The 2012 legislative amendments to Section 409.905(f), Florida Statutes require the Agency for Health Care Administration ("AHCA") to take steps toward the conversion of the current model of Medicaid fee-for-service ("FFS") inpatient1 hospital reimbursement to that of a Diagnosis Related Group ("DRG") model of payment. AHCA is required to submit a conversion plan to the legislature by no later than January 1, 2013 and begin implementation of DRG pricing by July 1, 2013. On August 29, 2012, a public meeting was held at AHCA with the hospital industry, legislative staff, and other interested parties who offered comments and recommendations on this issue to AHCA's representatives.

While implementation guidelines have yet to be formalized, AHCA  has been presented with a series of "preliminary" recommendations by its outside consultants.  Some of these are as follows:

  • Utilize the All-Patient Refined DRG model ("APR-DRG") rather than the Medicare Severity DRG model ("MS-DRG"). At this time, there appears to be a better correlation of existing data with the APR-DRG model - especially in the areas of obstetrics and neonatal care.
  • Adopt the national standards for DRG relative weights. While the claims history of Florida Medicaid recipients is such that a Florida specific standard of DRG relative weights could be utilized, the benefits attributed to the national weights were deemed more favorable by the consultants.
  • Distinguish the base rate for rural hospitals from that of all other hospitals to allow for rate accommodations where necessary.  The legislature has historically recognized the need for flexibility in reimbursement rates for rural areas of the state.
  • Adopt a "Medicare – like" stop loss model for reimbursement. Outlier payments will be made on losses in excess of established thresholds.
  • Consider a transition period prior to full implementation.

AHCA has indicated that it will take these recommendations under advisement and reject, modify, or adopt them for inclusion in the DRG plan to be submitted to the legislature on January 1, 2013. Industry representatives have requested that, prior to AHCA formalizing this plan, they be allowed to review and comment on its language.