the bill, my guess is it is the fact that it is

very prescriptive. That is by design. That is an

intent for the Legislature to say, yes, we don't want

the bureaucracy stalling any longer, yes, we believe you do -- I believe anyway, they do have the power to

implement this. And we believe that the

bureaucracy -- and sometimes we have a change at the

top, but sometimes the policies take a very long time

to filter through.

And quite frankly, we think that the time is

right to begin to save the taxpayers money, particularly where we are providing a quality

accessible program to our subscribers who should be

our first concern. So again, you have me at a

disadvantage; I haven't seen the letter. But quite frankly, it does not surprise me.

CHAIRMAN BAKER: Thank you very much. Just

so everyone knows, this letter just came this morning,

so we're all just now getting this.

MR. ROSENSTEIN: No. No. I didn't think

you were blindsiding me in any way. I was trying

to -- I hope I was able to answer based on the fact

that I had never seen the letter.

CHAIRMAN BAKER: You have it now. Thank

you, Mr. Rosenstein. I'll recognize the members now.

The Chair recognizes the Gentleman, Mr. Petri.

REPRESENTATIVE PETRI: Michael, if I might

call you Michael.

MR. ROSENSTEIN: Hope so. Everyone else

does. And only friends; others call me far worse.

REPRESENTATIVE PETRI: One of the concerns I

have coming from Bucks County is whether we have a

system that is uniform throughout the State as far as

rates and the like. And one of the reasons I'm

supportive of the Bill is that effectively it would

create the same benefits and responsibilities that we have in the southeast, southwest, Lehigh Valley with

regard to the rest of the State.

And I was wondering if you could comment on

that in light of DPW's letter. If we allow the -- in

your opinion, if we allow the administration to set

the parameters, are we likely to have a unified

system, or are we likely to have piecemeals where

every region is treated somehow differently?

MR. ROSENSTEIN: Thank you for that question. And perhaps -- and if I had a chance to

review and analyze the letter more carefully, I could

give a better response.

My sense is, again, in the conversations

that I've had with the Secretary, I believe they are

very supportive. And -- and so -- and I thank you for

your comments. I think the people in Bucks County,

the southeast and each of the regions where managed

care currently exists would similarly testify that

this is a system that works for the benefit of their

subscribers.

And so the one part of your statement that I

really want to reaffirm is that people throughout

Pennsylvania should have that same benefit. And the

taxpayers of Pennsylvania should not benefit

exclusively off the backs of those where managed care exists, but, in fact, should have the benefit of an

entire State system that is saving you tax money.

And, again -- and I tried to in my presentation, very early on, spend more time talking

about the quality and access and special needs issues

because I think they're every bit as important for the

subscriber. But the fact is the subscribers in rural

and non-HealthChoices areas ought to get the benefit

of access and ought to get the special needs work that

we do on behalf of our subscribers and they ought to

get the quality that we get. And all Pennsylvania

then ought to share in the benefit of the cost

containment.

So to that extent, I'm not -- I'm not really

worried about this Administration moving forward; it

is the fact that I think they need, perhaps, the prodding hand of a General Assembly that says, yes,

this is the right thing to do, it works for most of

our constituents now, and we'd like it to work for all

of Pennsylvania.

REPRESENTATIVE PETRI: One quick follow-up.

Under the existing system for those areas that -- that

are under this program, do they all have similar

provisions to Section 7, or the same provisions?

MR. ROSENSTEIN: They do not; and they don't for a very good reason. Remember what I said, we need

that to assure you that we can build networks. And we

don't have a problem building networks in Bucks

County. If one hospital chooses not to participate,

we can use other hospitals. If Children's Hospital in

Philadelphia chooses not to participate, we can use

St. Christopher's or Temple's Children's Hospital. We

have competitive forces so the taxpayers cannot be

held hostage in your area.

But in a rural area where there might be

only one provider or two, the taxpayers are then -¬

you think we're held hostage, but we are really your

agent. And so if we're held hostage, you are held

hostage. And in that instance, we absolutely need the

default rate. And remember what I said that default

is, it's exactly what they're receiving now; no less.

Remember what I said, not 10 cents less. But we need

that default rate to build the network.

Now, I think that becomes a negotiating

issue, and you can only negotiate above that rate

quite frankly. But we need the default rate to assure

that we can give you the savings.

CHAIRMAN BAKER: Chair, thank you,

Gentleman. The Chair recognizes Mr. Morris.

REPRESENTATIVE MORRIS: Thank you, Mr. Chairman. Michael, I'm curious, in your testimony

you state that your -- that the caseload under the

National Health Care Reform is estimated to increase

between 500,000 and 700,000 individuals. I'm curious

as to where you come -- come up with that number. And just in my estimation, that seems like a low estimate.

MR. ROSENSTEIN: Yeah. We actually tried to

be very conservative in all of our numbers, including,

by the way, our cost savings. And so rather than come

here before you -- and, sir, you and I haven't met,

but in my prior life I spent a fair amount of time

working with numbers in this General Assembly, and I

always try to give conservative estimates that I could

always justify.

