Texas Medicaid Wellness Program Reconciliation Method
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- Cuthbert Pope
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1 Texas Medicaid Wellness Program Reconciliation Method The intent of this document is to provide a detailed description of contractual issues concerning the reconciliation method associated with The Wellness Program contractor s contractual Performance Guarantee to the State of Texas Medicaid Wellness Program (TWP), as well as pertinent details of the reconciliation analysis method. Independent Contractor Provision The State of Texas will conduct the reconciliation calculations by engaging a qualified and independent contractor. It is understood that the third-party entity will apply the terms of the contractual reconciliation method to the process and that deviations from the explicit method will be completed only after agreement by officials of the Medicaid program and McKesson Health Solutions LLC (McKesson). Page 1 of 11
2 Reconciliation Process for Program Period 1 Disclosure of data, methodology, code and calculations used by the HHSC-contracted agent will be provided to McKesson for use in validating reconciliation results. One interim reconciliation will be conducted for Program Period 1, using six months of paid claims with three months of claims run out, for all parties to validate the model. In order to obtain a more stable population over time, 36 months of data shall be used to determine the members eligible for the TWP. 36 months of data shall be used to determine the risk scores for the reconciliation. Claims data extracts will always encompass a 36 month span based on the date of service (incurred date). Extracts for official reconciliations will always include claims paid through the end of the sixth month after the last month of this 36 month period of incurred claims. For the interim reconciliation, three months of runout may be used. Although it is not required that the Independent Contractor will complete more than one interim reconciliation, data for interim reconciliations will be made available to the Independent Contractor and to McKesson. Data will be provided for three, six and nine month interim reconciliations with three months of claims runout. HHSC will finalize the baseline data to be utilized for all subsequent reconciliation analyses. Overview of Key Terms and Phrases HHSC Texas Health and Human Services Commission Client any Medicaid recipient FFS fee for service Withheld Population clients meeting one or more of the following Dual Eligible client populations that are eligible for Medicare and Medicaid services Clients with Third Party Insurance Clients in a Medicaid waiver program other than PCCM Clients in a managed care program other than PCCM Clients in a Medicare pilot Clients in a hospice program Clients in institutional or community-based long term care service programs (clients previously enrolled in the Texas Medicaid Wellness Program who are in a skilled nursing facility (SNF) for less than 60 consecutive days in a 12 month period are not included in the Withheld Population) Undocumented aliens Other clients as mutually agreed upon by HHSC and McKesson PMPM per member per month Chronic Illness and Disability Payment System (CDPS) the predictive model developed and maintained by the University of California at San Diego, used to determine clients risk scores. Risk Threshold the minimum CDPS risk score required for inclusion in the reconciliation, as agreed by the parties prior to the Operational Start Date. The Risk Threshold may differ between four groups: TANF Adults, TANF Children, Disabled Adults and Disabled Children. The Risk Threshold values are contained in the Program Design Document. Page 2 of 11
3 Reconciliation Population - all clients whose risk score exceeds the Risk Threshold, less those selected client months excluded, as described in this attachment. Trauma claims (excluded in reconciliation) as well as inpatient, outpatient, provider and all other services/claims will be defined with appropriate codes in the HHSC-approved Project Work Plan. Trend Population clients who meet all criteria of the Reconciliation Population except that their CDPS risk score is less than the Risk Threshold Managed Members TWP members actively managed and billed for Operational Start Date - the official start date for the TWP, as defined in the contractual agreement between HHSC and McKesson. This date is currently expected to be March 1, 2011 Pre-Baseline Period 24 month period immediately prior to the Baseline Period Baseline Period the 12 month period used to establish costs prior to the program, which is used to derive savings and expected costs Initial Program Period, or Program Period the period beginning on the Operational Start Date and ending on February 29, B. Overview of Populations Included in (and Excluded from) the Texas Wellness Program The TWP targets the disabled and TANF Medicaid population with high medical risk, as defined by CDPS, subject to exclusions defined in this document. Persons Excluded from the Reconciliation Clients who are members of the Withheld Population will not be sent in the data files, and are therefore not part of the reconciliation. Clients in a SNF, long-term care facility or hospice for 60 consecutive days or more during the measurement period will be excluded from the reconciliation. Client months where Medicaid