Maryland Health Services Cost Review Commission (HSCRC) Global Budget Revenue (GBR) under the Maryland All-Payer Model
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1 Maryland Health Services Cost Review Commission (HSCRC) Global Budget Revenue (GBR) under the Maryland All-Payer Model January 19,
2 Goals of Today s Discussion Overview of Maryland s unique healthcare delivery system and transformation Description of development and operation of Maryland s current hospital payment system 2
3 The National Context: Health Care System Challenges Coverage & Access High costs Consumer demands Fragmentation and variation Aging and sicker population Health care disparities More Ahead... Over the next decade, Maryland s population >65 years old will increase by nearly 40% Recent consumer polls and bipartisan focus on affordability and costs 3
4 Maryland s Unique Healthcare Delivery System and Transformation
5 Background: Maryland s All-Payer Model Since 1977, Maryland has had an all-payer hospital ratesetting system, regulated by HSCRC Goal was to hold growth of Medicare inpatient average charge below the nation In 2014, Maryland updated its approach through the All- Payer Model 5-year agreement between Maryland & federal government (2014 through 2018) focused on hospital payment transformation Each hospital receives fixed Global Budget Revenue (GBR) 5 Shifts from volume to value-based payments Greater focus on patients and working with providers across the care continuum
6 Background: HSCRC Created in 1970s Independent state agency that works closely with Maryland Department of Health (MDH) 7 Commissioners, including a Chair and Vice Chair Day jobs of commissioners have included hospital executives, physicians, executives of long-term care facilities, and health policy consultants, experts, and economists Budget of $14.1 million in FY18 100% from assessments 39 full-time staff plus analytic support from contractors and Maryland s HIE 6
7 Nationally, Cost-Shifting Occurs Between Private and Public Payers Outside of Maryland, Medicare costs are shifted onto businesses and consumers Source: American Hospital Association (1) and (2). Includes Disproportionate Share Hospital (DSH) payments. In Maryland, hospitals are paid using a common rate structure by ALL payers, which eliminates cost shifting 7 See Note 3
8 Maryland s Current All-Payer Model ( )
9 Maryland s All-Payer Model since 2014 Maryland implemented a new All-Payer Model for hospital payment with the federal government s Center for Medicare & Medicaid Innovation (CMMI) Approved effective January 1, 2014 The All-Payer Model shifts focus From per inpatient admissions To all payer, per capita, total hospital payment 9
10 2014 Hospital Model Targets at a Glance All-Payer total hospital per capita revenue growth ceiling of 3.58% annual growth Medicare hospital payment savings of $330 million in savings over 5 years Patient and population centered-measures and targets to promote care improvement Medicare readmission reductions to Medicare national average All Payer 30% reduction in potentially preventable complications under Maryland s Hospital Acquired Condition program (MHAC) over a 5 year period Other quality improvement targets 10
11 All-Payer Model: Performance to Date Performance Measures Targets 2014 Results 2015 Results Results (preliminary) 2 All-Payer Hospital Revenue Growth 3.58% per capita annually 1.47% growth per capita 2.31% growth per capita 0.80% growth per capita 3 Medicare Savings in Hospital Expenditures $330m over 5 years (Lower than national average growth rate from 2013 base year) $120 m (2.21% below national average growth) $155m $275 cumulative (2.63% below national average growth since 2013) $311m $586m cumulative 3 (5.50% below national average growth since 2013) Medicare Savings in Total Cost of Care Lower than the national average growth rate for total cost of care from 2013 base year $142m (1.62% below national average growth) $121m $263m cumulative (1.31% below national average growth since 2013) $198m $461m cumulative 3 (2.08% below national average growth since 2013) All-Payer Quality Improvement Reductions in PPCs under MHAC Program 30% reduction over 5 years 26% reduction 35% reduction since % reduction since 2013 Readmissions Reductions for Medicare National average over 5 years 20% reduction in gap above nation 57% reduction in gap above nation since % reduction in gap above nation since 2013 Hospital Revenue to Global or Population-Based 80% by year 5 95% 96% 100% figures for readmissions are preliminary because CMS is evaluating the readmission data after ICD Preliminary results compare the performance available in calendar year 2016 to the same months in prior year or to the same months in the 2013 base year, these have not been validated by CMS. 3 Actual revenues were below the ceiling for CY 2016 and these numbers have been adjusted to reflect the hospital undercharge of approximately 1% that occurred in the second half of CY 2016.
