Medicaid Innovations and the Role of Academic Health Centers

Although they represent less than 8% of all U.S. hospitals, academic health centers (AHCs) deliver almost 40% of the inpatient care for Medicaid beneficiaries. However, because of low Medicaid reimbursement rates, AHCs have had to rely on supplemental funding sources, such as disproportionate share hospital (DSH) payments and upper payment limit (UPL) payments. Recent legislative efforts and changes to payment structures have made these sources vulnerable to severe reductions. For instance, DSH payments are scheduled to be cut by $8 billion by 2021, and UPL payments are a diminishing resource for many states because the program is based on a fee-for-service model and most states are moving to managed care.In this Invited Commentary, the authors argue that cuts to supplemental funding sources would harm AHCs. They advocate instead for restructuring traditional supplemental payments to accommodate novel reimbursement models. They cite Medicaid’s Delivery System Reform Incentive Payment program as an example of work to leverage supplemental payments to transform the delivery of care for Medicaid beneficiaries. AHCs should be at the epicenter of such innovations in population health for Medicaid beneficiaries. To that end, the authors encourage AHCs to build new partnerships with community-based primary care physicians and community health centers to balance the specialty composition of their faculty providers to assume the risk for Medicaid beneficiaries and other vulnerable populations.