eligibility was retroactively granted will be excluded from the reconciliation. Only eligibility included in the operational files will be included in the reconciliation. A client in FFS Medicaid with less than three (3) continuous months of Medicaid eligibility in the period being measured will be excluded from the reconciliation. Persons Included in the Reconciliation Clients not excluded from the reconciliation will be included, either in the Reconciliation Population or in the Trend Population. C. Reconciliation Programming The initial claims files extracted to calculate costs during the Baseline Period will include all claims during the specified 36 month period (Pre-Baseline Period and Baseline Period combined) with six months of claims runout. Identification for inclusion into the reconciliation will be performed using CDPS. Three years of data will be used. Any member with a risk score of at least the agreed upon Risk Threshold will be included in the reconciliation for all months in which the member was eligible. The HHSC approved Project Work plan Page 3 of 11
4 includes the agreed-upon Risk Threshold. Note that some members of the Diabetes Self Management Training Pilot (DSMTP) will meet this criteria, and will be included in the reconciliation; DSMTP fees for such members are not to be included in the reconciliation. HHSC will use an independent contractor to objectively develop the TWP baseline files. For both the Baseline Period and for each Program Period, HHSC will prepare claims and eligibility files that will be sent to both the independent contractor and to McKesson. The independent contractor will identify the target population by applying the criteria agreed upon by all parties. The contractor will provide control totals, code, and calculations as required for validation by McKesson. McKesson will sum every client s costs for the measurement period for each of the following claims categories: inpatient hospital, outpatient hospital, provider, pharmacy and all other costs. (The HHSCapproved Project Work Plan will contain a complete listing of the claims codes included in these categories.) Claims will be summed for all claims in each category, and any trauma claims will be excluded from these totals. Each of four groups of clients (TANF Adults, TANF Children, Disabled Adults and Disabled Children) will be treated separately for purposes of the reconciliation calculations, including trend and savings calculations, and their costs will be summed separately. The claims summaries described herein are subject to review and validation by HHSC s independent actuary. Claims are tallied according to the from date of service, or in the case of pharmacy claims the prescribed date. For the Baseline, or for a given Program Period, a total of 36 months of incurred claims, with 6 months of runout, will be used to determine the CDPS score for all clients eligible for that Program Period. Clients whose CDPS score equals or exceeds the Risk Threshold, subject to the exclusions contained in this document, will be considered to be part of the Reconciliation Population for all months in the study period in which that client was Medicaid-eligible. D. Reconciliation Calculations For accruing claims and member months, the Program Period reconciliation process will largely involve replicating the programming that occurs in developing the Baseline data. There will be 36 months of claims used to determine each client s CDPS risk score, and clients meeting or exceeding the threshold risk score will have their claims and eligible member months for the study period accrued. One interim report, after six months of Program Period 1 with three months of claims runout, will be produced by the independent contractor. The independent contractor is not required to produce other interim reports. Data for such reports shall be made available to HHSC, McKesson and the independent contractor, for purposes of program improvement. Trauma costs will be removed from the reconciliation. Non-trauma costs above $500,000 for any individual during a measurement period will be disregarded for that measurement period. Individuals with trauma are not excluded from the program, nor are members with non-trauma costs above $500,000. These are claim-level exclusions for reconciliation rather than service member-level exclusions. Trending Baseline Costs to the Program Period In order to establish expected costs in the absence of the TWP, the following are computed. 1. Calculate Baseline PMPM costs for the Reconciliation Population. Such members meet eligibility requirements, do not meet the criteria for exclusion, and have a CDPS risk score that exceeds the Risk Threshold. Trauma and stop-loss exclusions are applied. For TWP eligible months, claims costs will be accrued for inpatient hospital, outpatient, physician, pharmacy, and all other services. Separate calculations will occur for disabled and TANF populations. Page 4 of 11
