Session 33 L, Payment Reform and Medicaid Rate Development. Moderator: Zachary Christian Aters, ASA, MAAA

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1 Session 33 L, Payment Reform and Medicaid Rate Development Moderator: Zachary Christian Aters, ASA, MAAA Presenters: John J. Bartholomew Lori Coyner Timothy Michael Doyle, FSA, MAAA Douglas Emery SOA Antitrust Disclaimer SOA Presentation Disclaimer

2 Moderator: Zach Aters, ASA, MAAA Presenters: Lori Coyner, MA John Bartholomew Doug Emery Tim Doyle, FSA, MAAA

3 Payment Reform and Medicaid Rate Development 2

4 Payment Reform and Medicaid Rate Development OCTOBER 24, 2016

5 Payment Reform and APM? Broader push towards paying for value and quality MACRA Final Rule Medicaid Managed Care Final Rule Directions of various State Medicaid programs Alternative Payment Models (APM) These models are not just incentive based, but fundamentally change how we have historically paid for health care in the U.S. Potential to fundamentally alter the value we receive from health care Require we, as Medicaid Actuaries, to develop creative methodologies in assessing risk 4

6 Benefits and Challenges Positive influence of APMs on a Medicaid program Use of new tools that can measure Efficiency and/or Resource Intensity Creative approaches in assessing program cost from state perspective Develop creative methodologies that will be accepted by stakeholders and be consistent with CMS guidance and applicable ASOPs 5

7 Oregon Health Plan Population 16 Coordinated Care Organizations (CCOs) 6

8 Quality Pool Incentive Program To earn their full quality pool payment, CCOs had to: Meet the benchmark or improvement target on at least 12 of the 17 measures (including EHR adoption); and Have at least 60 percent of their members enrolled in a patient-centered primary care home (PCPCH). Money left over from quality pool went to the challenge pool. To earn challenge pool payments, CCOs had to: Meet the benchmark or improvement target on the four challenge pool measures: depression screening, diabetes HbA1c control, SBIRT, and PCPCH enrollment. 7

9 Meeting goals and what they mean The Metrics and Scoring Committee established a benchmark and/or improvement target for each incentive measure. Metrics and Scoring Committee reviews measures and targets each year for adjustment. Benchmarks: These are national level benchmarks, set for exceptionally high achieving Medicaid programs. We would expect these to be reached in the long term, rather than short term (5 to 10 years.) They may shift slightly year to year or be increased as needed. Improvement targets: Each CCO has improvement targets for each incentive measure. This target is based on each CCO s baseline. The baseline year moves forward requiring continued improvement. 8

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13 12 Four Proposals Included in Oregon Waiver Renewal 1. Include the costs of health-related services (i.e., flexible services and community benefit initiatives) in the medical portion of CCOs capitated rate 2. Implement a 3-year rolling average MLR requirement 3. Require CCOs to enter into value-based payment (VBP) arrangements with network providers 4. Implement a CCO performance incentive program

14 13 Implementing a CCO Performance Incentive Program Gain Augmentation Summary Timeline Methodology Consideration

15 14 Gain Augmentation: Summary Vary the amount of gain/profit loaded into a CCO s rate development based on efficiency/quality measurement Requires CCO specific non-medical load Range of gain could change year to year, based on MLR results 2.0% to 4.0% would put many CCOs close to 15.0% non-medical load, consistent with 85% MLR Design Methodology to: Promote Successful VBPs Results are based on Multidimensional Measurement: Efficiency and Quality

16 15 Gain Augmentation: Methodology Multidimensional Grid (Q&E Grid) X-axis measures quality Y-axis measures efficiency Efficient, but Quality Improvement Needed Needed Improvement in both Quality and Efficiency Efficient and High Quality Efficiency Improvement Needed, High Quality

17 16 Gain Augmentation: Methodology, cont. Each CCO Measured and Results Shown on Normalized Basis within the Q&E Grid CY18 Rate Development Used CY16 Data Grid Shows Gain/Profit Used within each Quadrant 2.0% 4.0% 1.5% 2.0%

both quality and efficiency in synergy Decisions needed on normalization process

18 17 Gain Augmentation: Considerations Closely aligns non-medical load with 85.0% MLR No major lag issues with measurement period and rate development Emphasizes both quality and efficiency in synergy Decisions needed on normalization process Methodology needed to measure quality and efficiency OHA and Optumas currently reviewing

