The Future of the Safety Net Assessment

Through hundreds of hours of staff work, dozens of amendments, and countless negotiation discussions, the Washington State Legislature has passed a new assessment program that meets all of the criteria outlined by the Washington State Hospital Association (WSHA) Board.

Without the approval of a new assessment program, the sunset of the first program on June 30, 2013 would have left a $270 million hole in the state’s general fund budget.  This budget gap likely would have led to further Medicaid cuts, leaving safety net hospitals in jeopardy.   

The board charged WSHA staff to develop a new program under which:

  • The bulk of funds are used to provide hospital care for vulnerable Medicaid patients; 
  • The benefit to the state does not exceed $100 million a year; and
  • There are legal protections, including another sunset date. 


The new program accomplishes these goals.

What this means for hospitals

In State Fiscal Years (SFY) 2014 and 2015, the new assessment program will provide approximately $220 million in net benefit to hospitals and $200 million to the state. 

Under the provisions of the law, Prospective Payment System (PPS) hospitals as a group should receive $1.26 in hospital payments for every $1 in assessments paid. The following table summarizes the assessment and net benefit (payments less assessments) by category of hospital:

 

 

 

Hospital Category

Estimated Annual Assessment

($ Millions)

Estimated Annual Payments

($ Millions

Estimated Annual Net Benefit

($ Millions)

PPS, including Psychiatric and Rehabilitation

$332.0


$421.2

$89.2

Large Government


0


15.6


15.6

Critical Access Hospitals


0.4


4.0


3.6

Total All Hospitals
(Includes $1 million in payment to border hospitals, required under federal law.

$332.4

 

441.8

$109.4


The program will remain essentially the same in SFY 2015 (July 2014 – June 2015).  Beginning in 2016, the law begins a phase down where assessments and payments decrease by one fifth each year for five years. However, it is important to note that as a practical matter the phase down will only be in effect for two years because the program sunsets in 2017. If the program is continued beyond 2017, the phase down means that WSHA and hospitals will need to address the low payment rates for Medicaid dependent hospitals. 

Hospital payments for the new program are restructured.  Payments are no longer tied to Medicaid rates. Instead Medicaid rates are lowered to their 2009 levels and additional lump sum payments are made on a quarterly basis prior to the collection of assessments.  This new structure should provide greater predictability and certainty for all member hospitals about the cash flows and financial benefits of the program. 

The Law

Overview.  Development of the safety net assessment law, SB 5913, involved countless hours of drafting, negotiating, and amending. The stakes were very high, the program very complicated, and a multitude of perspectives were present in the process.

In general the law describes how hospitals are assessed and, after federal match is received, payments are made to hospitals. The details are complex, but very broadly:

  • PPS hospitals, including psychiatric and rehabilitation hospitals, are assessed quarterly and receive quarterly payments;
  • Critical access hospitals are assessed and receive payments, in a manner similar to the first version of the assessment program that sunset on June 30, 2013; and
  • The larger government hospitals, paid under the Certified Public Expenditure (CPE) program, receive grant funds from the state. 


Legal Protections. The new law contains protections, as strong as any assessment program in the country, against a legislative raid. The protections include the same protections that form the basis of WSHA’s current lawsuit against the state for the legislative raid of the first safety net assessment. Additionally, the law includes contractual protections that will exist outside of the legislative arena. If the legislature were to change the law and reduce hospital payments, hospitals have an independent contract with HCA that entitles them to not pay any future assessments. 

The law instructs the state Health Care Authority (HCA) to offer hospitals a contract in which HCA agrees:

  • Not to reduce aggregate payment levels to hospitals for Medicaid inpatient and outpatient services: 
  • Not to reduce payments for the various classes of hospitals that receive payments under the law;
  • Not to increase the assessment levels from those set forth in the law; and
  • Not to use assessment revenues for any other purpose than to secure federal Medicaid matching funds to support Medicaid hospital payments.  


In return, hospitals agree not to sue the state under federal law for the rollback of rates to 2009 levels that occurred on July 1, 2013. Some hospitals have expressed concern about agreeing not to sue the state over these reductions.  It is important to note that hospitals are NOT giving up their right to sue over any inappropriate reductions in payment levels that occur in the future.   The only thing hospitals are giving up their right to sue over is the rate rollback to 2009 levels that occurred at the start of the program.  The rollback was a key provision in the shift from a rate-based payment increases to lump-sum payment increases.

For more details, including assessment rates, read WSHA's bulletin on this topic.  

Additional Background Documents

The assessment lawsuit

Questions and Answers about the assessment

Contact

Beth Zborowski

Beth Zborowski
(206) 577-1807