12 Medicare Test: At or below National Medicare Readmission Rate by end of CY 2018 Maryland is reducing readmission rate faster than the nation. With preliminary data for four months in CY 2017, Maryland is meeting the current hospital model s goal % 18.00% 18.16% 17.50% 17.00% 17.41% 16.50% 16.00% 16.29% 16.60% 16.46% 15.50% 15.00% 15.76% 15.38% 15.49% 15.95% 15.42% 15.60% 15.31% 15.30% 15.30% 14.50% CY2011 CY2012 CY2013 CY2014 CY 2015 CY 2016 CY 2017 YTD Apr National 16.29% 15.76% 15.38% 15.49% 15.42% 15.31% 15.30% Maryland 18.16% 17.41% 16.60% 16.46% 15.95% 15.60% 15.30% * Readmissions through April Data subject to change due to claims runout. 12
13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 MHAC Program Statewide Performance 1.3 Case-Mix Adjusted Cumulative PPC Rates as of June ALL PAYER MEDICARE FFS Linear (ALL PAYER)
14 The Model Progression (2018+): Total Cost of Care (TCOC) Model
15 Progression Plan: Key Strategies I. Foster accountability for care and health outcomes by supporting providers as they organize to take responsibility for groups of patients/a population in a geographic area. II. III. IV. Align measures and incentives for all providers to work together, along with payers and health care consumers, on achieving common goals. Encourage and develop payment and delivery system transformation to drive coordinated efforts and system-wide goals. Ensure availability of tools to support all types of providers in achieving transformation goals. V. Devote resources to increasing consumer engagement for consumer-driven and person-centered approaches. 15
16 Payment and Care Delivery Alignment Hospitals and Providers with aligned quality targets Sharing information Driving down costs Improving the health of populations
17 TCOC Model Targets at a Glance Continue All-Payer total hospital per capita revenue growth ceiling of 3.58% annual growth Medicare annual TCOC savings of $300 million by end of Year 5 (2023) Plus year-over-year growth targets ( Guardrails ) Sustain and further progress on patient and populationcentered quality measures Address population health Chronic conditions Deaths from opioid use Senior health and quality of life 17
18 Global Budget Development and Operation
19 Overview of Global Budget Implementation Following the Great Recession, Maryland came increasingly closer to failing the old-waiver test of maintaining growth in Medicare charges per discharge below national growth Due to nearly failing the waiver test and the realization that Maryland had to move away from a system that incentivized greater volume, the State began implementation of global budgets in fall 2013, based on the HSCRC draft policy for implementation of the new All-Payer Model. 19
20 Focus Shifts from Rates to Revenues Former Model: Volume Driven New Model: Population and Value Driven Units/Cases Revenue Base Year Rate Per Unit or Case Updates for Trend, Population, Value Hospital Revenue Unknown at the beginning of year More units create more revenue Allowed Revenue for Target Year Known at the beginning of year More units do not create more revenue
21 Global Budget History Global budget based on the Total Patient Revenue (TPR) framework. HSCRC instituted TPR in 2010 for 10 hospitals with distinct (mostly rural) markets as a model to support reform and implementation of population health approaches Particularly important for rural hospitals who struggle to reconcile viability with value based healthcare 21
22 Implementation Approach Global budgets were offered to those hospitals not already on TPR In first year 95% of hospital were on global budgets Standard agreement based on the TPR construct, with some adjustments to facilitate review and updates Implemented with an Agreement (rather than regulations) Agreement ties to the goals of the All-Payer Model Agreement includes additional consumer protections The ongoing budget is subject to HSCRC policies Quality programs, volume adjustment programs, price updates 22
23 Global Budget Calculations and Update Components
24 Key Aspects of Hospital Global Budgets Fixed revenue base for 12 month period with annual adjustments Reimbursement still handled in a fee-for-service system Annual update factor for upcoming Rate Year (July to June) Main attribute is updating hospitals for inflation (Price) Also inclusive of: Annual quality/value based adjustments (at-risk and realized at-risk revenue must be equal to or greater than Federal programs) Reductions in potentially avoidable utilization (PAU) Hospitals retain revenue related to PAU after providing a predetermined upfront savings amount Volume Adjustments Marketshift adjustments when patients shift across hospitals and settings Demographic adjustment for population growth and aging of population Uncompensated care adjustment Adjustments for specialized services (transfers, transplants, specialized cancer patients) 24
