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Districts face Medicaid funding cuts, increased compliance requirements

Sponsor: Spectrum K12 School Solutions

What's ahead for school districts in terms of their ability to continue to access Medicaid?

Schools may lose $635 million for the 2008-2009 school year. In addition, proposed rule changes will in many cases stop payments for services rendered in schools that Medicaid long has covered. At risk are monies collected by schools for specialized transportation to and from school, as well as the elimination of Medicaid recovery for service coordination and case management. Districts will face more restrictions for payment for services such as speech, occupational, physical therapy and in some cases, nursing services for particularly fragile children. Also, they will continue to be paid at rates far below the cost of services due to the manner by which rates are set.

"The manner by which
districts must seek
payment was designed
for hospitals and
medical providers."

What is triggering the reduction of this funding stream for schools?

The reductions are stemming from Medicaid funding cuts in general, but also from a tightening of conditions under which schools can recover costs for direct and administrative services. Over the course of the past 10 years, federal and state enforcement agencies have brought actions against various states for inappropriate and duplicate payments that impact school districts. Moreover, the institutional risks of noncompliance have grown from relatively non-adversarial audits and occasional return of payments to formal investigations resulting in sanctions and sizable returns of monies.

Are the rules for reimbursable expenses changing?

Some services rendered by schools may no longer qualify for reimbursement even though some of those services were approved by the respective state and federal Medicaid agencies. At issue is the degree to which services rendered in support of education qualify for reimbursement under Medicaid. Ironically, this is the same issue that was debated at the onset of the entry of school districts into the Medicaid arena during the late 1980s.

Where are districts vulnerable in terms of compliance with Medicaid rules?

There is a long list of trip-points for districts, but here are several that commonly trigger audit findings:

-Billing for services that are not covered or not adequately documented

-Billing for services that are instructional rather than health related

-Billing for services from providers who fail to meet licensure requirements

-Inadequate capacity to examine or resolve overpayments

-Lack of integrity in computer systems

-Failure to maintain confi dentiality of information/records

-Duplicate billing, or improper use of procedure codes

-Failure to institute standard internal audit reviews

What are some of the challenges for school districts?

The biggest challenge for school districts is to distinguish between a medically necessary service that meets criteria for reimbursement under Medicaid and services that are instructional in nature, which do not qualify for reimbursement. For instance, a district may determine that speech and language therapy may be necessary for a child who is struggling in reading and language arts. Medicaid auditors will argue that such therapies fail to meet criteria as a health service when they appear to support learning and instructional goals.

Do districts have difficulty navigating the Medicaid billing procedure?

Billing Medicaid for services is not a business solution common to school districts. In fact, the manner by which districts must seek payment was designed for hospitals and medical providers. Service claims for therapies and assessments is so challenging for districts that many turn to vendors for tasks such as tracking the delivery of services. In addition, districts struggle to secure and track provider credentials. This is particularly challenging in large school districts that may staff hundreds of therapists, nurses and other personnel, both directly and through vendors.

Part 2 of our Medicaid series will address ways that school districts can overcome some of the regulatory challenges.