5 2. Conduct a parallel calculation of PMPM costs for those clients in the Trend Population. 3. Conduct parallel calculations of (1) and (2) for the Program Period being studied. 4. Derive trend factors using the Trend Population by dividing the PMPM claims cost separately for inpatient, outpatient, physician, pharmacy and all other services in the Program Period to that of the Baseline Period. 5. Multiply these trend factors to the baseline PMPM claims cost for the Reconciliation Population to determine the expected costs in the absence of the TWP. Should the Reconciliation Population s historical cost trend differ materially from that of the Trend Population, both parties will agree to an adjustment to the trend to reflect the difference. That is, should the historical cost trend for the Trend Population not serve as a reasonable proxy for the cost trend of the Reconciliation Population, the parties agree to arrive at an appropriate adjustment to remove the bias. Calculate Medical Cost Savings To arrive at the aggregate net savings percent, which is the guarantee for which McKesson is at risk, we compute the following, separately for TANF Adults, TANF Children, Disabled Adults and Disabled Children. 1. Subtract the expected PMPM claims costs in the program period for the Reconciliation Population from (5) from previous trend baseline list to the actual PMPM claims costs incurred by the Reconciliation Population to determine PMPM gross savings. 2. Multiply the PMPM gross savings by the number of total Reconciliation Population member months for the Program Period to arrive at aggregate gross savings. 3. To determine expected costs, find the total claims cost for clients that are both Managed Members and in the Reconciliation Population in the Program Period. These costs include any savings due to the TWP, so the gross savings previously calculated get added to this claims cost to determine the expected cost in the absence of the TWP. 4. Net savings is equal to the gross savings from (2) less the fees for members included in (3). 5. Net savings as a percent of claims is equal to the net savings from (4) divided by the expected claims cost in (3). Savings Example Assumptions: 1. There are 200,000 clients whose CDPS risk score is above the Risk Threshold, and who do not meet any exclusionary criteria. That is, the Reconciled Population is 200,000 members. 2. The Reconciliation Population has a Baseline PMPM of $1,000 and a Program Period PMPM of $1, The Managed Members have a Program Period PMPM of $2, The Trend Population has a Baseline PMPM of $500 and a Program Period PMPM of $510. Assume that the trend factor is therefore $510/$500=1.02. Contractually, trend is done for various categories of assistance and categories of service, but we omit that for simplicity. 5. There are 10,000 Managed Members. 6. Assume all members are eligible for 12 months. 7. Reconciled fees (fees attributable to managed and reconciled members) are $12,000,000 Calculation: 1. The expected PMPM cost for the Reconciled Population = $1,000 * 1.02 = $1,020. Gross PMPM savings = $1,020 - $1,010 = $10 2. Total gross savings = $10 * 200,000 * 12 = $24,000, Expected cost of the Managed Members = $2,000 * 10,000 * ,000,000 = $264,000, Total net savings = $24,000,000 - $12,000,000 = $12,000, Net savings as a percent of claims = $12,000,000 / $264,000,000 = 4.54% Page 5 of 11
6 Should HHSC determine that significant changes have occurred in demographics, Medicaid benefits, disease mix, category of service mix, ICD-10 diagnosis conversion, or other exogenous factors, the parties will make appropriate adjustments to eliminate the effects of such shifts, subject to approval by the parties. Calculate Payback Should net savings as a percent of expected costs fall below the 5% guarantee, then the payback will be proportional as follows: Payback = (Reconciled Fees) * (Percent of fees at risk for net savings) * [1- (Actual Net Savings % from above/5%)] In the example above with 4.54% net savings and $12,000,000 in reconciled fees, and 20% total risk (of which 8% is at risk for the savings guarantee), payback would be: Payback = $12,000,000 * 0.08 * ( / 0.05) = $88,320. Page 6 of 11
7 Reconciliation Process for Program Period 2 and After Disclosure of data, methodology, code and calculations used by the HHSC-contracted agent will be provided to McKesson for use in validating reconciliation results. In order to obtain a more stable population over time, 36 months of data shall be used to determine the members eligible for the TWP. 36 months of data shall be used to determine the risk scores for the reconciliation. Claims data extracts will always encompass a 36 month span based on the date of service (incurred date). Extracts for official reconciliations will always include claims paid through the end of the sixth month after the last month of this 36 month period of incurred claims. For the interim reconciliation, three months of run out may be used. Although it is not required that the Independent Contractor will complete more than one interim reconciliation, data for interim reconciliations will be made available to the Independent Contractor and to McKesson. Data will be provided for three, six and nine month interim reconciliations with three months of claims run out. Overview of Key Terms and Phrases HHSC Texas Health and Human Services Commission Client any Medicaid recipient FFS fee for service Withheld Population clients meeting one or more of the following Dual Eligible client populations that are eligible for Medicare and Medicaid services Clients with Third Party Insurance Clients in a Medicaid waiver program other than PCCM Clients in a managed care program other than PCCM Clients in a Medicare pilot Clients in a hospice program Clients in institutional or community-based long term care service programs (clients previously enrolled in the Texas Medicaid Wellness Program