So we did a conservative analysis. And

quite frankly, we thought the most conservative number

was 500,000. And when the Governor testified before a

Congressional Committee that Congressman Pitts hosted,

he used the number 700,000. So I used our low

estimate and the Governor's estimate because that's

the range that I had seen and we had worked with. But

if it is even higher, then it is a more compelling

case for you to use statewide managed care. But we

tried to give a conservative range of what the

enhanced exposure to the Commonwealth for increased subscribers might be.

CHAIRMAN BAKER: Chair. Thank you,

Gentleman.

Just so everyone knows, there are many

competing committees, Judiciary Committee and other

committee meetings transpiring, so you'll be seeing

members coming and going. We fully understand that.

The Chair recognizes General Lady, Ms.

Gingrich.

REPRESENTATIVE GINGRICH: Thank you, Mr.

Chairman. And I'm going to be one of those folks that

has to leave in a couple minutes because I'm going to

Appropriation, thus, the question I'm going to ask

you: I'm most interested in and at the moment focused

on what you disclosed to us as your error rate through

the CMS reporting system as a pretty admirable one,

.195, when CMS, itself, is looking at a 4 percent.

And, of course, we've heard reports of a great deal

more than that.

Specifically, since that's where I'm headed,

into budget, and those discussions about how we're

going to deal with the shortfall and how we're going

to cover the great needs we have under the Welfare

budget; how do you account specifically? Is it part

of the uniformity of your program? I hear you say your grid is cost quality accessibility; focused on

the cost. Why is your error rate so much lower than

probably most; if you can tell me that?

MR. ROSENSTEIN: Not only can I tell you

that, but if I can, share some written material with

you because I was hoping, quite frankly, that the

question would be asked.

For those who don't know, Representative

Gingrich and I have not talked, but I do thank you

very much for the question. We take our role very

seriously, but quite frankly beyond that, if our error

rate is high, it costs us a substantial amount of

money. Now, the bulk of errors come about as a direct

result of the verification of eligibility.

We, managed care organizations, have

nothing, zero, to do with that determination. That is

exclusively done by the Department of Public Welfare,

and they give us lists of potential subscribers. And

if an individual is on that list and is part of our

organization, we must, we are compelled, to serve the

needs of that individual. And if we know that

individual is now working, as an example, we can

notify the Department and say Mr. Jones is not

eligible based on the fact that he is working, we know

him to be working, his circumstance has changed. And the fact is, it doesn't matter; we were compelled to serve Mr. Jones if he's on that list.

And three months later, the Department of

Public Welfare says, oh, we're not paying you for

Mr. Jones because he's not eligible, and it's up to us to then go back to the provider. And almost never can we collect after the fact because they delivered the service, and so we lose money.

We made a conscious decision, each of our plans individually, that they are losing too much money based on errors, based on waste, call it fraud, if you will. I'm going to call it abuse; I don't know whether it's fraud or not. That's a legal term beyond me. I'm going to call it -- certainly going to call it waste; I'm certainly going to call it abuse; I'm certainly going to call it serving individuals who should not be on the rolls appropriately.

And so we do prospective work, both with subscribers to clean up the rolls where we can. And spend a tremendous amount of money trying to with providers and cut through provider fraud. And I know many of those folks are our friends, but the fact is most of the savings are not with subscribers, but they are with providers. And we have an obligation, and we work with providers to make sure that only services that are eligible and needed are provided so that, indeed, we can cut back.

What I gave you by way of a handout is a piece we prepared just to give some idea of what we do in terms of the specific programs we run. Each of our plans are different. Remember what I said, this is a competitive business. And as a result, you get the best -- the benefit of best practices throughout the

Commonwealth.

And so those are some of the programs we run to specifically bring that number down from that

4 percent to .19 percent. Remember what I said, we're never satisfied with any; but .19 is not a bad record, and we're proud of it. That doesn't mean we're not going to continue and look for other ways to -- to curb costs in a way that does not affect our subscribers who need and deserve the services we provide.

REPRESENTATIVE GINGRICH: Thank you, Mike, and I agree with you. And if you have a formula that serves you well for looking at the provider's side of abuse or whatever we want to call it, and that can go to fraud, well, we'd love to know that as well. So thank you for the efforts you're making.

MR. ROSENSTEIN: Thank you. CHAIRMAN BAKER: Chair thanks the Lady.

We're already running behind on our agenda, so I

apologize if -- if we have to shorten up some of the questions. I'll recognize Representative Smith and

then Representative DeLissio, and then we have to move

on if we're going to try to get all the rest of the -¬

the people. Yes, thank you, Representative Smith.

REPRESENTATIVE SMITH: Thank you,

Mr. Chairman, and thank you Mr. Rosenstein for your

testimony today. Very quickly, several months ago we

saw the end of Adult Basic in Pennsylvania. And that

took tens of thousands of hardworking Pennsylvanians

and put them out adrift with respect to their

healthcare.

How does managed care, or does managed care

affect these people? And once again, with respect to

access to care, quality of care, tell me how this

affects those people.

MR. ROSENSTEIN: Yeah. That's a very good question and I thank you for it. Several or our

managed care organizations -- let me do that a little

bit differently.

