Escambia County Commissioners on Friday morning approved a new funding formula that could bring more state Medicaid dollars to five local hospitals that care for low-income and uninsured patients.
The decision centers around the Statewide Medicaid Hospital Directed Payment Program (DPP), which allows counties like Escambia to help local hospitals draw down federal and state matching funds by contributing local assessments.
The board adopted a resolution amending how those hospital assessments are calculated for the 2024–2025 fiscal year. The changes are designed to maximize reimbursements through the program, while better reflecting each hospital’s financial operations.
What This Means for Local Hospitals
The new formula replaces the current flat rate of 5.47% of net outpatient revenue with a two-part structure:
- 3.11% of gross inpatient revenue, and
- 0.80% of gross outpatient revenue
This change is expected to reflect each hospital’s earnings more accurately and improve their ability to receive larger reimbursements from the Florida Agency for Health Care Administration (AHCA) and the Low Income Pool (LIP) program.
Participating hospitals include:
- Sacred Heart Health System
- Baptist Health Care
- West Florida Regional Medical Center
- Encompass Health Rehabilitation Hospital of Pensacola
- Select Specialty Hospital Pensacola
These facilities are part of the Escambia County Local Provider Participation Fund, a program that helps fund the assessments necessary to unlock federal support.
Why It Matters
The Statewide DPP is particularly important for “safety-net” hospitals, which serve a high number of Medicaid and uninsured patients and often operate on tight margins. As demand for uncompensated care continues to grow, programs like the DPP help hospitals stay financially stable while continuing to provide essential services to vulnerable populations.
What Is the Medicaid Directed Payment Program (DPP)?
The Directed Payment Program, or DPP, is a funding mechanism approved by the federal government that allows states to direct additional Medicaid payments to hospitals, clinics, and other providers—without requiring new state or federal legislation.
Here’s how it works:
- Local governments (like Escambia County) collect special assessments from hospitals.
- These funds are pooled and sent to the state’s Medicaid agency (AHCA in Florida).
- The state then uses these local dollars to draw down federal Medicaid matching funds.
- The combined funds are returned to the hospitals as increased Medicaid reimbursements.
The DPP is designed to offset the costs hospitals incur when treating Medicaid patients, who are typically reimbursed at rates lower than the cost of care.
Programs like this are becoming increasingly common as states look for ways to support overburdened healthcare systems without raising taxes or cutting services.
