STATUS OF NEW MARYLAND MEDICARE WAIVER APPLICATION TO CMS

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1 STATUS OF NEW MARYLAND MEDICARE WAIVER APPLICATION TO CMS Clinical Services Directors Christopher J. Parker, Sr. Vice President/CNO April 4, 2013 Source: UMMS Financial Affairs Committee TODAY'S DISCUSSION o Status and Timing of the New Medicare Waiver Application o Key Concepts In the New Waiver Application o Potential Impact on Future Hospital Revenue Growth 1

2 STATUS AND TIMING OF NEW MEDICARE WAIVER APPLICATION o On March 26, 2013, the State of Maryland submitted the new Medicare Waiver Application tocms o The State's effort was led by DHMH Secretary Joshua Sharfstein, M.D. and HSCRC Chairman John Colmers o The review, negotiation and approval process will likely continue throughout the Summer of 2013 ', :. ~. '.. p ~ : [.: c :. : ;. :... : THE OVERARCHING HYPOTHESIS OF THE NEW WAIVER Is... o "That an all payer system that is accountable for the total cost of care on a per capita basis is an effective model for establishing policies and incentives to drive system progress toward achieving the three part aim of: An enhanced patient experience (including quality and satisfaction), Better population health, and Lower costs." 2

3 THE NEW WAIVER WILL BE IMPLEMENTED IN TWO PHASES Phase Time Period Main Financial Focus I II Year 1-Year 5 Year 6 and Beyond Controlling and reducing the rate of growth in per capita hospital expenditures for Maryland residents Controlling and reducing the rate of growth in total per capita health care expenditures for Maryland residents Phase I of the new Medicare Waiver would begin on January 1, THE NEW MEDICARE WAIVER WILL FOCUS ON A MORE VALUE BASED HOSPITAL PAYMENT SYSTEM Moving To ~ ~ AMore Value Based Payment System Where rewards and penalties are provided for: Demonstrated quality With a focus on clinical outcomes Cost containment on a per capita basis Management of patient care across various health care delivery settings (population health) 3

4 APPROACHES TO ATTAINING THE TWIN GOALS OF IMPROVED QUALITY AND REDUCED COSTS o Gather timely data on the utilization of patient care Especially hospital admissions o Focus on coordinating care and transitions across care settings o Use team based care o Target interventions toward high-risk enrollees, and o Limit the number and cost of expensive admissions KEY CONCEPTS IN NEW WAIVER APPLICATION o New waiver follows an "All Payor" approach to setting rates and controlling growth in Maryland hospital expenditures o Phase I of the new waiver focuses on controlling and reducing the rate of growth in per capita hospital expenditures for Maryland residents o An all-payer "Hard Per Capita Revenue Growth Ceiling" would be established for Phase I (the first five years) o Maryland must be below an all-payer total hard revenue growth ceiling or cap for the five year period f:.. [.:=:: r: 4

5 PROPOSED MAxiMUM ANNUAL ALLOWABLE STATEWIDE PER CAPITA HOSPITAL REVENUE GROWTH Year % (0.50%) 3.07% Year2 3.57% (0.50%) 3.07% YearS 3.57% (0.50%) 3.07% Year4 TBD TBD TBD Year5 TBD TBD TBD HSCRC WILL CONSTRAIN REVENUE GROWTH BY... o Limiting annual update factors (rate increases) to fund cost inflation ~. ' ' ['. ;... r Hospital rate updates will be based upon hospital specific performance under new efficiency models o Lowering the variable cost factor (VCF) for volume Increases: Currently: 85/15 Proposed: 60/40 o To reduce the incentive for hospitals to grow volumes, 5

6 UMMS REVENUE GROWTH HAS EXCEEDED THE 3.07% GROWTH CEILING HISTORICALLY ~ Ceiling 3.07% FY2011 FY2012(l) 2013 YTD IUMMS state I (1) 1.75% growth is attributable to increase in Medicaid Deficit Assessment HOSPITAL OPPORTUNITIES TO GROW REVENUE BEYOND 3.07% o Hospitals share in savings "Lockbox" generated by Readmission reductions Quality reimbursement initiatives o Maryland Hospital Acquired Conditions o Quality Based Reimbursement Total Patient Revenue o Utilization reductions o HSCRC to adjust "Ceiling" annually for population -~ 6

7 POTENTIAL IMPACT ON HOSPITAL RATE INCREASES FOR FISCAL 2014 o New waiver will establish a five year hard per capita hospital revenue growth ceiling: Limiting annual hospital volume growth will be crucial to staying below the ceiling o HSCRC is likely to change the volume variable cost factor (VCF) from 85/15 to 60/40 Expect a small update factor in first year owe do not expect a zero update factor for fiscal2014 if.!. : DISCUSSION 7