For several of our companies, managed care

is one part of their list of programs that they run.

Several of our companies ran Adult Care programs when they existed and so were able to provide the services

for those citizens who were eligible for the program.

It is a separate line of business and not comingled.

Why? Because Medicaid managed care is required to be

limited to just those who are Medical Assistance

eligible. And the Adult Basic category are

individuals who do not meet the eligibility level.

They may have slightly higher earnings; they may have

slightly higher assets, but they don't qualify for the

Federal Medical Assistance program. So our MCOs

cannot -- with that particular product, dealing with

MCO managed care, cannot service that clientele.

So if that clientele became Medical

Assistance eligible -- and I understand after the fact

they started to look at the eligibility rolls, and

those that were Medical Assistance eligible we could

pick up if they were in our zones as part of our

service to Medical Assistance managed care. We have

picked up some; I could not begin to tell you how

many.

REPRESENTATIVE SMITH: Thank you.

CHAIRMAN BAKER: The Chair thanks the

Gentleman and recognizes Representative DeLissio.

REPRESENTATIVE DELISSIO: Thank you,

Mr. Chairman. I know we're all just seeing this letter for the first time. I was here for a hearing

that the Chairman convened on MCOs a few months ago,

and we went over that within the last Administration,

there was an RFP put out to roll out these

HealthChoices in the northwest, northeast, the places

where they were missing, correct?

MR. ROSENSTEIN: Yes, ma'am.

REPRESENTATIVE DELISSIO: So in this letter

from this Acting Deputy Secretary, it says the

Department currently has the authority to expand. So

that would be clear, unless something got rescinded

from one administration to the last, so they do appear

to have the authority since that RFP was out there

previously.

Do you have any guess -- and I know you've

seen this for the first time -- where they're saying

that they don't think this legislation gives them the

necessary flexibility to manage its Medical Assistance

program, can you even guess at what the Department

might be referring to with that sentence?

MR. ROSENSTEIN: It is only a guess, but let

me try to stab at it. I've not read the letter. It

was just handed to me and I was interacting.

REPRESENTATIVE DELISSIO: Last paragraph,

first page. MR. ROSENSTEIN: If I had to guess, one, we

are using the very same zones that they used in the past. Remember, sometimes bureaucracies don't like to

have Legislatures directing them to do things, even if

they're the same things that they were going to do.

REPRESENTATIVE DELISSIO: Okay.

MR. ROSENSTEIN: But we didn't tamper with

zones, but we are prescriptive. We have the same

northeast zone, the same northwest zone, the same

balance of the State as they proposed originally. If

they choose to move Tioga County out of a rural area

and move it to Philadelphia, I can't begin to help

you. But if they want to reanalyze the zones, we

don't have a problem with that. But it, quite frankly, is part of the problem we often have, and you

often have, with bureaucracies that don't move

aggressively as sometimes the General Assembly would like them to move.

Second issue might be the prescriptive time frame. We have put them on a tight time frame to

aggressively get this implemented. And quite frankly,

it was our view -- maybe erroneously, but it was our

view that you had a fiscal crisis this year. And you

needed to save money, which meant the Department of

Public Welfare, if there was a way to save money without adversely affecting constituents, that's what

you would want them to do. And if that means that the

bureaucracy has to move a little more aggressively

than they're accustomed to doing, I think that's an

appropriate thing for the General Assembly to tell

them to do.

Now, it's possible that you don't want to

tell them to do that. But our view was if you've got

a financial crisis now, you could raise taxes, and

people tell us you don't want to do that -- I don't

know if you do or don't, but I'm told you don't

collectively. You can eliminate services to people

who need those services, and we don't recommend that.

Or you can reform the system and save money through

reforms.

We think Mr. Peifer's Bill does that and

respectfully it's the reason we advocate for it. And

again, I cannot speak for the Department of Public

Welfare, but I can only give you my assessment.

REPRESENTATIVE DELISSIO: Thank you.

CHAIRMAN BAKER: Chair thanks the Lady.

Chair, lastly, recognizes Chairman Myers for a question and then we need to move on. Thank you.

CHAIRMAN MYERS: Thank you, Mr. Chairman,

and I certainly do agree, looking at the time. I've been very quiet and -- on purpose, and

I'm probably going to be quiet through most of this

because I get a sense that everything that needs to be

said is not being said. And I believe that the

various camps have reasons why they don't want to

expose certain levels of information, because all the

answers I'm hearing are like, yes, button up; yeah, I like you, but I really don't like that guy, you know.

There's a subtle level of discussion that's going on that at least I'm not privy to. And I said

this yesterday with some woman, I said, I don't want

to bring politics into this, even though everything we

do is political, but it reminds me of some campaigns I

went through and you was wondering, well, why did that guy give that guy that contribution. And they said,

well, I don't know, you know, I don't control what he

does. Well, I thought he was on my side, you know.

No, man, well, he is on your side. But why are you

giving the opposition $15,000; I don't want you to

talk to him about that. And it seems to be that kind

of dynamic going on.

