Hospital officials are urging lawmakers to reject a Medicaid cost-control plan and instead preserve a rapid-pay system that a state audit indicated has resulted in as much as $845 million in ineligible taxpayer-funded payments to providers.

Hospital officials are urging members of the Senate to approve legislation that would prevent use of private managed-care companies in Oklahoma’s Medicaid program. Gov. Kevin Stitt has called for use of managed care to control taxpayer costs.

One reason cited by hospital officials for opposition to the Stitt plan is that it would result in longer “payment-processing time.” But a 2020 state audit indicated that medical providers have received hundreds of millions in potentially illegal Medicaid payments due in part to rapid-payment processes.

Under Stitt’s plan, the Oklahoma Health Care Authority (OHCA) would contract with private companies to oversee the care of many Medicaid patients. Those private companies would be paid a flat fee and any cost overruns could generally be borne by the private company, based on contracting provisions.

Supporters say use of managed care could result in more patients receiving routine care and preventative treatment that helps Medicaid patients avoid far more expensive taxpayer-funded treatment after their health condition has deteriorated.

But a website established by several medical groups opposed to Stitt’s plan declares it a “myth” that managed care creates savings, saying it instead increases “bureaucracy and payment-processing time.”

Similarly, a flyer provided to lawmakers by officials with SSM Health St. Anthony’s claims that under Stitt’s plan managed care entities could “cut inpatient hospitalizations by 40%, ER visits by 40% and mental health by 20%.”

But officials at the Oklahoma Health Care Authority told lawmakers earlier this year that those reductions are expected to occur because patients will be directed to routine-and-preventative care instead.

Notably, the three categories highlighted by SSM Health St. Anthony’s are among the highest-billing services at many hospitals, and state officials have long argued that too many Medicaid patients are provided routine care through expensive emergency rooms rather than through a primary care doctor.

Hospitals’ defense of the current rapid-pay Medicaid system runs counter to the findings of a state audit released in 2020 that found that up to $845 million in taxpayer-funded Medicaid payments may have been made by the Oklahoma Health Care Authority to cover treatment for potentially ineligible recipients.

“Overall, OHCA does not have adequate internal controls in place to ensure compliance with federal laws and regulations that require only eligible participants receive Medicaid and CHIP benefits,” the audit concluded. “OHCA made payments on behalf of Medicaid recipients who did not meet, or may not have met, federal and state eligibility requirements.”

The audit found one reason for the substantial share of potentially ineligible recipients, whose treatment was nonetheless covered by taxpayers, is that the OHCA prioritized rapid approval over determining program eligibility.

The audit noted Oklahoma “is the only state to approve 100%” of Medicaid applications “within 24 hours” when federal law allows up to 45 days to verify an applicant’s information.

“Utilizing additional days to verify the applicant’s information would give the state better leverage to ensure only eligible applicants are receiving services,” the audit stated.

OHCA’s rapid-approval process facilitates faster payment to providers.

In his February State of the State address that called for use of managed care in Medicaid, Stitt noted that Oklahoma’s Medicaid system is meant to help patients, not provide ready cash flow to providers regardless of quality or validity of treatment.

“It’s time to focus on outcomes and not just paying invoices,” Stitt said.

The flyer provided to lawmakers by officials with SSM Health St. Anthony’s also cited a February 2021 article in “The American Journal of Managed Care” as evidence that lawmakers should reject Stitt’s plan.

But that article conceded use of managed care in other states “may have slowed state spending growth” as Stitt has argued, and also stated that “little research” has been done on the quality of care provided through Medicaid managed care.

As an alternative to Stitt’s plan, hospital officials and allied groups are calling on state senators to instead pass Senate Bill 131, which would effectively create a state-run managed-care company within the Oklahoma Health Care Authority.

While Stitt’s plan involves no new overall cost, a legislative fiscal analysis of SB 131 shows it will increase the expense of state government by an average of $263 million per year and require the OHCA to hire an additional 1,200 employees. Administrative costs would surge to 11 percent of OHCA’s total budget under the bill.

SB 131 would increase the number of OHCA employees by as much as 216 percent, since the OHCA’s 2020 annual report showed the agency employed just 553 full-time staff at that time.

The fiscal analysis also showed that the OHCA would not be able to implement any cost-control program for two to three years, while Stitt’s plan could be implemented starting this year.

Some medical officials fighting against Stitt’s plan for managed care in Medicaid have also fought against legislation to prevent “surprise billing” by hospitals that leaves patients facing financial ruin in the face of wildly inflated bills.

Senate Bill 548, by Sen. Julie Daniels and Rep. Tammy Townley, would have prohibited medical providers from turning over a bill to debt collectors if the provider failed to give the patient a good-faith estimate of cost prior to treatment.

In April the Oklahoma Hospital Association (OHA) declared its “stiff opposition” to the legislation and stated that OHA officials were “working to have the bill not heard on the House floor by the deadline.”

While SB 548 passed out of the Oklahoma Senate, it was defeated on the House floor after opponents said the legislation might financially harm hospitals and providers that have profited from “surprise bills.”