LA- Louisiana Medicaid implementing new payment model for hospitals

[MM Curator Summary]: The move seeks to prevent disruption if /when current hospital sugar money strategies change at the federal level.

Payments will be made based on Medicaid utilization

Louisiana Medicaid has received approval from the Centers for Medicare & Medicaid Services (CMS) to implement a new payment model for hospitals that is based on Medicaid utilization.


The new payment model increases hospital supplemental payments and prioritizes maintaining adequate funding for safety-net hospitals across Louisiana, without requiring additional state general funds. Additionally, the model creates more uniform guidelines and stability for hospital payments.


Developing a standardized funding formula for hospitals is one of the 17 initiatives included in our FY22 Business Plan


“We are excited to begin implementing this new payment model that is sustainable and equitable for hospital providers,” said LDH Undersecretary Ruth Johnson. “This new model, called a state directed payment model, changes the way we reimburse hospitals for care provided to Medicaid patients to align with guidance issued by CMS. The new model is a critical part of our Business Plan and was a top LDH priority during the Spring 2022 Regular Legislative Session.”


“This change demanded careful, attentive work and strong partnerships,” said Johnson. “We are thankful for the support of Gov. Edwards, the advocacy of the Louisiana Hospital Association (LHA), input from our legislative partners and the painstaking work of our LDH team members that made this new model possible.”


LDH through its Medicaid program has been working closely with CMS, hospital providers, the LHA,  legislators, and other stakeholders to design this new payment model. 


“This was important to legislators which is why we passed House Concurrent Resolution 8 of the 2022 Legislative Session,” said State Rep. Clay Schexnayder. “We are grateful for the thoughtful and transparent process LDH used in the development of this new hospital payment model, which focuses on effectively and appropriately funding our vital network of hospitals.”


“Hospitals are critical to our comprehensive medical care, to respond to health crises, and so much more,” said State Sen. Page Cortez. “This new payment model supports hospitals to ensure that they continue to be available in our communities for access by all of our state’s residents.”


“The LHA sincerely appreciates the hard work performed by LDH and Milliman throughout this process as well as their transparency and engagement with LHA and its member hospitals,” said LHA President and CEO Paul A. Salles. “We also want to thank the Louisiana Legislature for voting to implement this directed payment model when unanimously passing HCR 8 by House Speaker Clay Shexnayder (R-Gonzales). This new program requires no additional state general funds and places Louisiana in stronger compliance with federal guidelines, while making it easier for Louisiana hospitals to continue caring for their communities.”


The increased payments will be based upon Medicaid inpatient and outpatient hospital, long-term care, free-standing rehabilitation and free-standing psychiatric hospital services across the state. 


The new payment model became effective July 1, 2022.


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