June 25, 2004 MERC Advisory Committee Meeting Minutes - Minnesota Dept. of Health

June 25, 2004
MERC Advisory Committee Meeting Minutes

Advisory Committee Members Present:

John Abenstein, Gary Anderson, James Davis, Tim Gaspar, Jim Kohrt, Larry Kuusisto, Louis Ling, Dawn Ludwig, Daniel Mareck, Kathy Meyerle, Charles Sawyer, Marilyn Speedie, and Catherine Wisner.

Interested Parties Present:

Barbara Adrian, Carol Backstrom, Ben Bornsztein, Rena Garni, Beth Hagel, David Hagen, Merri Moody, Raquel Rodriguez, Rick Roberts, Trisha Schirmers, Anna Thompson, Edward Todd, and Peggy Veilleux.

Staff Present:

Scott Leitz, Diane Reger, and Diane Rydrych - MN Department of Health

Mary Kennedy - MN Department of Human Services

I. Introductory Remarks from MERC Advisory Committee Chair - Louis Ling

Dr. Ling opened the meeting by welcoming the committee members and visitors and asked that there be introductions of all attendees.

It was announced that Dr. Howe, who had served on the committee representing the University of Minnesota Medical School, would be retiring on July 1, 2004. Dr. Ling will be taking his place at the University of Minnesota in a half-time position while remaining at HCMC the other half of the time.

II. Discussion of MERC Federal Financial Participation for fiscal year 2004 and Beyond - Mary Kennedy, Medicaid Director - MN Department of Human Services

Mary Kennedy summarized the conversations that DHS has had with the Centers for Medicare and Medicaid Services (CMS) regarding the State Plan Amendment for SFY04.  Each year, DHS submits a State Plan Amendment (SPA) that describes the methodology that the departments of Human Services and Health will use to draw down a federal match and to transfer funds to MDH for distribution. The methodology, involving special one-time transfers of Medicaid dollars to and from six large teaching hospitals, has been approved by CMS each year. Legislation passed in 2003 directed DHS to attempt to use physician clinic payments as part of this mechanism, where feasible, rather than just the historically used inpatient hospital payments. Given that change, the language in the FY04 SPA was different from that used in previous years to account for the different payment mechanism.

With this change in methodology, DHS has now had to work with an additional group of reviewers at CMS, 'non-institutional' staff with little experience with the MERC program or the policies that led to its establishment, and has had several conversations and document exchanges to get CMS staff up to speed on how our program works. CMS has indicated that they feel uncomfortable with our current approach for drawing down federal match for several reasons, and they will not approve the current year’s SPA unless DHS agrees to change its approach in future years. They would, however, approve the existing methodology for FY04 and FY05 contingent on changes in subsequent years. As of this point, DHS has agreed to work with CMS to change the match methodology beginning in FY06, but the nature of that change has not yet been agreed upon; CMS still has many concerns about Minnesota's funding of GME in general, including a concern that MERC payments are not sufficiently tied to Medicaid volume and that we should consider changing MERC to a system of add-on payments.

There is still a slight concern that the FY04 SPA won't be approved by the end of the fiscal year, as CMS would like DHS to guarantee that legislative changes to the MERC statute will be made in the next session; however, Ms. Kennedy promised to keep committee members posted on that issue. (Note:  the SPA was subsequently approved for FY04 and FY05). 

Dr. Abenstein asked whether the CMS response to our SPA is a veiled attempt to withdraw federal money from GME or to make the approval process for a GME-related State Plan Amendment so difficult that states will instead choose to pursue an alternative funding mechanism. Ms. Kennedy agreed that this was possible, but thought it was more likely that the difficulties are due to an administration with a different view of GME funding and a concern about fraud or abuse of MA funds by states. Mr. Leitz asked whether it would be necessary to change the MERC statute in FY06 in response to changes in how we draw down federal match. Ms. Kennedy stated that this is a possibility, depending on the nature of the changes that CMS is willing to approve for MERC on an ongoing basis.

Jim Davis asked if DHS would like help from the committee in securing approval of the FY04 SPA. Ms. Kennedy responded that such help would not be necessary at this point, since DHS and CMS were close to agreement on the FY04-05 SPA. But she also stated that there might come a time in the near future when support or advocacy from the committee and from other interested parties might be necessary, depending on the direction that CMS would like Minnesota to take in FY06 and beyond with regards to GME financing.

