About half of the 25-plus case management agencies that oversee Medicaid care for the elderly in Hawai'i's adult foster homes could go out of business because of a planned 50 percent reduction in their reimbursement rates from a state contractor, industry representatives said yesterday.

In a legislative hearing before the House Human Services Committee, agency representatives said the planned reimbursement reduction by 'Ohana Health Plan — one of two companies that contracts with the state to provide Medicaid services for 40,000 aged, blind and disabled residents — would drive many out of business, result in less oversight for an especially vulnerable segment of the community and reduce accessibility to a vital service.

"This will result in a health care crisis," said Nancy Walch, a case manager.

But Erhardt Preitauer, president of the Hawai'i region for 'Ohana, said the planned reduction, scheduled to take effect Feb. 1, is necessary to reduce costs to make the program financially viable while maintaining services to the 22,500 elderly and disabled Medicaid members 'Ohana covers.

"In these very, very challenging circumstances, unfortunately I feel like we weren't left with a choice," Preitauer told Rep. John Mizuno, D-30th (Moanalua, Kalihi Valley, 'Alewa), the committee chairman.

Responding to a question from Mizuno, Preitauer said he was open to considering ways to reduce the size of the reimbursement cut. But outside the hearing, Preitauer said in an interview that his company already has done an extensive analysis on ways to wring more savings from the program. Probably the only way to lessen the impact, he said, would be to reduce benefits or increase state funding, both areas not within 'Ohana's purview.

TROUBLED PROGRAM

The reimbursement controversy is only the latest wrinkle in the Department of Human Services' new Quest Expanded Access program, which switched from a fee-for-service model to managed care nearly a year ago to cover the elderly, blind and disabled Medicaid population. The launch was marked by widespread confusion and complaints from clients.

The latest controversy erupted on New Year's Eve, when many of the case management agencies received letters from 'Ohana with news of the slashed reimbursement rates.

The agencies currently get a daily rate of $16.25 per patient from 'Ohana to oversee care of the foster-home clients. That rate would drop to $8.50 starting Feb. 1 — unless a compromise is fashioned before then.

Many of the case management agencies, which typically are small operations with two to 20 employees, also do business with Evercare Quest Expanded Access, the other health plan that provides Medicaid services to the elderly and disabled population.

Evercare, however, has not notified case managers of plans to cut reimbursement rates, they said yesterday.

An Evercare representative could not be reached for comment.

In addition to contracting with the case management agencies to oversee care for the 400-plus 'Ohana members in foster homes, 'Ohana also provides its own case management services to the other 22,000 members who are not in foster homes.

While 'Ohana reimburses the agencies $16.25 per day for each of the foster-home clients, the health plan manages the care of the other 22,000 members for less than $8 per person daily, according to Preitauer.

He said the program's current costs can't be sustained, especially amid the state's worsening budget crisis.

Medical expenses for foster home clients, for instance, are four times greater than the medical expenses of comparable residents in nursing homes, Preitauer said.

'SEVERE' RESULTS

While some case managers hoped the state could block such a steep reimbursement reduction, DHS' contract with the two health plans doesn't allow the department to approve or help set their reimbursement rates, according to Patti Bazin, a DHS administrator.

"We cannot do something we don't have the ability to do," she told Mizuno.

What DHS can do, she added, is ensure the health plans meet the contract requirements, including having case management services available statewide and providing patients with the choice of at least two providers.

If nothing is done to stop the 50 percent reimbursement reduction, the consequences likely will be severe, case managers said.

"Losing half the agencies is going to be a problem," said Donna Schmidt, a case management agency owner. "People will not be able to access services," especially on the Neighbor Islands.

Schmidt said she believes savings can be achieved throughout the healthcare system, but the paring has to be done in a thoughtful fashion.

"This is not the way to do it — by wiping out half the providers for a critically needed service," she said.