19 Colorado s Version of Payment & Delivery System Reform Improving health care access and outcomes for the people we serve while demonstrating sound stewardship of financial resources October 24, 2016

20 Colorado Delivery System and Payment Reform: Colorado s incremental approach began in 1999 with Risk Adjusting Capitation Fast Forward to the 21 st Century (skipping the lawsuit years and 2 recessions): Accountable Care Collaborative: Launched in 2011 o A regional, community driven approach to coordinate care and manage utilization through Primary Care Providers Accountable Care Collaborative: Phase II launch 2018 o Builds on Phase I: integrates physical and behavioral health to be managed by one entity, numerous payment reforms 19

21 Making Progress & Addressing Needs 20

22 CO ACC: Managing Care Appropriately 74 Inpatient Admissions Per Thousand Members Per Year Emergency Room Visits Per Thousand Members Per Year % SFY SFY SFY SFY SFY % SFY SFY SFY SFY SFY High Cost Imaging Count Per Thousand Members Per Year 70% Pre Natal Care Rate % 60% 50% 40% 23.6% 200 SFY SFY SFY SFY SFY % SFY SFY SFY SFY SFY

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25 Colorado Delivery System and Payment Reform: Current/Future Transformation Initiatives follow core precepts State Accountability to not have overly burdensome regulations Provider Accountability, especially to those with costbased rates Attaching Service Reimbursement to Performance 24

26 Provider Accountability Look at: Providers with cost-based rates or those with rates based on cost o Federally Qualified Health Clinics o Hospitals o Nursing Facilities What you re paying for matters! 25

27 FQHC Report Card 26

28 Hospital Report Card Combination of Hospital Overhead Ratio Performance Measures using an episode of care tool 27

29 Hospital Overhead Costs: A Primer 28

30 Four States: Four Rates of Hospital Overhead Costs 29

31 Ex. Of Episode of Care Tool Output Aggregations Average Multiple values Multiple values 2014 All Episodes Cost data displayed by Average or Sum per Aggregations filter above Aggregated variance of Total Cost across provider names Episode Name Count Total Cost Expected Total Cost Total Typical Cost Total PAC Cost Bariatric Surgery Bariatric Surgery 407 $9,173 $8,538 $8,205 $968 C-Section C-Section CABG, Valve Rep, Complex Heart S.. 6, $6,583 $30,572 $4,923 $28,277 $6,259 $25,049 $324 $5,523 CABG, Valve Rep, Complex Heart Surg Colorectal Resection 410 $18,734 $13,851 $15,609 $3,125 Colorectal Resection Coronary Angioplasty Gall Bladder Surgery 741 3,021 $10,492 $4,829 $10,721 $4,089 $7,753 $3,970 $2,738 $860 Coronary Angioplasty Hip Replacement & Hip Revision 451 $11,813 $11,306 $10,825 $988 Gall Bladder Surgery Hysterectomy Knee Replacement & Knee Revision 1, $5,020 $8,846 $5,032 $9,916 $3,720 $8,273 $1,300 $573 Hip Replacement & Hip Revision Lumbar Laminectomy 419 $5,111 $4,967 $4,399 $713 Hysterectomy Lung Resection Mastectomy Pacemaker / Defibrillator 363 $9 008 $ $6 919 $2 088 $13,661 $5,851 Episode Name All All All Episodes $4,035 $4,150 $12,244 $4,817 $1,416 $1,034 Knee Replacement & Knee Revision Lumbar Laminectomy Lung Resection Before Trigger $953, Mastectomy Trigger Date $5,234, Pacemaker / Defibrillator 7 Days Out 8-30 Days Out 31+ Days $741, $640, $809, Prostatectomy Shoulder Replacement $0.00 $1,000, $2,000, $3,000, $4,000, $5,000, $6,000, Average Paid $0 $20,000 $40,000 Total Cost 30

