Nebraska hospitals are set to receive a significant boost in federal Medicaid funding thanks to the recently passed LB1087. This legislation, similar to the directed payment program implemented in Iowa, is expected to provide additional annual funds to hospitals across the state. Furthermore, the bill includes $50 million per year for scholarships to support the development of Nebraska's nursing workforce, funded through private investments. This bill is expected to benefit every hospital system in Nebraska.

Background and Legislative Process

LB1087 was introduced by Senator Mike Jacobson and prioritized by Senator Christy Armendariz. The bill passed the Nebraska Legislature with overwhelming support, securing a 45-0 vote. Governor Jim Pillen signed the bill into law on March 27, marking a significant milestone for the state’s healthcare system. With an emergency clause, the law took effect immediately.

How the Directed Payment Program Works

• Assessment: Nebraska hospitals will pay an assessment to the Nebraska Department of Health and Human Services (DHHS) of up to 6% of their net patient revenues
• Matching Funds: DHHS will use these assessment funds as matching dollars to qualify for additional federal Medicaid funding

Financial Impact on Nebraska Hospitals

Nebraska's new program, like Iowa's, uses hospital assessments to draw down federal funds, thereby enhancing Medicaid payments without additional state expenditure. By examining Iowa's experience, Nebraska can anticipate positive outcomes. This mechanism is estimated to generate nearly $1 billion annually in additional federal funding for hospitals.

Senator Jacobson said, “LB1087 is one of the most impactful and transformative pieces of legislation that we passed this session. This program allows our state to dramatically increase reimbursement rates to hospitals without costing our state general fund any additional dollars. It will have a dramatic impact on reimbursement rates, hospital services, and ultimately on the availability of health care across the state.”

Implementation & Reporting

As hospitals navigate the new Medicaid Directed Payment program, it is crucial to work closely with auditors and cost report preparers. This collaboration will ensure that:

• The directed payment program is properly recorded on the general ledger.
• Any potential impacts on the Medicare cost report are addressed.

LB1087 represents a substantial opportunity for Nebraska hospitals to access increased federal Medicaid funding and support the development of the state's healthcare workforce. Effective implementation and reporting are essential to maximize these benefits.

Workforce Development and Additional Benefits

Beyond the immediate financial boost, LB1087 includes provisions for workforce development. The bill allocates $50 million annually for scholarships aimed at developing Nebraska’s nursing workforce, funded through private investments and managed in partnership with the Nebraska Center for Nursing. This initiative is expected to alleviate the shortage of healthcare workers and improve healthcare services across the state.

The passage of LB1087 is particularly beneficial for hospitals serving rural communities and a high percentage of Medicaid patients. Brett Richmond, President & CEO of Methodist Fremont Health, described it as a "real game-changer for Nebraska and Nebraska hospitals."

Lutz’s Healthcare Professionals Offer Guidance on LB1087

At Lutz, we make the complex simple. With comprehensive healthcare solutions, we’re here to help you navigate this new legislation. If you have any questions, please contact us.