You know, I mean, I like the hospitals, I

like y'all. And y'all don't seem to have y'all thing

together with regards to like it being a story that

y'all collectively have wrapped your arms around. This letter from DPW, bam, just showed up out of the

air. Yesterday, I thought they was down. You know, I

don't know who was in the discussion last night, you

know. And I don't know if they let you know who was

in the dicussion last night, but a letter came out of

that discussion.

So I think having these hearings is a good

thing, and we can collect more information and then

maybe -- at least me, I can get a sense of like who's

on first and who's on second.

MR. ROSENSTEIN: I know that's not a formidable question, but I do want to say thank you

because we have the same concerns. And I should have

acknowledged when you did come in, Chairman; thank you for being here. Thank you.

CHAIRMAN BAKER: Chair thanks the Members for their good questions, and Mr. Rosenstein, Michael, for your due diligence of nearly an hour. We

appreciate your testimony and your answers. Thank you

very much.

MR. ROSENSTEIN: Thank you, Mr. Chairman.

CHAIRMAN BAKER: The next testifier will be

Paula Bussard, Senior Vice President, Policy and

Regulatory Services, The Hospital & Healthsystem

Association of Pennsylvania. Joining her is Ron Butler of the Laurel Healthcare System, President/CEO,

located in Tioga County, of which I represent.

Welcome, and thank you. You may proceed.

MS. BUSSARD: Thank you, Mr. Chair.

As stated, I am Paula Bussard, Senior Vice

President for Policy and Regulatory Services at the

Hospital & Healthsystem Association of Pennsylvania.

And as you know, HAP represents and advocates for the

nearly 250 acute and specialty-care hospitals, but

most importantly for the patients that they serve. I

will be presenting the views of the broad hospital

community, and Ron Butler will make some remarks on

Medical Assistance managed care from the perspective

of a rural health system.

My written testimony is before you, and I'm

only going to highlight some of the statements in

there. The hospitals in Pennsylvania have long

supported Medicaid managed care. In fact, the

original capitation program began under the Thornburgh

Years in the City of Philadelphia.

We view managed care as an ability to

improve and continuity of care, quality of care and

access to physicians services for the Medical

Assistance population. Designed appropriately and

implemented properly, it allows a focus on preventative care, improved continuity for chronically ill individuals; an integration of care. It promotes individual recipient responsibility for their healthcare choices. And, as has been reported earlier, it helps the State to control Medicaid program costs.

As noted by our Chair, House Bill 1480 would require the Department of Public Welfare to expand

HealthChoices. As you may know, the -- currently,

70 percent of Medical Assistance recipients are in

HealthChoices in southwest, southeast, south central and Lehigh Valley area. Under those HealthChoices programs, MCOs contract with healthcare providers.

Successful managed care programs recognize that the

MCO and its provider network need to work together to insure that the right care is delivered at the right time and in the right setting.

The essential idea and why the hospitals have supported Medicaid managed care is that there is the focus on primary and preventive care, thereby reducing unnecessary emergency room use and inappropriate hospitalizations as compared to a traditional fee for service program. Effective managed care organizations establish their networks, they employ education strategies, provide incentives to both recipients and providers. They review care to insure that it's appropriate and in the right setting.

MCOs use an array of provider contracting strategies so that they're aligning their goals and the providers' goals to do what's in the best interest of the recipient and to do it in a cost effective manner. Thereby, MCOs reimburse contracted providers using fee schedules, per diem, per case and/or prospected payment systems such as are used in

Medicare and the traditional fee for service Medicaid program.

They also use a lot of other strategies to improve the effectiveness. MCOs use medical hones that link an individual with chronic conditions with a primary care practitioner who is working collaboratively with the plan and the recipient to address such conditions as diabetes, congestive heart failure or asthma where when you're not properly managed might result in hospitalizations.

They also provide quality incentive payments to providers, such as improving vaccination rates for children or reducing healthcare associated infections in healthcare settings. And they use an array of review strategies to assure that care is medically necessary and provided appropriately and timely. And so if the care should have been provided in an

outpatient setting, they're not paying for an

inpatient stay. They use precertification, concurrent

review, and many of the MCOs in where the more

concentrated population areas are, often deploy

discharge planning staff within a hospital so that

they are working collaboratively to assure a smooth

transition to home or another care setting.

As a result of this ability to use all of

these contracting techniques, hospitals and doctors

under HealthChoices have had the opportunity to

negotiate contract terms, including rates, that

reimburse on a per-case or per-visit basis, a better

rate than traditional Medical Assistance fee for

service. The idea is there's less utilization, but a

better payment for that utilization. And this has

been done, as has been reported, without increasing

overall Medical Assistance costs to the Commonwealth,

because the providers in the plans are working

collaboratively to reduce this unnecessary and

inappropriate use.

As exists now, the Department of Public

Welfare operates the HealthChoices program under a

Federal waiver. And that waiver is required because

recipients are restricted in their choice of plans, and may be restricted in their choice of providers given the plan's provider network. There was Federal protections, consumer protections, provider network advocacy, special needs. And the Federal government requirements do establish a default rate so that in the event that a noncontracting provider has to treat and enrollee in an emergency situation, that enrollee has access. And in that situation, the provider is paid the traditional fee for service rate.

