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November 30, 2006

Department of Corrections Reimbursement Rates

On November 3, 2006, the Illinois Department of Healthcare and Family Services (HFS) published notice of proposed rules with respect to healthcare procurement, contract implementation and vendor payments under its newly reorganized healthcare purchasing arm. In the proposed rules it is specifically stated that with respect to the interagency agreement between the DOC and HFS, HFS responsibilities are to, "Negotiate, procure and monitor contracts with healthcare providers for the rendering of services authorized by federal and State laws and regulations at the applicable rates under the Medical Assistance Program." While comment on this proposed rule is requested by December 3, 2006, there is a 45 day window and as such it is due by December 18, 2006.

Recall, effective July 1, 2005, the Governor proclaimed via an Executive Order that healthcare procurement and administrative functions primarily from CMS, DOC, Department of Human Services, Department of Veterans’ Affairs and Department of Public Aid would be transferred to HFS. The order included, rate development and negotiation with hospitals, physicians and managed care providers. The order did not set the reimbursement rates. This proposed rule implements the Executive Order.

In our opinion this rule gives unprecedented authority to DHFS to set hospital inpatient and outpatient rates at Medicaid for DOC inmates and opens the door to further rate setting for other programs administered by the Department. There is no State statute limiting reimbursement to healthcare providers for state inmates to Medicaid rates. While the Department has authority to negotiate rates, the law has not limited those rates to Medicaid. The Illinois Hospital Association (IHA) has continually expressed our opposition to this budget tactic -- HFS rates should not be the basis for determining reimbursement for medical services provided to state prisoners unless they are eligible and enrolled in Medicaid.

Recall, IHA previously issued memorandums to you regarding potential changes to rates for correctional inmates/prisoners in the inpatient and outpatient setting. At that time, we noted that DOC previously sent out letters that it "will reimburse all inpatient hospitalizations at the current Medicaid rate effective July 1, 2005." This was an agenda item of DOC to reduce the inpatient hospitalization line from $16 million to $8 million and based on the fact that DOC believes that the majority of prisoners are eligible for federal financial participation (there are about 2500 annual inpatient DOC days, the majority concentrated at approximately 10 hospitals). While the decision to pay at the Medicaid rate was put on hold previously, IHA was informed ultimately that in fact with the change in the vendor, DOC would be paying Medicaid rates for inpatient hospitalizations through the new vendor with add-on payments to be processed by HFS. At that time, DOC also informed us that outpatient and emergent care would likely be paid at a negotiated rates.

We urge affected hospitals to comment on this proposed rule and send us a copy of their comments. The provision as published has significant financial consequences for those hospitals that are caring for the state inmate population and potential access issues. Clearly, these patients are unique and present different challenges for hospital staff and other patients receiving care at the hospital. To download the rule, click here. Proceed to look up the November 3, 2006 Illinois Register pages 17209-17218. A copy of the IHA comment letter is attached for your review (click here).

Staff Contact: Elena Butkus: (630) 276-5526