who are in a skilled nursing facility (SNF) for less than 60 consecutive days in a 12 month period are not included in the Withheld Population) Undocumented aliens Other clients as mutually agreed upon by HHSC and McKesson PMPM per member per month Chronic Illness and Disability Payment System (CDPS) the predictive model developed and maintained by the University of California at San Diego, used to determine clients risk scores. Risk Threshold the minimum CDPS risk score required for inclusion in the reconciliation, as agreed by the parties. Reconciliation Population - all TWP Eligible clients whose risk score exceeds the Risk Threshold, less those selected client months excluded, as described in this attachment. Trauma claims (excluded in reconciliation) as well as inpatient, outpatient, provider and all other services/claims are defined with appropriate codes in the HHSC-approved Project Work Plan. If any Wellness Program Eligible Population does not meet the minimum reconciliation method requirements, then that population will be excluded. Page 7 of 11
8 Trend Population clients who meet all criteria of the Reconciliation Population except that their CDPS risk score is less than the Risk Threshold Managed Members TWP members actively managed and billed for Pre-Baseline Period 24 month period immediately prior to the Baseline Period Baseline Period the 12 month period used to establish costs prior to Program Period 1, which is used to derive savings and expected costs Program Period 2 - the 12 month period beginning on March 1, 2012 and ending on February 28, Program Period 3 - the 12 month period beginning on March 1, 2013 and ending February 28, B. Overview of Populations Included in (and Excluded from) the Texas Wellness Program The TWP targets the disabled and TANF Medicaid population with high medical risk, as defined by CDPS, subject to exclusions defined in this document. Persons Excluded from the Reconciliation Clients who are members of the Withheld Population will not be sent in the data files, and are therefore not part of the reconciliation. Clients in a SNF, long-term care facility or hospice for 60 consecutive days or more during the measurement period will be excluded from the reconciliation. Client months where Medicaid eligibility was retroactively granted will be excluded from the reconciliation. Only eligibility included in the operational files will be included in the reconciliation. A client in FFS Medicaid with less than three (3) continuous months of Medicaid eligibility in the period being measured will be excluded from the reconciliation. Persons Included in the Reconciliation Clients not excluded from the reconciliation will be included, either in the Reconciliation Population or in the Trend Population. C. Reconciliation Programming The initial claims files extracted to calculate costs during the Baseline Period will include all claims during the specified 36 month period (Pre-Baseline Period and Baseline Period combined) with six months of claims run out. Identification for inclusion into the reconciliation will be performed using CDPS. Three years of data will be used. The HHSC approved Project Work plan will include the agreed-upon Risk Threshold for each Program Period. Any member with a risk score of at least the agreed upon Risk Threshold will be included in the reconciliation for all months in which the member was eligible. HHSC will use an independent contractor to objectively develop the TWP baseline files. For both the Baseline Period and for each Program Period, HHSC will prepare claims and eligibility files that will be sent to both the independent contractor and to McKesson. The independent contractor will identify the target population by applying the criteria agreed upon by all parties. The contractor will provide control totals, code, and calculations as required for validation by McKesson. Page 8 of 11
9 McKesson will sum every client s costs for the measurement period for each of the following claims categories: inpatient hospital, outpatient hospital, provider, pharmacy and all other costs. (The HHSCapproved Project Work Plan will contain a complete listing of the claims codes included in these categories.) Claims will be summed for all claims in each category, and any trauma claims will be excluded from these totals. TANF clients and disabled clients will be treated separately for purposes of the reconciliation calculations, including trend and savings calculations, and their costs will be summed separately. The claims summaries described herein are subject to review and validation by HHSC s independent actuary. Claims are tallied according to the from date of service, or in the case of pharmacy claims the prescribed date. For the Baseline, or for a given Program Period, a total of 36 months of incurred claims, with 6 months of run out, will be used to determine the CDPS score for all clients eligible for that Program Period. Clients whose CDPS score equals or exceeds the Risk Threshold, subject to the exclusions contained in this document, will be considered to be part of the Reconciliation Population for all months in the study period in which that client was Medicaid-eligible. D. Reconciliation Calculations For accruing claims and member months, the Program Period reconciliation process will largely involve replicating the programming that occurs in developing the Baseline data. There will be 36 months of claims used to determine each client s CDPS risk score, and clients meeting or exceeding the threshold risk score will have their claims and eligible member months for the study period accrued. Trauma costs will be removed from the reconciliation. Non-trauma costs above $500,000 for any individual during a measurement period will be disregarded for that measurement period. Individuals with trauma are not excluded from the program, nor are members with non-trauma costs above $500,000. These are claim-level exclusions for reconciliation rather than service member-level exclusions. Trending Baseline Costs to the Program Period In order to establish expected costs in the absence of the TWP, the following are computed. 