Healthcare providers freely negotiate contracts with managed care plans in the commercial sector, in the Medicare sector and in the existing

Medicaid HealthChoices. This includes rate and a lot of other contract terms regarding review, prior authorization, obligations, or other incentives.

Therefore, we see no reason that Section 7 should be included in House Bill 1480 because it would interfere with the ability of healthcare providers, in this case, hospitals, to fairly and freely negotiate contracts. In actuality, by establishing a floor, you may also be establishing incentive. For while a hospital may not be paid 10 cents less, it might also not receive one cent more. And as such, this provision really conflicts with the intent of a more competitive marketplace where providers and MCOs can collaborate and negotiate.

The hospital community cannot support House

Bill 1480 with the inclusion of Section 7. We are supportive of expanding HealthChoices statewide. The

HealthChoices program has worked effectively in the

Commonwealth for more than a decade. And in all of the existing regions, southwest, south central, Lehigh and southeast, there are very rural communities, and

HealthChoices has worked effectively and saved the

Commonwealth funds and has not required establishing the provision in Section 7.

I would also note, just before Ron — I turn to Ron to let him provide a few points, that in the recent Pennsylvania Healthcare Cost Containment

Council Report, on the financial status of the State's hospitals, one in four Pennsylvania hospitals have a negative margin. And even with the enactment last year of Medical Assistance Modernization, which improved payments under the fee for service program to hospitals, on average your hospitals are still only receiving 89 cents per a dollar cost of care. And so the ability to freely negotiate rates under managed care is very important to the hospital community.

At this time, I would like Ron to provide a brief perspective from a rural healthcare system. MR. BUTLER: Thanks, Paula. And thank you,

Mr. Chairman, for the opportunity to speak with you

this morning.

Tioga County is a rural county of nearly

40,000 people spread over 1,100 square miles in north

central Pennsylvania. Laurel Health System is the

primary provider of healthcare services in Tioga

County as a nonprofit, community controlled integrated

health and human services delivery system. And like many rural community hospitals and health systems,

we're the largest employer in our community and have a

significant economic impact on our community.

Our system includes Soldiers & Sailors

Memorial Hospital; the only hospital in Tioga County,

and six Federally-qualified health centers, which are

distributed through Tioga County so that we have a

primary care physician within about 20 minutes of any

residence in our community. And this is an important

access issue.

Our FQHCs provide services on a sliding-fee

scale, and the hospital has a charity care policy so

that we provide both primary care and acute care to

every resident of our community regardless of the

ability to pay. Under the current system, no resident

of our community is denied access to healthcare services. The MA fee for service reimbursement rate,

as Paula said, covers a significantly less amount than

it costs us to provide services to the over 6,000

Medical Assistance beneficiaries in Tioga County.

This fiscal year, Medical Assistance

reimbursement accounts for 19.6 percent of our

hospital's net revenue. And Tioga County, routinely,

has one of the highest rates of all counties in

Pennsylvania for uncompensated care. Because we

provide a disproportionate share of Medical

Assistance -- of services to Medical Assistance

patients, Solders & Sailors Memorial Hospital qualifies for some supplemental payments to help ease

the burden of providing care to a disproportionate

share of Medical Assistance and indigent patients.

These supplemental payments for

uncompensated care and disproportionate share amount

to a few hundred thousand dollars for our hospital and

help us to sustain services for all the residents of

our community. So including Section 7 in this

legislation would not pay us 10 cents less than under

the current fee for service system, but would pay us

several hundred thousand dollars less than we're paid

under the current reimbursement system.

The MA fee for service default rate would create a ceiling for us instead of a floor. It would

strip any negotiating position that we may have to

obtain reasonable reimbursement rights from the managed care organizations. It would eliminate

consideration for the disproportionately high rate of

Medical Assistance beneficiaries who we serve in our

community. It would eliminate any consideration for

incentives for quality care standards. And it would

reduce the MA payments, again, by hundreds of

thousands of dollars annually for our hospital,

thereby threatening our ability to sustain services to

all the residents of our community.

While we support expanding Medical

Assistance managed care to rural Pennsylvania,

including this section of the Bill strongly favors the

MCOs at the expense of the rural community hospitals,

and it would eliminate any opportunity that we would

have for meaningful negotiations of reimbursement

rates.

Thank you, Mr. Chairman.

MS. BUSSARD: So in summary, we do believe

that managed care can be expanded through the State in

a way that assures the efficiencies, improves quality

and access for recipients, but also that fairly pays

for health services and affords public accountability. We believe Pennsylvania's rural communities and our most vulnerable citizens deserve no less.

We would urge the Committee to consider

amending House Bill 1480 by deleting Section 7. The

HealthChoices program has worked effectively in the

Commonwealth. It has not, to date, required this

provision.

We appreciate the opportunity to present our

views, and we'll be happy to answer any of your questions.

