In order for healthcare cost containment to work, you have to actually contain the cost.
New report from the State Auditor’s office shows how the state healthcare plan fumbled the overpayments to Bpatist Hospital. Via the report (pdf):
Using the combination of variables most closely aligned with the cost containment intent of the contract’s inflation adjustment provision, the estimated overpayment to Baptist Hospital for outpatient services is approximately $1.34 million, or 75% higher than the Plan’s calculation method.
Also, they didn’t even recover the lower amount.
This spells out what happened:
However, the State Health Plan did not have a plan for monitoring Baptist Hospital outpatient fee increases and determining if an inflation adjustment discount was allowed, and no one was assigned this responsibility. As a result, inflation adjustment analyses were not performed, and the discount rate was not increased during the entire contract period.
The State Health Plan should have sought fee increase information directly from Baptist Hospital as part of its contract monitoring plan. The National State Auditors Association “Best Practices in Contracting for Services” states, “Contract Monitoring is an essential part of the contracting process. Monitoring should ensure that contractors comply with contract terms, performance expectations are achieved, and any problems are identified and resolved. Without a sound monitoring process, the contracting agency does not have adequate assurance it receives what it contracts for.”
Because the State Health Plan did not monitor Baptist Hospital outpatient fee increases and did not increase the discount rate as allowed in the contract, the State Health Plan paid more to Baptist Hospital for outpatient services than it had to per the contract.