A proposed change in how Medicaid will pay for some urban hospital inpatient psychiatric services has been called "punitive" to all but a few Utah hospitals.

Medicaid, administered in Utah by the Division of Health Care Financing, bases payments to urban hospitals on Diagnostic Related Groups, going through a list of criteria to decide which group the patient fits into.To guarantee hospitals a certain portion of their costs, Medicaid currently pays either the diagnostic group fee for treatment or 60 percent of actual charges. But July 1, the division wants to eliminate the 60 percent rule, a move it hopes will save $270,000 in state funds and $730,000 in federal funds. The proposal is one prong of a mandated reduction of $13.5 million.

The division's proposal says that acute care hospitals will serve acute care patients, while Medicaid patients with chronic mental health problems should be served through the Utah State Hospital, community mental health centers and other providers. Hospital payments will be based on length-of-stay criteria. The payment system does not apply to treatment of patients under 20 in licensed pediatric units.

The proposal will be discussed in a public hearing from 8 to 10 a.m. May 25 in the Cannon Health Building, 288 N. 1460 West, Room 125. Then a hearing officer will make a recommendation to Dr. Suzanne Dandoy, director of the state health department. If she approves the change, it will then go to a rulemaking committee.

"If rulemaking approves it as proposed," said Dale Gunnell, associate administrator of the University Hospital for financing, "that would reduce payment to a length of stay average that is about one-third of what our average stay actually is.

"We're totally against it," he said. "It's too punitive to any hospital with adult patients."

Hospitals fear that, besides reductions in the payments they receive for inpatient psychiatric services, they will also be left with the entire cost of some treatment. Once a patient has been admitted with acute psychiatric problems, Gunnell said, the hospital must continue to treat him, even if the patient's stay has exceeded the time allowed by Medicaid.

"Hospitals don't admit or discharge," he said. "Doctors do. And we can't go to them and say, `Time's up; send that patient home.' We may have someone in a 25-day program and we can't just discharge him after nine days."

"It's a misconception, possibly, by mental health people that this will now put psychiatric care under a DRG system," F. Roy Dunn, division of health care financing, said. "We put them there in 1983, except Primary Children's Medical Center."

Since 1983, inpatient psychiatric Medicaid costs have increased by 360 percent, Dunn said. Other services increased in cost by about 90 percent. The change will make inpatient services a little more comparable to other services, he said.