Washington ACEP’s Historic Fight Over Medicaid Cuts

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Expansion of the Medicaid rolls under the Affordable Care Act has caused more than one state to look at ways to cut healthcare spending. In Washington State, the result has been a clash between physician groups and state health agencies that could to be a sign of battles to come.

Expansion of the Medicaid rolls under the Affordable Care Act has caused more than one state to look at ways to cut healthcare spending. In Washington State, the result has been a clash between physician groups and state health agencies that could to be a sign of battles to come.


According to Dr. Steven Anderson, an emergency physician from the Washington State ACEP chapter, trouble began in Washington when the Health Care Authority (HCA) was charged with cutting $72 million from a budget already suffering from a $1.5 billion shortfall.

The budget proviso stated that the HCA – the state agency in charge of Medicaid expenditures – was to make the cuts in cooperation with “the Collaborative Group,” a collection of organizations comprised of the Washington State Medical Association (WSMA), Washington State Hospital Association (WSHA), the Washington chapter of the American College of Emergency Physicians (WA ACEP), the American Academy of Pediatrics, and the American College of Physicians. Enter Steven Anderson, who has been spearheading Washington ACEP’s efforts in what quickly turned from collaboration to conflict.

Instead of seeking consensus, the HCA acted over the objections of the Collaborative Group, publishing a list of 700+ diagnostic codes that would not be paid for more than 3 times per year. The HCA list was significantly expanded from what the medical community considered truly non-emergency because that list would have only saved $10 million/year. (See inset for covered “Emergency Conditions” and patients exempted from the limitations.) Further, the HCA planned to use the “Billings Formula” to retrospectively identify those claims that were ‘non-emergent’ and would be denied payment. “It was absolutely in violation of the ‘prudent layperson’ standard which came out of the Healthcare Affordability Act in 1996,” said Dr. Anderson. This plan was to be implemented Oct 1, 2011 and run through June 30, 2012.


Since EMTALA still applied to EDs, with the standard for mandated treatment being what the prudent layperson deemed to be an emergency, the Group concluded that the HCA was effectively expanding an already massive unfunded mandate for emergency care, the cost of which would be born by the poor and those that provided care, mostly the latter.

WSMA, WSHA, and WA ACEP responded by proposing a robust notification and tracking system after each “unnecessary” visit, without denying payment. It was estimated to save the state $15-25 million per year. This plan, however, was rejected by the HCA. The Group responded by filing a suit to enjoin the implementation of the HCA plan, which was initially successful. However, even this temporary action to restrain the law cost over $300,000 in legal fees. On Christmas Eve, 2011, the HCA changed their tactics by changing the rules of the game. They announced that the previous “rule” was no longer that. Rather, it was simply a “budget management process,” fluid in nature, with no hard list of what was to be denied. As such, the HCA’s decisions were not subject to the courts injunction. To make matters worse, the HCA decided to forego the 3 visit rule and simply deny payment for ALL “non-emergent visits”.

By doing this, the HCA effectively took the process underground, with no medical oversight, no access to input, no limits to decision, no communication of list of accepted or denied services, and no further collaboration with the “Collaborative Group”.

The plan that was announced Jan 27, 2012, was – according to the HCA – no longer about “bottom dollar savings” but about “quality, best practices, and utilization review,” optimizing state tools for case management of ‘frequent flyers’, and tracking “medically unnecessary uses of the ED.” The Collaborative Group responded with a detailed plan of their own to accomplish the goals outlined by the HCA. However, three days later, this plan was rejected by the HCA.


At the time of this writing, the Collaborative Group has turned it’s efforts to lobbying the Governor and the legislature to step in and impose the “prudent layperson” standard into any payment scheme that the HCA applies to emergency care.

The Prudent Layperson Exception
According to a document promulgated by the AMA “as an educational and advocacy tool for use by physicians” the Affordable Care Act states that “All emergency screening and treatment services (as defined by the prudent layperson standard) provided by physicians and hospitals to patients must be covered without regard to prior authorization or the treating physicians’ or other health care provider’s contractual relationship with the payer.” As such, the Collaborative Group anticipated that the federal government might intervene on behalf of the medical community and their patients to enforce this standard on state Medicaid programs. However, the legal position of the HCA and subsequently the federal government was that a closer evaluation of the law suggests that the prudent layperson standard only applies to insurance groups and not to Medicaid. Was this an intentional oversight on the part of the legislators drafting the law or just a semantic manipulation by crafty government lawyers? No one is saying. “We anticipated that someone from CMS would step in and get involved,” said Dr. Anderson. But so far the response from the Administration has been “disappointing.”