CHAIRMAN BAKER: Thank you very much for

your enlighting testimony. I know in many rural

counties, particularly Tioga County, and perhaps

others, there's just one hospital for the whole

county. So, in essence, it's -- it's the safety net

hospital. And if that hospital should fall, it would

create quite a gap in care for its residents. So it's

really a significant impact and probably one of the

largest employers in any rural county.

So given the fact that one in four of

these -- of your hospitals are already operating in

the red, as your testimony indicated, and given the

fact that this could actually add harm to some

hospitals, I'm very, very concerned about its full

import and impact to rural areas. Thank you very, very much. I'd be interested in knowing what other hospitals similarly to Tioga County would be impacted with a negative number should this be passed with this section in its -- in the legislation. I really appreciate your testimony.

Members have any questions? Representative

Day.

REPRESENTATIVE DAY: Thank you,

Mr. Chairman. So by your testimony today, Section 7, which to me looks like it establishes a minimum; is that what you would say it does?

MS. BUSSARD: It establishes a floor, but that's for all services provided. Managed care -- the managed care plan can contract or not contract with providers. And they do, if they don't find you meet their quality or their other provisions. But what that section says for the providers, who also should have a choice in contracting or not if they feel a plan is not in the best interest of their patients, says regardless of that underlying concept, you have to take care of patients and receive this rate.

Managed care also comes with additional costs that the fee for service program doesn't have.

So you're getting a fee for service rate, but would be subject to a lot of the review or prior authorization

or all of that that the fee for service program might

not have, and so it pays you, in essence, a lower

rate. There's no incentive when you have that

foreplan to contract at a more favorable rate.

REPRESENTATIVE DAY: Thank you. In rural

Pennsylvania, many times the providers that are

seeking, you know, the ability to negotiate with the

managed care provider are the only provider in the

area, giving them an unlevel playing field. They're

the only ones to be able to go to; the only provider.

So I'm looking at this as maybe a piece of

legislation that levels that playing field a little

bit, and maybe makes a statement and says -- and says,

you know, if you want to do business in Pennsylvania

that there's a floor. Which leads to my question:

You also negotiate to receive payments from other

private sector insurance companies; is that correct?

MS. BUSSARD: Yes.

REPRESENTATIVE DAY: Are they generally

paying more or less than this program?

MS. BUSSARD: Well, the commercial sector

pays better than Medicaid. And the Medicare program,

while not paying full costs, pays a bit better than

the Medicaid program. What I want to note, Representative, all of

the other HealthChoices regions have counties in which

there is only one provider. And in all of those

regions, there are multiple health plans who have

secured contracts. And so it hasn't -- it hasn't

necessitated this provision in serving Fayette or

Green or Perry or Lebanon, where there are areas

that -- or Adams County where there's one hospital.

The providers and the plans have worked it

out in the best interest of patients, because you

still want to serve your population. And if nearly 20

percent or 25 percent, or in some rural counties, 30

to 35 percent of your patients are Medical Assistance,

you're going to negotiate with health plans because

that's your population.

This just gives more of an edge to the plan.

And it is our small rural hospitals that are

struggling the most financially, so I would just also

add that point.

REPRESENTATIVE DAY: And my last comment,

Mr. Chairman, I appreciate the indulgence, I know

we're trying to keep on schedule here, you know, I

look at it as these areas -- if these rates were kept

lower than you wanted by a Bill like this, where this

plan was deciding what the reimbursement was going to be and you have less control, or maybe almost no

control, over what those payments are, if that would

cause a hospital to go away or go under, then that

community is not sustaining the healthcare services on

its own.

So, you know, I find that in many ways that

the overall provisioning of healthcare services in a

community like that is being subsidized quite a bit,

either from private-sector payers, the insurance,

or -- and you could argue that this makes them pay

more. Also, it -- you could argue that if they want a

hospital in their county, they better pay more for

that. We're representing this plan. We make

decisions for the entire Commonwealth, so you

understand why a Bill like this comes out.

Thank you for your time. And I really

appreciate that you're as engaged as you are in this

issue. I like to consider legislation with as much

industry input as possible. Thank you, Mr. Chair.

CHAIRMAN BAKER: Chair thanks the Gentleman.

Just one more comment or question. Given the lack of

certitude with respect to the budget in terms of the

hospitals receiving disproportionate share funding and

uncompensated care funding on top of this particular

legislation, those rural hospitals that you referred to earlier could be even more at a particular risk.

Is that an accurate statement?

MS. BUSSARD: It is absolutely accurate.

And as you know, I've worked for the Hospital

Association over a number of decades and have seen a lot of smaller rural hospitals close. We have also seen smaller rural hospitals have to make difficult choices between providing obstetrical services or providing inpatient psychiatric services because of the burden of underpayment.

There is really, only so far, commercial, employer-based groups are willing to subsidize underfunding. And as the budget proposals are being debated, yes, uncompensated care monies are vulnerable, the additional payments for obstetrics or critical access, which our 13 smallest hospitals are at risk. And those payments are -- even after those payments, our State's most small hospitals are still very financially vulnerable. So you make a good point, Representative Baker.

