© 2013 Waller Lansden Dortch & Davis, LLP. All Rights Reserved.

Texas Medicaid Update

Michelle Apodaca, J.D. - WallerJohn Berta – Texas Hospital Association

2014 TAHFA Annual Fall SymposiumSeptember 22, 2014

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Presentation Topics

Texas Political Climate

ACA and Medicaid

State Medicaid Budget

1115 Transformation Waiver

Texas Medicaid Items

HHSC Initiatives

Advisory Committees

Sunset Review – Medicaid Focus

Interim Studies

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Waller

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About THA

The Texas Hospital Association is a nonprofit trade association representing Texas hospitals and health systems.

In addition to providing a unified voice for health care, THA serves its 500+ members with timely information, data analysis, education on essential operational requirements, networking and leadership opportunities.

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THA’s Family of Companies

HealthShare markets products and services offered through THA-endorsed vendors. HealthShare also manages and markets voluntary insurance programs, THA’s PDS program and the THA Retirement Plan.

Texas Hospital Insurance Exchange, managed by the Texas Hospital Insurance NetworK, a wholly owned subsidiary of THA , provides dependable, competitively priced liability insurance and workers’ compensation coverage designed specifically for the Texas health care market.

Texas Healthcare Trustees is affiliated with THA and provides an education, advocacy and leadership role for the governing board members of Texas health care organizations.

Texas Center for Quality & Patient Safety is an initiative of THA and the Texas Hospital Association Foundation focused on improving the quality of care at the bedside, and reducing costs, through evidence-based practices.

HOSPAC, composed of THA’s state and federal political action committees, is the voice for more than 355,000 health care professionals working in Texas hospitals

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Political Climate

Governor Perry’s decision not to run again

created a domino effect on state-wide offices

Next governor: Attorney General Greg Abbott (R) (received 1.2 million votes in the primary) vs. Wendy Davis (432,000 votes)

In January, Speaker Straus must be re-elected by the House of Representatives to retain his leadership of the House

Unprecedented vacancies in key leadership positions: House Appropriations and Senate Finance will trigger a round of musical chairs for other legislative committee chairmanships

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General Election – November 4th

Ugly Primary –

– Tea Party Affiliated Candidates Prevailed

– Low voter turnout (951,461 of 13.6 m of Registered Votes

– Senate District 2 – Hall (R) – (defeated Senator Deuell by 300 votes)

Governor – Abbott (R) vs. Davis (D)

Lt. Governor – Patrick (R) vs. Van de Putte (D)

Attorney General – Paxton (R) vs. Sam Houston (D)

Agriculture Comm. – Miller vs. Hogan (D)

Railroad Comm. – Sitton (R) v. Brown (D)

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Texas Senate Preview

Lieutenant Governor: Senator Dan Patrick (R) (beat current Lt. Gov. David Dewhurst vs. Leticia Van de Putte (D)

Republican majority

At least 6 new members:

– Rep. Van Taylor (R) (replacing Ken Paxton in runoff for AG)

– Don Huffines (R) (beat John Carona in the primary)

– Newly elect Senator Brandon Creighton (R)

– Konni Burton (R), vs. Libby Willis (D) (to replace Wendy Davis)

– Paul Bettencourt (R) is expected to win Sen. Patrick’s seat or ? to replace

– Senator Robert Duncan (R) will be the new Texas Tech Chancellor

And potentially 2 more new faces:

– Special election for Glenn Hegar’s seat if he is elected Comptroller

– Special election for Leticia Van de Putte’s seat if she is elected Lt. Governor

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Texas House Preview

At least 20 new House members

Small changes in party split expected, but most newly elected Rs are Tea Party supported

About 2/3rds of the House will have 2 or less sessions of experience

Texas - Status of ACA Reforms

No Medicaid expansion No state run health

insurance Exchange No enforcement on state

level -Texas is one of six states with no enforcement authority

- Legislature hostile to ACA – no statutory authority likely to pass

- Federal rules - if state does not enforce, CCIIO will

Federal Exchange

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ACA Delivery ReformsImproving Quality and Efficiency

ACA Title III – Improving the Quality and Efficiency of Health Care – Numerous demonstration

projects and initiatives aimed at encouraging development of alternative payment models

CMMI– Established by ACA to test

innovative payment and service delivery models

– $10 B appropriated for CMMI activities between FFY 2011 – 2019 and per decade thereafter

Primary care transformation– Advanced primary care

practice (patient-centered medical home)

Bundled payment programs– Payment for all services

furnished during an episode of care

Shared savings programs – Accountable care

organizations

State-based demonstration programs

– Dual eligible – - Section 1115 demonstration

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Medicaid Payments to Hospitals – IGT & GR

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SFY 2008SFY 2009

SFY 2010SFY 2011

30%

35%

40%

45%

50%

55%

60%

65%

IGT

GR

36%43% 44%

44%

64%

57%56% 56%

IGTGR

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Medicaid Shortfall

FY2013 FY2014 FY2015 FY2016 2,400

2,600

2,800

3,000

3,200

3,400

3,600

Federal Funds and GR for DSH and UCHospital Medicaid Shortfall FY2013-16

(amounts in Billions)

