Directed Payments - A Lifeline for Rural Healthcare

Rural hospitals face a perfect storm of challenges: aging populations, higher rates of chronic disease, lower reimbursement rates, and thinner operating margins. The Medicaid Directed Payment Program has emerged as a critical tool to ensure these essential healthcare facilities remain viable while improving care quality. Nebraska's recent implementation offers valuable insights into how these programs can transform rural healthcare delivery.

Directed payments, established by the Centers for Medicare & Medicaid Services (CMS) in 2016, allow states to require Medicaid managed care organizations (MCOs) to pay providers according to specific rates or methods. According to MACPAC (Medicaid and CHIP Payment and Access Commission), these payment arrangements can be used to establish minimum fee schedules, require participation in value-based payment arrangements, or implement uniform payment rate increases. Unlike traditional supplemental payments, which aren't allowed in managed care, directed payments must be tied to utilization and delivery of services under the managed care contract, distributed equally to specified providers, and advance at least one goal in the state's managed care quality strategy.