CHAIRMAN BAKER: And part of the problem that leads up to that equation is your census, correct? The number of people that are on MA, the number of people that continues to climb expedientially it seems. And also people continue to climb on Medicare, as well as your underinsured and

uninsured. There are a lot of factors involved in

contributing to that particular, perplexing difficulty

that you have; am I not correct?

MS. BUSSARD: You are absolutely correct.

And I think you know that over the recession, one of

the areas where we've seen, obviously, what happens

when people lose jobs and lose the job that had health

insurance, we've seen the reliance in rural

communities on Medical Assistance grow at a fast -¬

much faster rate than the urban areas. And in some

communities, more than half of births are now being

paid for by Medicaid.

So it's in rural communities that are

struggling hard with the recession. Medical

Assistance still is a very important program; an

important lifeblood for rural hospitals, as well.

CHAIRMAN BAKER: Again, thank you very much

for your testimony. We have one more person, unless

Members have a question -- quick question, I think we

can get it in right before session starts at 11:00.

Thank you very much. Our last testifier will be Kyle

Fisher. Kyle Fisher represents the Pennsylvania

Health Law Project. Welcome, Kyle. You may proceed

when you're ready. MR. FISHER: I'll try and keep this brief

with an eye on the time. Again, my name is Kyle

Fisher. I'm a staff attorney with the Pennsylvania

Health Law Project.

The Pennsylvania Health Law Project is a

statewide organization that provides free legal

services and advocacy to Pennsylvanians who rely on

publicly funded health insurance like Medicaid. Our

statewide helpline receives more than 2,000 calls a

year from individuals who are either uninsured, or

whose health insurance companies are not providing a

medically necessary service. While working with

individuals on their concrete problems, we also engage

in statewide health policy advocacy to maximize health

coverage and access to care.

Speaking in that capacity, we want to

highlight three areas of concern with House Bill 1480,

all of which pertain to access to care. First, we're

concerned that risk-based managed care simply does not

work well in Pennsylvania's rural areas. The managed

care plans already have the ability to operate in the

State's rural areas and the majority have chosen not

to.

And since the statistics haven't been

discussed yet this morning, I want to provide you context. We have 25 counties that have mandatory

managed care right now. Another 25 counties have

voluntary managed care, plus what's called ACCESS

Plus, the State's primary care case management system.

So they're already in a form of managed care, but it's

not capitation based, it's not risk based. 17

counties have ACCESS Plus alone and there's no managed

care, and that's because the managed care

organizations, the MCOs, have chosen not to open

there.

The MCOs that do operate in the voluntary

counties, which are overwhelmingly rural, struggle to

attract members and the providers they need to serve

those members. And the Gateway experience that the

Chairman discussed earlier illustrates this well. And

last year -- in September of last year, Gateway

withdrew from 17 of the 19 voluntary counties in which

it was operating citing venue losses for three

straight years. Gateway's withdrawal affected over

14,000 MA consumers, many of whom were forced to find

new doctors. We fear a repeat of this; new managed

care plans coming in, discovering they can't make a

profit and pulling out leaving consumers in the lurch.

Given the choice, consumers -- and, again,

much of the discussion today has focused on what's in the best interest of Medicaid consumers. Given the

choice, they've overwhelmingly chose an ACCESS Plus,

the State's fee for service and primary care case

management system. The few MCOs that operate in the

rural voluntary counties typically enroll less than

10 percent of the counties' consumers, and that's

because the MCOs in rural areas can't attract doctors

and struggle to provide adequate provider networks.

And that's what a lot of underlying discussion around

Section 7 concerns.

I mean, unless you alter the playing field,

the managed care plans are going to struggle to

negotiate and provide contracts with the larger

hospital systems, as well as smaller providers that

may not be associated with the hospital system. Let

me add that the poor fit of managed care in rural

areas isn't limited to Medicaid here. In our Medicare

advocacy, again, Medicare primarily provides services

for the elderly and the severely disabled, very few

Medicare managed care plans, called Medicare Advantage

Plans, operate in the State's rural counties. And

many of those that have tried to have later withdrawn,

which goes back to the issue, or our fear, of MCOs

moving into the rural counties, discovering they can't

make a profit out of it and pulling out. So expanding mandatory managed care, in the short, is going to disrupt care for approximately

300,000 consumers, without, in the long term, guaranteeing adequate access to care. Our concern around access to care is only heightened by the fact that it's now routine for Medicaid, managed care organizations, and hospital systems to part ways.

And, again, we're talking about three zones where we already have Medicaid managed care.

To give you an example, next month the

Health Partners Plan will terminate its contract with the Mercy Health System in the southeast, forcing

6,600 consumers in the southeast zone to either change their doctor or keep their doctor and change their managed care plan. The type of adversarial business negotiations that lead to ruptures like this and subsequent disruptions in care for consumers does not occur on Medicaid's fee for service side where a provider either accepts a Medicaid fee schedule or doesn't.

And I should add that no one thinks the

Medicaid fee schedule is too high. Pennsylvania pays among the lowest in the country for its Medicaid rates.

Attracting enough doctors into the Medicaid system is already a problem, especially in the rural

areas. Adding this type of rate negotiation and

hospital system MCO rupture that we see in

HealthChoices now is likely only going to make the

provider's shortage problem worse.