1. Calculate Baseline PMPM costs for the Reconciliation Population. Such members meet eligibility requirements, do not meet the criteria for exclusion, and have a CDPS risk score that exceeds the Risk Threshold. Trauma and stop-loss exclusions are applied. For TWP eligible months, claims costs will be accrued for inpatient hospital, outpatient, physician, pharmacy, and all other services. Separate calculations will occur for disabled and TANF populations. 2. Conduct a parallel calculation of PMPM costs for those clients in the Trend Population. 3. Conduct parallel calculations of (1) and (2) for the Program Period being studied. 4. Derive trend factors using the Trend Population by dividing the PMPM claims cost separately for inpatient, outpatient, physician, pharmacy and all other services in the Program Period to that of the Baseline Period. 5. Multiply these trend factors to the baseline PMPM claims cost for the Reconciliation Population to determine the expected costs in the absence of the TWP. Should the Reconciliation Population s historical cost trend differ materially from that of the Trend Population, both parties will agree to an adjustment to the trend to reflect the difference. That is, should the historical cost trend for the Trend Population not serve as a reasonable proxy for the cost trend of the Reconciliation Population, the parties agree to arrive at an appropriate adjustment to remove the bias. Page 9 of 11
10 Calculate Medical Cost Savings To arrive at the aggregate net savings percent, which is the guarantee for which McKesson is at risk, we compute the following, separately for TANF Adults, TANF Children, Disabled Adults and Disabled Children. 1. Subtract the expected PMPM claims costs in the program period for the Reconciliation Population from (5) from previous trend baseline list to the actual PMPM claims costs incurred by the Reconciliation Population to determine PMPM gross savings. 2. Multiply the PMPM gross savings by the number of total Reconciliation Population member months for the Program Period to arrive at aggregate gross savings. 3. To determine expected costs, find the total claims cost for clients that are both Managed Members and in the Reconciliation Population in the Program Period. These costs include any savings due to the TWP, so the gross savings previously calculated get added to this claims cost to determine the expected cost in the absence of the TWP. 4. Net savings is equal to the gross savings from (2) less the fees for members included in (3). 5. Net savings as a percent of claims is equal to the net savings from (4) divided by the expected claims cost in (3). Savings Example Assumptions: 1. There are 200,000 clients whose CDPS risk score is above the Risk Threshold, and who do not meet any exclusionary criteria. That is, the Reconciled Population is 200,000 members. 2. The Reconciliation Population has a Baseline PMPM of $1,000 and a Program Period PMPM of $1, The Managed Members have a Program Period PMPM of $2, The Trend Population has a Baseline PMPM of $500 and a Program Period PMPM of $510. Assume that the trend factor is therefore $510/$500=1.02. Contractually, trend is done for various categories of assistance and categories of service, but we omit that for simplicity. 5. There are 10,000 Managed Members. 6. Assume all members are eligible for 12 months. 7. Reconciled fees (fees attributable to managed and reconciled members) are $12,000,000 Calculation: 1. The expected PMPM cost for the Reconciled Population = $1,000 * 1.02 = $1,020. Gross PMPM savings = $1,020 - $1,010 = $10 2. Total gross savings = $10 * 200,000 * 12 = $24,000, Expected cost of the Managed Members = $2,000 * 10,000 * ,000,000 = $264,000, Total net savings = $24,000,000 - $12,000,000 = $12,000, Net savings as a percent of claims = $12,000,000 / $264,000,000 = 4.54% Should HHSC determine that significant changes have occurred in demographics, Medicaid benefits, disease mix, category of service mix, ICD-10 diagnosis conversion, or other exogenous factors, the parties will make appropriate adjustments to eliminate the effects of such shifts, subject to approval by the parties. Calculate Payback Should net savings as a percent of expected costs fall below the 5% guarantee, then the payback will be proportional as follows: Payback = (Reconciled Fees) * (Percent of fees at risk for net savings) * [1- (Actual Net Savings % from above/5%)] In the example above with 4.54% net savings and $12,000,000 in reconciled fees, and 20% total risk (of which 8% is at risk for the savings guarantee), payback would be: Page 10 of 11
11 Payback = $12,000,000 * 0.08 * ( / 0.05) = $88,320. Page 11 of 11
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