A Reasonable Goal
Considering that the CDC has determined that 8% of emergency department visits were non-emergent, the Collaborative Group set an 8% reduction in expenditures as a more reasonable cost cutting goal. (Even a superficial analysis of this logic would show that the Collaborative Group was being generous in their estimates. The majority of costs of an emergency department fall on the sickest, obviously emergent patients.) The Collaborative Group focused their attention on reducing the cost of frequent fliers by aggressive case management. Patients who over-utilize the ED were assigned to case managers with their names appearing on widely circulated lists. One health system alone found that patients who had been seen 10 times or more in an ED were responsible for 30,000 annual visits to the system. At an average visit cost of $331, these frequent fliers accounted for $9.9 million dollars a year in cost to the system.

As all emergency physicians know, one of the drivers of over-utilization of the ED is opioid prescription abuse. With the implementation of a statewide opioid prescription monitoring program they were able to see gradual declines in utilization of up to 10 percent. Maintaining this rate of decrease would result in savings of $25 million per year. Targeting unnecessary return visits to the ED and to other providers by simply providing better home-going instructions, the Group felt that they could reduce follow ups and returns by 20%, thus saving $4.2 million per year.

Next, the Collaborative Group turned it’s attention on drug costs to the system. They found that while state and federal law prohibited the adoption of a mandatory statewide formulary, by working with other physicians from every specialty, they felt that they could adopt a voluntary formulary that would take advantage of some of the market-based reduced cost pharmaceuticals such as the $4 Walmart formulary. By publishing a statewide quarterly report to all physicians that included data on generic fill rates, opioid prescribing habits and ED utilization rates, the Group felt that an 8% reduction in costs, $4-8 million, was achievable.

Summing up all of the achievable goals, the Group determine
d that a reasonable goal was $48.2 million. They felt that such a plan would improve care while not imposing arbitrary limits. Nevertheless, the HCA rejected this plan in favor of deeper cost cutting.

Where It Stands in Washington
At the time of this writing, WA ACEP had received a very positive hearing from the legislative committee responsible for putting their plan forward. “We’ve been in the courts,” said Dr. Anderson, “we’ve worked with . . . the HCA, but clearly where we’ve made our inroads is going to the legislator, going to the governor’s office and really presenting our plan.” However, more action has been taken between writing and printing. Follow here on www.epmonthly.com or on Twitter @epmonthly for real-time updates on this situation.

Tip of the Spear
Washington State’s budget issues – and the proposals to solve them – are not unique to Washington. Sixteen states have followed the progress of Washington in anticipation of using this method of shrinking their Medicaid budget. So unless your state has a significant budget surplus, even if your state is not one of the 16, the expansion of the Medicaid rolls nationwide as a result of the Affordable Care Act will put a strain on state budgets. This will likely cause legislators to look to you to make up the difference. In other words, what happened in Washington is likely to happen everywhere. So get ready.



Lessons Learned in Washington

Strategy Session with Dr. Steven Anderson

1. Protect the prudent layperson protection that exists in the Health Care Affordability Act, because if Medicaid is successful with this, every private insurer in the country is going to look at it.

2. Provide alternative plans, don’t just come to the table with, “we don’t like what you’re saying.”

3. Advocacy is your best alternative to litigation. The old axiom that “you can’t fight City Hall” is true. Go over the bureaucrats heads and go straight to top executives and legislators that you can reach. It may be sad to admit that medicine has become political. But given that, play the game to win.

4. Rally your troops and your allies. Every emergency physician is going to be effected, so everyone should be involved. Raise the necessary money. Make friends and allies with other specialists, and speak with one voice.

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  1. Steve, in your legal wrangling with Washington State, have WA ACEP’s legal advisors looked into whether the EMTALA mandate to provide medical screening to all ED patients (and the Fed’s and State’s enforcement of this mandate), in combination with refusal to pay for even medical screening (let alone treatment) for certain patients whose diagnosis, as a result of this screening, meets WA State’s criteria for non-payment, constitutes illegal theft of emergency physician services by the government? If so, is government service mandate without government payment deemed to be a cause of action worthy of pursuit if the State decides to implement this non-payment scheme, or CMS decides to allow other states to do the same?

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