A second concern here is a separate

dimension to the provider network problem. For many

types of providers the current HealthChoices rules

require only a choice of two providers per zone. In

small zones, that's not a problem. In zones the size

of those being proposed -- and I should note the

central zone stretches from the State's northern

border to its southern -- having two providers of a

specialist type per zone would mean that consumers

would likely face very long travel times.

And to give you an example of that: If a

plan's two in-network cardiologists are located near

the southern border, a consumer in Tioga or Bradford

County would have to travel nearly four hours to see

his heart doctor. I mean, even a travel time that's

two hours would likely present an insurmountable

barrier to care. And that's especially the case for

consumers depended on MATP, the Medical Assistance

Transportation Program. Because it's a county-based

system, traveling between counties in MATP poses real challenges.

In contrast, consumers on fee for service

now can see any provider who's enrolled in a MA

program. And that even includes providers, perhaps

using the Tioga example again, who may be located in

New York. As long as that provider is willing to take

the Medicaid rate, the consumer can travel to New

York, the consumer can travel to the northeast,

Wilkes-Barre, Scranton. That wouldn't be the case

under mandatory managed care because the consumer

would be limited to those doctors who are in, for

example, the AmeriHealth, Mercer Health network.

Our third danger, our third concern, I will

move quickly, is that mandatory managed care -- or

risk-based managed care runs the risk of inappropriate

care denials. And as an egregious and a known

example, the number of current managed care plans are

inappropriately denying shift nursing and home health

aides for children on the basis of the child's

diagnosis, and specifically on the basis of having a

behavioral health diagnosis like autism.

And I should add that this wasn't a case of

conflicting medical opinion. I mean, utilization

review normally means you have a plan doctor, who's

looking at what your doctor has prescribed and saying I don't think it's needed, I differ, we have a

difference in clinical opinions. This wasn't that

situation. This was the plan doctor saying, oh, you

have autism, we're not going to cover the service.

That was an inappropriate basis, and the Department of

Public Welfare agreed that was an inappropriate basis

for denial.

Given that, the DPW put four managed care

plans in what it calls corrective action. And one of

those managed care plans had to overturn denials and

approve services for 92 children. All right; that

means 92 children were wrongly denied shift nursing or

home health aide services. Going without needed care,

obviously poses a problem for sick children. And to

the extent that it makes those sick children sicker,

it increases healthcare expenditures.

A related concern is the ability of the

State to maintain control over the managed care plans

its contracting. As the MCOs consume an ever larger

part of the State Medicaid budget, it's increasingly

difficult for DPW to exercise effective oversight over

them, especially where one plan becomes dominant in a

zone like Keystone Mercy is in the southeast.

This was illustrated in the corrective

action context I just described. The plan that had to overturn denials for 92 children was put in corrective action in December of 2009. That plan and three others is still in corrective action today. That a plan has been in corrective action for nearly a year and a half, 18 months, raises serious accountability concerns.

And the last brief point I want to make is unlike with fees for service utilization review where any savings realized go to the State Treasury, any savings realized from an MCO doctor denying care or reviewing care, goes to MCO profit. It's an obvious financial incentive and it's inherent in a risk-based managed care, as opposed to the managed care you have now in rurals with ACCESS Plus, because you have managed care there, but the incentives are to increase health outcomes, to increase preventative and primary care, not to deny care, period.

Given that incentive, which almost certainly leads to inappropriate denials of care, the State has to retain the authority and the actually ability to prevent those abuses.

Thank you, again, for the opportunity. I'm happy to take any questions.

CHAIRMAN BAKER: Thank you very much for your testimony. We only have two or three minutes before we must adjourn to attend session. Very good testimony. Thank you for that information that we have not heard before.

With respect to the bill and Section 7, payments to hospitals, notwithstanding that section, let's say for instance that was deleted from the bill, would you still have the same concerns about this legislation moving forward?

MR. FISHER: The concerns over adequate networks so that a plan having enough doctors for members to have a choice would only intensify because that would mean -- I mean, that section likely increases the ability of the plans to contract with hospitals and outpatient providers, which sort of alleviates that extent the network is adding to it; the concern about consumers having access to doctors.

So that concern would be even hightened if

Section 7 is removed. And there's still the concern about inappropriate denials of care, and that's affected by Section 7 one way or the other. The basic incentive in risk-based managed care is to deny care, and that's what the plans do; it's an extent that leads to cost savings. But you can get the same cost savings through the State doing utilization review, like it does now. And the ACCESS Plus vendor right now is -- I think ACCESS Plus is in all the remaining counties, other than HealthChoices, providing health coaches, providing disease management, working with providers to make sure people, the consumers, are getting the preventative and primary care they need.

CHAIRMAN BAKER: We do -- do have, I'm sure, additional questions concerning other issues such as

RFPs and so on and its impact and implications, but we must be on the floor within a minute, apparently.

So I will adjourn the Health Committee and thank everyone for their testimony. And if you would be kind enough to proffer your testimony for us, we'd appreciate it. Thank you very much. Thanks all to the members.