Many pediatric hospitals have an opportunity to be a lead provider of patient care and administrative services to patients in states that are outsourcing Medicaid program administration to managed care companies.  Winn Halverhout presented on this topic for an AHLA webinar titled “Innovative Pediatric Hospital/Provider Partnerships.”

Thirty-seven states currently outsource all or part of their Medicaid administration to managed care companies.  Many states are dividing into regions and awarding Medicaid contracts in each region to only one or a handful of managed care companies, which creates opportunities for pediatric providers that MCCs regard as critical providers within a service region.  Pediatric hospitals are well-positioned to be the lead provider if they can build a critical mass of physicians and other pediatric care providers in the contract region.

Managed care companies often seek a lead provider that would have substantial responsibilities in the care and administration of assigned Medicaid lives under their state contracts.  Some MCCs perform the administrative functions under their contracts, including processing claims and managing providers and their activities, but want a lead patient care provider.  Other MCCs want to subcontract those functions as well to the lead provider.  Pediatric hospitals with their in-place infrastructure and is proportionately large base of Medicaid patients are well-positioned to be that lead provider.  The challenge is creating a network of physicians and other pediatric providers to achieve critical mass in the assigned contract regions.

Pediatric hospitals have to consider a number of issues when entering these relationships including risk-sharing, federal and state antitrust and tax laws, federal healthcare regulatory and privacy laws, and state laws related to business entities, insurance, and other regulatory matters.

These types of relationships can provide many opportunities for pediatric hospitals, but extensive legal issues permeate these relationships.  New (and sometimes unique) types of contractual relationships must be negotiated and documented.  Although not without controversy, the trend is here to stay for the time being.