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New Payment Model for Hospitals Based on Utilization Implemented for Louisiana Medicaid

Louisiana – On August 25, 2022, the Louisiana Department of Health (LDH) announced that the Centers for Medicare & Medicaid Services (CMS) has authorized Louisiana Medicaid to establish a new payment model for hospitals based on Medicaid utilization.

The new payment model boosts hospital supplementary payments while prioritizing adequate financing for Louisiana’s safety-net hospitals without requiring extra state general expenditures. Furthermore, the model establishes more consistent norms and consistency for hospital payments.

One of the 17 initiatives listed in our FY22 Business Plan is the development of a consistent funding methodology for hospitals.

“We are excited to begin implementing this new payment model that is sustainable and equitable for hospital providers,” said LDH Undersecretary Ruth Johnson. “This new model, called a state directed payment model, changes the way we reimburse hospitals for care provided to Medicaid patients to align with guidance issued by CMS. The new model is a critical part of our Business Plan and was a top LDH priority during the Spring 2022 Regular Legislative Session.”

“This change demanded careful, attentive work and strong partnerships,” said Johnson. “We are thankful for the support of Gov. Edwards, the advocacy of the Louisiana Hospital Association (LHA), input from our legislative partners and the painstaking work of our LDH team members that made this new model possible.”

LDH has been working closely with CMS, hospital providers, the LHA, legislators, and other stakeholders to establish this new payment mechanism through its Medicaid program.

“This was important to legislators which is why we passed House Concurrent Resolution 8 of the 2022 Legislative Session,” said State Rep. Clay Schexnayder. “We are grateful for the thoughtful and transparent process LDH used in the development of this new hospital payment model, which focuses on effectively and appropriately funding our vital network of hospitals.”

“Hospitals are critical to our comprehensive medical care, to respond to health crises, and so much more,” said State Sen. Page Cortez. “This new payment model supports hospitals to ensure that they continue to be available in our communities for access by all of our states’ residents.”

“The LHA sincerely appreciates the hard work performed by LDH and Milliman throughout this process as well as their transparency and engagement with LHA and its member hospitals,” said LHA President and CEO Paul A. Salles. “We also want to thank the Louisiana Legislature for voting to implement this directed payment model when unanimously passing HCR 8 by House Speaker Clay Shexnayder (R-Gonzales). This new program requires no additional state general funds and places Louisiana in stronger compliance with federal guidelines, while making it easier for Louisiana hospitals to continue caring for their communities.”

Increased payments will be made across the state for Medicaid inpatient and outpatient hospital, long-term care, free-standing rehabilitation, and free-standing psychiatric hospital services.

The new payment model went into effect on July 1, 2022., according to the Louisiana Department of Health.

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