32 Rank Hospital Performance Cost data displayed by Average or Sum per Aggregations filter above Provider Name Count Total Cost Expected Total Cost Total Typical Cost Total PAC Cost HEALTHSOUTH REHABILITATION HOSPITAL 1 $13,450 $848 $12,602 SAN LUIS VALLEY HEALTH CONEJOS COUN 3 $12,347 $8,627 $4,509 $7,838 NORTHERN COLORADO REHAB HOSPITAL 3 $9,062 $16,002 $2,201 $6,861 VALLEY HEALTH SYSTEM 1 $35,571 $29,997 $5,574 UNIVERSITY OF NEW MEXICO HOSPITAL 1 $24,143 $21,286 $2,857 METRO COMMUNITY PROVIDER NETWORK I 1 $4,599 $8,358 $1,777 $2,822 CHILDRENS HOSPITAL COLORADO 115 $18,977 $5,255 $16,314 $2,663 ST ANTHONY HOSPITAL NORTH 218 $9,284 $5,594 $6,715 $2,569 MT SAN RAFAEL HOSPITAL 8 $5,401 $2,303 $2,978 $2,423 CENTURA HEALTH-CASTLE ROCK ADVENTIS 35 $5,723 $4,699 $3,587 $2,136 UNITED MEDICAL CENTER 2 $10,562 $8,446 $2,117 ST ANTHONY HOSPITAL 216 $8,548 $8,233 $6,533 $2,015 CATHOLIC HEALTH INITIATIVE COLORAD 3 $2,089 $13,923 $199 $1,889 PAGOSA MOUNTAIN HOSPITAL 8 $7,864 $6,114 $1,750 NORTHWEST TEXAS HOSPITAL 1 $11,502 $9,817 $1,684 MELISSA MEMORIAL HOSPITAL 3 $5,976 $2,905 $4,305 $1,671 UNIVERSITY HOSPITAL 864 $14,017 $10,559 $12,408 $1,610 ST ELIZABETH REGIONAL MEDICAL CENT 2 $4 496 $3 549 $2 913 $

33 Payment Reform and Medicaid Rate Development: Opportunities for PROMETHEUS Analytics Doug Emery 24 October 2016

34 Summary of Capabilities Create prospective budgets of episodes of care for bundled payments or reference pricing You can implement a bundled payment or reference pricing program Measure quality and cost of episodes attributed to physicians and hospitals; gain insights on network performance You can reliably differentiate cost/quality performance of hospitals and physicians Determine the underlying causes of intra-episode variability within a network or health system and track effect of interventions Isolates the relative effect of price, use, mix on total variability of episode costs Guide provider care reengineering and supply chain management efforts Creates management accountability within ACOs and identifies defects (misuse, underuse, overuse) 33 Proprietary & Confidential. All Rights Reserved.

37 Some State Medicaid Programs Have Aggressive VBP Programs NYS DOH DSRIP and VBP Five year Roadmap moving from volume to value Heavy emphasis on reducing PACs and hospitalizations Three basic models at 3 levels of risk 1. TCGP Total Care General Population 2. IPC/CC Integrated Primary Care/Chronic Conditions 3. Maternity Bundles 36 Proprietary & Confidential. All Rights Reserved.

39 Considerations for Actuaries OCTOBER 24, 2016

40 Considerations for Actuaries States emphasizing efficiency in Medicaid managed care programs in an attempt to slow the rate of the growth in healthcare while improving value Linking financial payment incentives to access, quality and/or health outcomes Medicaid Managed Care Final Rule value-based purchasing mentioned throughout 39

41 Considerations for Actuaries Actuary needs to develop rates in accordance with 438.4, 438.5, and generally accepted actuarial principles and practices Tools exist to assist the actuary depending upon the Payment Reform chosen 40

42 Considerations for Actuaries CMS/OACT Data Methodology Assumptions 41

43 Considerations for Actuaries CMS/OACT Data o Base data=>cms states that encounter data and financial reports would be appropriate sources of base data for value based purchasing (modified FFS for new populations) o Data used for value-based purchasing will likely include clinical data to confirm that quality was achieved as described in contract o Trend? o Non-benefit component? o Compliance with ASOP 23? 42

44 Considerations for Actuaries CMS/OACT Methodology o Lay out value-based reimbursement contractual terms o Examples o If episodes of care, define clinical episode o If performing an efficiency adjustment analysis, adjustment should be assessed by health plan, otherwise if done across the board then assumes all plans are operating at the same level of efficiency 43

45 Considerations for Actuaries CMS/OACT Assumptions o Efficiency adjustment Explain level of efficiency applied Expectations around how plan may become more efficient Considerations for limitations, barriers and restrictions o Withhold approach Estimate of the percentage of the withheld amount through a withhold arrangement that is expected to be returned and the basis for that determination Rate must be actuarially sound regardless of whether any of the incentive is earned back 44

Oregon Health Authority Metrics and Key Performance Measures

Oregon Health Authority Metrics and Key Performance Measures Presented to the Human Services Legislative Sub-committee on Ways and Means April 18, 2017 Leslie Clement, Health Policy and Analytics Division