25 Monitoring a Fixed Revenue Base Reasonable volume levels at a hospital are still required to obtain a global budget HSCRC monitors hospitals monthly at a rate center level to ensure reduced price variance Hospitals may alter their rates by 5% either way without acquiring HSCRC staff permission Hospitals may ask for rate center changes up to 10% with HSCRC staff permission A 40% penalty is assessed for not staying within rate corridor. i.e a hospital is overcharged 5.8% in a rate center, a 40% penalty will be applied to the revenue associated with the 0.8% 25
26 Monitoring a Fixed Revenue Base HSCRC also monitors hospitals overall evert six months to ensure compliance with global budgets Revenue undercharged will be added back the following year, but undercharges in excess of -.50% will be penalized. Revenue overcharged will not be added back the following year and HSCRC will assess a penalty if the overcharge exceeds.50% Undercharge Corridors: 0% to 0.50% No Penalty 0.51 to 1% 20% Penalty 1% to 2% 50% Penalty 2% and greater 100% Penalty Overcharge Corridors: 0% to 0.50% No Penalty 0.51% to 1% 20% Penalty 1% and greater 50% Penalty 26
27 Annual Update Factor (Price) Must ensure that Maryland Hospitals pass contract tests and stay within various guardrails when determining annual update factor Contract Goals From CY14 to CY18, the growth in Maryland Medicare hospital expenditures must be slower than the Nation to generate $330 million in savings Annual all-payer hospital growth must not be greater than 3.58% per capita Calculated originally as ten year Compound Annual Growth Rate (CAGR) for State GDP. Guardrails Maryland Medicare Total Cost of Care growth cannot be greater than the Nation by 1% in any year Maryland Medicare Total Cost of Care growth cannot be greater than Nation in consecutive years Contract Goals and Guardrails require converting Medicare projections to all-payer projections because HSCRC does not tier rates based on payer. 27
28 Annual Update Factor (Quality) Maryland Potentially Avoidable Utilization (PAU) Savings Quality Based Reimbursement (QBR) Readmission Reduction Incentive Program (RRIP) Maryland Hospital Acquired Conditions (MHAC) CMS Value Based Purchasing Hospital Readmissions Reduction Program Hospital Acquired Condition Reduction 28 Maryland must apply annually for VBP waiver showing MD has equivalent program and outcomes; waivers from HRRP and HAC programs are granted automatically each year based on performance on waiver targets
29 Quality Measures Rewards and Penalties for these programs are included in annual GBR updates QBR (Quality Based Reimbursement) Clinical Process of Care Measures Patient Experience of Care (HCAHPS) Mortality MHAC (Maryland Hospital- Acquired Conditions) 65 Potentially Preventable Complications Readmissions Readmissions 30-day bundled episodes Reduction Improvement program 29
30 Potentially Avoidable Utilization Definition: Hospital care that is unplanned and can be prevented through improved care coordination, effective primary care and improved population health. Prevention Quality Indicators for Admissions Readmissions /Revisits Components of PAU HSCRC Calculates Percent of PAU Revenue for PAU Savings Policy, which prospectively reduces all hospital GBRs based on PAU percentage 30 30
31 Annual Update Factor (Volume) Marketshift Demographic Adjustment Potentially Avoidable Reduction (PAU) Rate Year Volume Adjustment Case Mix Adjusted Volume Growth without PAU REDISTRIBUTED by service line and geographic region (zip code or county level) Projected Population Growth PROVIDED to all hospitals. Attributed by hospitals market share of each zip code and scaled for age and PAU. Approximately 10% of PAU Revenue REDUCED prospectively from Rates. Statewide Revenue reduction is 1.45% in RY18 and is scaled by a hospital s share of revenue attributable to PAU. Marketshift and Demographic Adjustments Affect Hospital Permanent Revenue. The PAU reduction is RESTATED each year. 31
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