Children's Hospitals Join Hospital Coalition to Block CMS Implementation of Medicaid Upper Payment Limit Rule

3/7/2002

From: Kimberly Cordero or Gillian Ray, 703-684-1355, both of National Association of Children's Hospitals (N.A.C.H.); E-mail: kcordero@nachri.org or gray@nachri.org; Web site: http://www.childrenshospitals.net/

ALEXANDRIA, Va., March 7 -- The National Association of Children's Hospitals (N.A.C.H.) today joined the National Association of Public Hospitals (NAPH), American Hospital Association (AHA), Association of American Medical Colleges (AAMC), as well as state hospital associations and other hospitals in a lawsuit to block implementation of a rule promulgated by the U.S. Department of Health and Human Services' (DHHS) Centers for Medicare and Medicaid Services (CMS).

The CMS-proposed rule reduces the Medicaid upper payment limit (UPL) from 150 percent to 100 percent for non-state government owned or operated hospitals, and is scheduled to go into effect March 19.

The plaintiffs filed suit today in U.S. District Court for the Eastern District of Arkansas in Little Rock, seeking an injunction to halt the implementation of the March 19 rule, asserting that the way in which DHHS promulgated the rule violated the Administrative Procedures Act.

"Anything that so dramatically affects the nation's largest funding source for children's health care deeply concerns children's hospitals," said Lawrence A. McAndrews, president and CEO of N.A.C.H. "Medicaid is critical to the health of the nation's children and the ability of children's hospitals to serve them." Half of all recipients of Medicaid are children, accounting for one in every five children and one in every four infants in the nation.

The new UPL rule will cut billions of federal dollars to the nation's single, largest source of health coverage for children -- state Medicaid programs. Major reductions in federal Medicaid funding to states compounds the budget crises many of them are already facing.

"Children's hospitals are vital to this nation's pediatric health care system and are committed to serving all children. While they represent only three percent of the nation's hospitals, they provide a disproportionate 30 percent of the medical care to all children assisted by Medicaid," said McAndrews.

In January 2001, CMS (Health Care Financing Administration at the time) issued a regulation intended to eliminate the potential for abuse using Medicaid UPL. Going into effect just one year ago on March 13, 2001, the regulation created a higher 150 percent category designed to allow legitimate state flexibility to increase payments to safety net hospitals -- payments that offset safety net hospitals' higher costs of providing essential health services to needy populations in their communities.

On Nov. 23, 2001, CMS reversed itself by issuing a proposed rule that eliminates the 150 percent UPL category. This rule will be implemented on March 19, unless an injunction is issued by federal court.

"CMS has put the cart before the horse by rushing to publish and then implement a new rule without adequate assessment of the impact of the previous rule that went into effect in March 2001," said McAndrews.

There is bipartisan opposition to the rule, and a pair of bills by Sens. Blanche Lambert Lincoln (D-Ark.) and Rep. Nathan Deal (R-Ga.) would delay implementation for at least a year. However, in order to enact such legislation, Congress must act on it as part of a larger budget bill. The legislative calendar precludes Congress from acting on such legislation until the summer at the earliest. As a consequence, court action is the only option remaining to delay implementation of the new UPL rule.

------ The National Association of Children's Hospitals (N.A.C.H.) is the public policy affiliate of the National Association of Children's Hospitals and Related Institutions. Representing more than 120 freestanding acute care children's hospitals, freestanding children's rehabilitation and specialty hospitals, and children's hospitals organized within larger medical centers, it addresses public policy issues affecting children's hospitals' missions of service to the children of their communities, including clinical care, education, research and advocacy.