Governor McKee, EOHHS Announce State-Directed Payments to Local Hospitals

Published on Thursday, January 18, 2024

PROVIDENCE, RI – Governor Dan McKee and the Rhode Island Executive Office of Health & Human Services (EOHHS) today announced that the federal Centers for Medicare & Medicaid Services (CMS) has approved new state-directed payments (SDPs) to hospitals to promote access and quality. 

For the state FY24 budget, Governor McKee proposed, and the General Assembly passed, new state-directed payments to hospitals through contracted Medicaid Managed Care Organizations (MCOs). This budget initiative required federal CMS approval, which EOHHS recently received for the current fiscal year. 

“As part of my administration’s Rhode Island 2030 Plan, we are always seeking ways to strengthen our state’s health system in ways that better support affordable and accessible services to maximize health outcomes for all Rhode Islanders,” said Governor Dan McKee. “These new payments, combined with changes to other supplemental payments and taxes in the FY24 budget, result in over $110 million in new Medicaid funding to our state’s hospitals.” 

“The state-directed payments will provide additional funding to hospitals based on each hospital’s Medicaid claims,” said EOHHS Secretary Richard Charest. “Since Medicaid rates are often lower than commercial insurance rates, these new payments will help close the gap between rates and provide hospitals with additional financial support.” 

A state-directed payment is a mechanism used by state Medicaid programs to direct specific payments to Medicaid providers through contracted MCOs. These payments are made in accordance with a structure determined by EOHHS and approved by CMS. They must be consistent with Medicaid law, including provisions related to economy, efficiency, quality of care, and access to care, and be approved prior to payment.  

“The Hospital Association of Rhode Island and its Board of Trustees are grateful for the support Governor McKee, Speaker Shekarchi, and Senate President Ruggerio provided for the Medicaid Managed Care State Directed Payment Program in the FY 2024 budget," said M. Teresa Paiva-Weed, President of the Hospital Association of Rhode Island. "Their commitment to this initiative not only underscores their dedication to the well-being of our community but also recognizes the crucial role that hospitals play in providing essential care to Rhode Island's residents. These funds are indispensable in ensuring that our healthcare facilities can continue to deliver high-quality care, maintain cutting-edge medical services, and invest in the well-being of our communities."

“The implementation of the Medicaid Managed Care State Directed Payment Program is an indication of the foresight and commitment of Governor McKee, Speaker Shekarchi, and Senate President Ruggerio to optimizing federal funding, thereby fortifying the financial stability of our hospitals," said Mary Marran, MS, OT, MBA, President and COO, Butler Hospital and Chairwoman of the Board of Trustees of the Hospital Association of Rhode Island. "This initiative aligns with our shared goal of fostering a healthcare system that is inclusive, compassionate, and responsive to the diverse needs of our citizens. We look forward to our continued work together to create a stronger and more resilient healthcare infrastructure that will positively impact the lives of countless individuals across Rhode Island."

“These state-directed payments will help provide appropriate rates to hospitals in a way that also helps manage the costs of the Medicaid program,” said Medicaid Director Kristin Sousa. “This will ensure that MCOs continue to operate with robust provider networks that are able to meet the needs of the Medicaid members we serve.” 

As announced in the State of the State Address earlier this week, Governor McKee will include these payments again in his FY25 budget. Payments will require CMS approval in future years.