Adjusting Medicaid Payments for Social Determinants to Boost Care

Medicaid PaymentsUsing a per-person adjustment for Medicaid payments to hospitals would address social determinants of health and help hospitals fund more comprehensive care, experts say.

Adjusting Medicaid payments for social determinants of health would help address the broader social needs of children and cost restraints at safety-net hospitals, according to researchers from the Northwestern University Feinberg School of Medicine.

Children who rely on Medicaid payments frequently experience numerous socioeconomic challenges that compound their health care needs. For example, youth with unstable housing, food security, and/or poor access to timely primary care may present with more severe acute illnesses than patients with more resources and better access to care.

Yet, Medicaid payments to hospitals – children’s hospitals in particular – oftentimes falls short of covering the costs needs to address social determinants of health, explained Matthew M. Davis, MD, MAPP, and Kristin Kan, MD, MPH, MSc, in a recent article in JAMA Open Network.

Although the current Disproportionate Share Hospital (DSH) program, which enables states to provide supplemental payments to safety-net hospitals to offset uncompensated and undercompensated care is a helpful approach, it would be more efficient to implement policies that follow the person, they argued.

Increasing Medicaid reimbursement, applying a per-patient payment adjustment, or correcting the under-reimbursement of hospitals for the care of children with social disadvantage are some of the options to address emerging concerns on both sides, the researchers stated.

Increasing Medicaid reimbursement for hospitalizations would serve as a direct adjustment of the level of reimbursement for the number of disadvantaged children that hospitals serve. But this policy option may also be the least politically feasible because increasing reimbursement would increase healthcare spending at the federal and state government levels.

Another option would be to apply a per-patient adjustment for geographically defined social risk, which would address the cost constraints hospitals located in under-resourced areas face when addressing social determinants of health.

For example, a report found that hospitals located in counties with chronic poverty or counties that have been designated as having shortages of healthcare professionals had significantly worse performance on measures included in Medicare’s Value-Based Purchasing (VBP) program than hospitals with fewer local socioeconomic challenges.

But Davis and Kan pointed out that this policy option also has some issues. They explained that some stakeholders may be concerned that the hospital reimbursement adjustment based on location “would reimburse hospitals without requiring that they attend to hospital-to-hospital differences in quality and outcomes that might also be associated with social determinants of health.”

Therefore, a third potential policy would be a per-patient adjustment for social determinants of health as recommended by a National Academy of Medicine Committee for Medicare. This policy would require separate reporting of quality measures for hospitals in different categories related to distinct levels of social risk in populations they serve.

Under this policy, hospitals would be rewarded for incremental improvements in quality measures against their own historical benchmarks. The payment adjustments could also promote closing gaps in the quality of care that may be worse among institutions serving disadvantaged populations.

Relieving the under-reimbursement of hospitals for the care of children with social disadvantages is another policy option, Davis and Kan stated. The option is also appealing because hospitals that achieve specific levels of activities in communities would earn greater reimbursement for caring for children with social disadvantages. This could also encourage hospitals to commit to their roles as major employers and purchasers of goods in their communities, they said.

As literature rapidly emerges about how to better address social determinants of health in children and the population at large, reforming Medicaid reimbursement policies to account for these factors is critical to improving outcomes and supporting hospitals.

But incorporating social determinants of health into value-based purchasing contracts can also make the difference between a model that merely incentivizes providers to alter their workflow and one that sustainably lowers costs and improves quality, bringing long-term savings to all stakeholders.

“There’s infrastructure and capital that is required to set yourself up to be able to deal with social determinants of health,” Brian Donovan told earlier this year. “But the industry is beginning to realize and understand just how critical it is to bring that into the value equation if we are going to be successful in driving outcomes, controlling quality, and managing costs.”

The industry should be working on addressing social determinants of health, and that should come in the form of creating community-based provider networks alongside the tradition provider network, Donovan also emphasized.

Moving beyond DSH payments to programs that follow the patient or the community can provide promising opportunities to address persistent shortfalls in hospital reimbursement for the neediest children, while also promoting high-quality care, community engagement, and neighborhood reinvestment.

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