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Major changes ahead for medicaid: managed care plans can participate in Florida's reform process.

During its 2011 session the Florida Legislature passed HB 7107, considered to be a landmark Medicaid reform act that will convert Florida's Medicaid system from a traditional fee-for-service (FFS) system to one primarily based upon managed care plans. Once overhauled, Florida's system will be one of the only Medicaid programs in the nation to operate under a managed care system.

According to the Florida Agency for Health Care Administration (AHCA), Florida's current Medicaid enrollment is approximately 2.97 million people, half of whom are children or adolescents under the age of 20. More than 100,000 Florida medical facilities and medical professionals offer services to Medicaid enrollees. To become eligible to provide services to Medicaid recipients under Florida's current system, a medical provider need only complete an online application at AHCA's fiscal agent website.

However, the current system has led to out-of-control cost inflation, with estimated expenditures for fiscal year 2010-2011 totaling approximately $20.2 billion. By passing HB 7107, the Florida Legislature is betting that the cost control and fraud prevention measures commonly utilized by private health maintenance organizations will form the basis for a solution for Florida's Medicaid delivery system by affording comprehensive medical services while controlling costs and reducing fraud and abuse.

HB 7107 created the Medicaid managed medical assistance program and the long-term care managed care program to be implemented and administered by AHCA. Under HB 7107, Florida will be divided into 11 service regions that are consistent with historic Medicaid utilization patterns.

To ensure that participants will have plans from which to choose in each region, AHCA will be required to procure a minimum of two and a maximum of 10 health plans for the Medicaid-managed medical assistance program. In order to implement the program, AHCA was required to seek federal approval for a Medicaid waiver by Aug. 1, 2011.

AHCA also must develop an invitation to negotiate (ITN) before Jan. 1, 2013, in order to establish criteria and a process to qualify managed health plans to provide services in designated regions under the Medicaid program. AHCA announced it will begin rulemaking to develop the ITN process in October 2011.

Be Part of the Process

For managed care plans considering participation in either the Medicaid managed medical assistance program or the long-term care managed care program, AHCA's development of the standards it will utilize in the procurement process will be critical to its ultimate determination of participant qualifications and eligibility.

By participating in the ITN rulemaking process, a health plan can play an important role in AHCA's development of the ITN's criteria, process, forms, and scoring systems that will be used to evaluate proposals for managed care plan services.

Further, if a managed care plan wishes to protect its rights based on AHCA's ultimate contract award, it will likely only have a matter of days to take action. In such a compressed time frame, it will be advantageous for the plan to have fully participated in the procurement development and bid process.

AHCA has been given general guidelines by the Legislature for the plan selection criteria. For plans seeking to participate in the Medicaid-managed medical assistance program, this includes accreditation, network availability, community partnerships, disease management, policies and procedures for preventing fraud and abuse, and prior business relationships within the applicable region.

Selection criteria for plans seeking to participate in the long-term care managed care program include executive managers with expertise and experience in serving the aged and disabled, establishment of specialty services for persons receiving home and community-based care, whether the eligible plan has a contract to provide managed medical assistance services in the same region, whether a plan offers consumer-directed care services to enrollees, and whether a plan is proposing to provide home and community-based services, in addition to the minimum required benefits. Preference will be given to plans with well-defined programs for recognizing patient-centered medical homes and state-based entities.

Procurement for plans will occur separately and simultaneously in each of the 11 regions. AHCA will be required to enter into 5-year contracts with providers selected to participate in the programs. Capitation rates or FFS payments with each plan must be negotiated by AHCA to guarantee aggregate savings of at least 5 percent in the first year of the first contract term. Provider service networks will be allowed to operate at FFS for the initial 2 years of operation or until Sept. 1, 2014, whichever is later.

Profit margins for managed care plans will be limited if they exceed 5 percent. If plans cannot reach an agreement with essential service providers or hospitals, AHCA will have the authority to set the reimbursement rate for those providers between 90 and 110 percent of the Medicaid rate.

Be Part of the Solution

In order to adequately protect their interests, managed care plans should participate in the development of rules relating to AHCA's authority to set reimbursement rates for essential services and hospitals, because no adjustments to a hospital's reimbursement rate will be authorized for 5 years after the hospital is notified of an audited and established rate. Early participation will allow enhanced opportunity for the plans to reach an agreement on reimbursement rates for essential service providers and hospitals prior to AHCA setting a rate, which cannot be changed for 5 years. Managed care plans also should monitor the programs' statutory profit limitations. Issues such as which costs of doing business will be allowed when calculating a plan's profit should be addressed in a proactive manner.

Active engagement in the process of implementing Florida's Medicaid-managed medical assistance program and the long-term care managed care program will likely be essential for a plan to favorably participate in the programs. AHCA rulemaking in setting managed care plan selection criteria, as well as reimbursement rates that plans will be required to utilize for hospitals and essential services, may be critical in either eliminating certain plans that may otherwise be qualified for either program or establishing the ultimate profit margin allowable for participating plans.

Early entry and participation in the rulemaking process can also provide a managed care plan with the opportunity to create a useful record for challenging the later award of contracts, if that becomes necessary.

Richard J. Fidei ( and Katherine S. Webb ( are partners in the law firm of Colodny, Fass, Talenfeld, Karlinsky & Abate. Timothy Fordham Stanfield ( is an associate. Based in Fort Lauderdale with offices in Tallahassee, the full-service firm specializes in insurance regulatory, transactional, and administrative law, government relations and complex commercial litigation on both the trial and appellate levels. The authors may be reached at 954-492-4010.
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Title Annotation:Feature story
Author:Fidei, Richard J.; Webb, Katherine S.; Stanfield, Timothy Fordham
Publication:Florida Underwriter
Geographic Code:1U5FL
Date:Aug 1, 2011
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