III. OIG Audit of State Medicaid GME Payments - Diane Rydrych

Ms. Rydrych updated the committee on the current audit of Minnesota's Medicaid GME payments by the Office of Inspector General at DHHS. This audit is not related to the ongoing discussions about the MERC components of the State Plan Amendment discussed above, but is rather one of 15 state audits being conducted by OIG at the request of the Office of Management and Budget. The auditors are looking for information about whether our Medicaid GME payments are being made in accordance with the State Plan Amendment, about the financial integrity of the program, and whether any Medicaid GME funds have been used in intergovernmental transfers. Both MDH and DHS provided the OIG auditors with a wealth of materials about the MERC and Medicaid programs at their entrance interview in late May, and they have responded to several requests from the auditors in the month since then. The auditors have also contacted several MERC sponsoring institutions to verify their receipt of the proper amount of funds, their reporting to MDH, and their timely pass-through of funds. They have also indicated that they will be contacting a random sample of training sites.

The final audit report will be released in roughly six months, along with Minnesota's response to any concerns raised by the OIG. Ms. Rydrych also noted that the results of the OIG's audit of Michigan Medicaid GME payments were included in committee members' handouts, and that a copy of that report is available on the OIG website at http://oig.hhs.gov/oas/reports/region5/50200081.htm.

IV. Review of Upcoming MERC/PMAP Distribution Changes and Timing - Diane Reger

Diane Reger went over the MERC 10% discretionary fund handout and reiterated the eligibility criteria for these funds. She explained that the 2004 funds must be given out to one or more eligible clinical training sites from the 2002 fiscal year that either were part of the application or did not qualify on the basis of having less than 0.5 FTEs. The department is asking sponsoring institutions to submit a list of sites they may potentially distribute the funds to by July 19, 2004. At that time, the department will verify eligibility of the training sites' MA number. If the site does not have a currently valid MA number, they will not be eligible for the 10% discretionary fund. Ms. Reger also mentioned that it is not essential for the department to know at this point what discretionary mechanism institutions plan to use to distribute the funds, the final selection of sites, or potential amounts they plan to distribute; however, this will be required after the funds are distributed. (See the attached document regarding the discretionary fund for more information.)

Preliminary distribution amounts were passed out to the committee. Ms. Reger reiterated that the numbers are only preliminary at this point in time since the department is still waiting for confirmation of the federal match and the final PMAP payment. These numbers should be finalized by June 30, 2004.  At that time, new distribution amounts will be communicated to the committee.

After MERC staff receives confirmation of the final grant amount, Diane Rydrych will send contracts to the sponsoring institutions, which will need to be signed and returned within a short timeframe. If turnaround of the contracts along with cutting of the distribution checks proceeds without any delays, the department anticipates that the distribution will be sent out around July 26.  After sponsoring institutions receive the funds from the department, they will have 60 days (per the MERC statute) to forward the funds to the training sites. Once funds have been distributed, Grant Verification Forms must be returned to the department along with the reports and methodology required by the 10% discretionary fund.

V. Update on 2005 MERC/PMAP Application Process - Diane Reger

We anticipate the 2005 MERC/PMAP application to be available on August 2, 2004.  The web application will contain all the sites from the previous year along with any updated addresses supplied to the Department of Human Services incorporated into the existing information.

The 2005 application falls during the second year of the biennium; therefore, cost data will not be required for the application.

Diane Reger informed the committee that she would be on maternity leave starting at the end of November/beginning of December so she encouraged institutions to be sure to send in their applications as soon as possible. According to statute, applications are due no later than October 31, 2004, without written approval of an extension. It is strongly encouraged that web applications be completed before Ms. Reger goes on leave.

VI. 2004/2005 Legislative Sessions - Diane Rydrych

The 2004 legislative session did not bring changes that affected MERC/PMAP other than language that altered the loan period from the Academic Health Center (AHC).  Originally the $4.85 million loan from the AHC was borrowed on April 15, each year and had to be paid back with interested on June 30, regardless of if the department was able to secure a match on the funds.

Since issues related to securing federal match for MERC dollars in FY04 are ongoing and might not be resolved by the end of the fiscal year, new language was added so that the department would have authority do two transfers in this fiscal year if necessary.

MERC staff have been thinking about addressing the issue of cost collection at the next legislative session in 2005.  When MERC first began, cost data was required every year. The MERC statute was later changed to direct that cost data only be collected in the first year of each biennium. Staff is now considering collecting cost data less frequently than every other year and only collecting data from eligible clinical training sites instead of all clinical training costs. Ms. Rydrych told the committee that staff believes this would be welcomed news for the sponsoring institutions. For the department, however, it would mean that the results may be harder to analyze because we will not be collecting the same information as in the past, making it more difficult to compare costs year-to-year.

Committee members expressed concern regarding the small site issue and potentially adding small sites (< 0.5 FTEs) back into the distribution. Louis Ling spoke about the letter that he wrote, on behalf of the committee, to the Commissioner of Health asking for support in changing the legislation to include sites with fewer than 0.5 FTEs per teaching program. However, the department will not pursue any changes to this portion of the statute, although sponsoring institutions or stakeholders are free to pursue their own legislative solutions.

VII. Upcoming Meeting Dates

Potential future meeting dates were suggested to the committee. Diane Reger said she would send an email to all committee members to get a consensus of their schedules before a date was chosen. Based on that consensus, the meetings are set for the following dates:

December 3, 2004

June 17, 2005

Both meeting will be held from 1 - 4 p.m. in the Red River Room at Snelling Office Park. Directions can be found on the MERC web site.

VIII. Additional Items

Dental Innovations Update: RFPs were recently sent out. Only one application has been received to date. There is currently over $2 million available, as it has been difficult to distribute all the funds each year given limited response to the RFP. Although it would require a change in statute, lobbyists from sponsoring institutions could attempt to add additional provider types to this innovations pool. The department will not be pursuing any changes. Diane Rydrych cautioned the committee saying that they may want to be careful in approaching this to avoid giving the impression that the need for this program is not there; there is still a need for additional dental access for public program and uninsured patients, but perhaps not enough organizations that have the means to apply for funding. Ms. Rydrych is hopeful that more proposals will be received this year, allowing us to award all funds.

Dr. Anderson from the University of MN Dental School stated that one difficulty many dental providers are facing right now is the $500/person public program cap, which is limiting the amount of dental care that many MHCP patients are able to receive.

Health Economics Address:  Effective July 23, 2004, MERC staff will have a new address. See attached sheet for details.

MERC 10% Discretionary Fund

Beginning with the 2004 MERC distribution, ten percent of the total MERC/PMAP funds will be carved out and set aside in a discretionary fund that will be distributed to sponsoring institutions along with their MERC/PMAP funds. The sponsoring institutions will receive these funds based on the total percentage of funds they received from the combined MERC/PMAP distribution. For example, an institution that receives 40% of the combined MERC/PMAP distribution would receive 40% of the discretionary fund. The discretionary funds must be distributed to eligible MERC training sites from the fiscal year on which the application was based (the 2004 MERC application was based on fiscal year 2002 training sites), or to sites that would have been eligible for the distribution if they had hosted program FTEs of 0.5 or greater. Sponsoring institutions may choose to distribute discretionary funds to sites in the following manner:

- To all eligible sites listed on their application, based on the overall MERC/PMAP formula.

- To eligible sites listed on their application plus those small sites (with currently valid Medical Assistance Identification Numbers) that did not qualify for funding due to the 0.5 FTE cutoff.

- Another approved method of funding that distributes funds to valid training sites.

The list of sites to which you plan to distribute the discretionary funds must be submitted to the Minnesota Department of Health, to the attention of Diane Reger, to receive pre-approval before the distribution is made. If the funds are intended for sites that were not listed on the MERC application, but would have otherwise qualified for funding if the 0.5 FTE cutoff was not in place, please send a list of those sites, including the accredited program they provided clinical training for, the site name, physical address, Medical Assistance Identification Number, billing address, and eligible FTEs. MERC staff will verify the Medicaid provider status of each site prior to the distribution. All sites must be currently enrolled as Medicaid providers in order to be eligible for funds from the discretionary pool

Like the MERC/PMAP distribution, the discretionary funds are subject to verification that the funds were forwarded to eligible training sites within 60 days of the sponsoring institution receiving the available funds. A report must be submitted to MERC staff once the discretionary fund distribution is completed; this report may be sent along with the GVR. The report must include:

- Rationale used to determine the funding amount sent to each site.

- The program name, site name, physical site address, MAID number, billing address, and FTEs located at the training site during fiscal year 2002.

- Letter verifying funds were forwarded to eligible training sites signed by an authorized sponsoring institution representative.

Since each sponsoring institution may differ in the way they distribute their discretionary funds, it is suggested that institutions send a letter along with the distribution explaining why sites are receiving funds in addition to the usual MERC/PMAP distribution.

If you have any questions regarding the discretionary fund, please contact MERC staff.

MERC/PMAP Preliminary Distribution  

Tobacco Tax (MERC)


AHC Temporary Loan


Federal Match Received (MERC)


2004 PMAP Funds



2003 MERC/PMAP Funds Returned (already matched)



Return AHC loan to AHC


Loan Interest due to AHC



Overall 2005 Combined Amount



10% Discretionary Fund


MERC Distribution


PMAP Distribution


Updated Monday, May 08, 2017 at 10:35AM