Medicaid Shortfall Federal Funds & GR for DSH & UC

HHS State Budget Issues – Legislator’s View

Expand managed care– Budget certainty

– Premium tax revenue

No more lump-sum payments for uncompensated care– 1115 Transformation Waiver

– Pay-for-performance / rate increases

Arbitrarily reduce hospital payments for inappropriate ER utilization

Relax scope-of-practice rules to help ease physician shortages

Expanded focus on audit and OIG oversight

HHS State Budget Issues – Provider View

How to Fund Medicaid

– State Share for Medicaid Supplemental Payments

– Acute Care Provider Rates

– Graduate Medical Education

– Physician Rates and Participation

Mental Health

Trauma Funds

Nursing School Funds

State BudgetS.B. 1 Hospital Supplemental Payments

SB1 – The biennial budget bill FY 2014-15

Rider 86

– Appropriating as much as $300 million in state General Revenues in fiscal years 2014 ($160m) and 2015 ($140m) to improve Medicaid hospital payments either as DSH or through rate adjustments;

– Developing a framework/plan to improve the system for providing Medicaid payments to hospitals that addresses:

• Proportional allotment of DSH and UC among:

– Large public hospitals

– Small public hospitals; and

– Non-public hospitals

State BudgetHospital Supplemental Payments cont.

SB1 – Rider 86 – THHSC Plan (Continued)• Allotment based on care rendered to Medicaid and low

income patients and on IGT provided by large public hospitals;

• The impact of Medicaid shortfalls and uncompensated care costs;

• Methods to:

– Flow at least some of these payments through Medicaid MCOs;

– Transition payments from DSH to quality-based payments; and

– Eliminate the use of state GR for DSH after 2015.

Linking the appropriation to demonstrable measures:

• In 2014 – documenting progress towards the development of the plan mentioned above; and

• In 2015 – finalizing the plan;

State BudgetCost Containment Rider

Rider 51 – HHSC Cost Containment Initiatives:

Directs THHSC to use a variety of methods to achieve savings of as much as $400 Million General Revenue / $963 Million All Funds

Nine of these would impact hospitals potentially totaling $185.9 M GR / $445.5 M All Funds

State BudgetCost Containment Rider in S.B. 1

Rider 51 components with direct impact on hospitals:

Quality-based payment adjustments.

Improve birth outcomes/reduce preterm births.

Transition outpatient payments to prospective payment system that maximizes bundling, including imaging (EAPGs).

Develop hospital ER rates for non-emergency visits.

Strengthen prior authorization requirements.

Expand initiatives to pay more appropriately for outlier payments.

Adjust reimbursement for labor and delivery services provided to adults at children’s hospitals.

Re-establish hospital 30-day spell of illness limitation in STAR+PLUS.

Enforce appropriate payment practices for non-physician services.

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1115 Transformation Waiver – Overview

Five-Year Medicaid 1115 Demonstration Waiver (2011 – 2016)

Establishes Regional Healthcare Partnerships (RHPs) anchored by public hospitals or another public entity in coordination with local stakeholders

Allows expansion of managed care while protecting hospital supplemental payments under a new methodology

Incentivize delivery system improvements and improve access and system coordination

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1115 Waiver – Uncompensated Care & DSRIP

Under the Waiver, historic UPL funds and new funds are distributed to hospitals and other providers through two pools:

Uncompensated Care (UC) Pool - Replaces upper payment limit (UPL) funding; Costs for care provided to individuals who have no third party coverage for hospital and other services

Delivery System Reform Incentive Payments (DSRIP) Pool - New program to support coordinated care and quality improvements through 20 Regional Healthcare Partnerships (RHPs); transform delivery systems to improve care for individuals (including access, quality, and health outcomes), improve health for the population, and lower costs through efficiencies and improvements; DSRIP providers include hospitals, physician groups, community mental health centers, and local health departments

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1115 Transformation Waiver – UC Status

Demonstration year (DY) 1 UC payments totaling $3.7 billion were completed in June 2013

Half of the UC payments for DY 2 were advanced to providers in August 2013

DY 2 UC pool totals $3.9 billion

Final DY 2 UC payments of approximately $1.95 billion are scheduled for distribution in June 2014

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Waiver Funding

ProgramDY 1

(2011-12)DY 2

(2012-13)DY 3

(2013-14)DY 4

(2014-15)DY 5

(2015-16) Total

UC $3.7 B $3.9 B $3.534 B $3.348 B $3.1 B $17.6 B

DSRIP $500 M $2.3 B $2.666 B $2.852 B $3.1 B $11.4 B

Total/DY $4.2 B $6.2 B $6.2 B $6.2 B $6.2 B $29.0 B

% UC 88% 63% 57% 54% 50% 60%

% DSRIP 12% 37% 43% 46% 50% 40%

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HHSC Terminates Contract with Xerox – May 9, 2014

HHSC is finalizing an agreement with Accenture for the transition period.

HHSC to rebid the work.

During transition - HHSC will break the large contract into as many as 5 contracts to make it easier to take action against a vendor without disrupting medical care for people with Medicaid. (processing Medicaid claims; requests for prior authorization of services; provider enrollment; maintaining data on Medicaid managed care transactions; collecting drug manufacturer rebates and staffing call centers for Medicaid providers.)

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STAR+PLUS Expansion – as per SB 7

Takes effect September 1, 2014

Expands STAR+PLUS statewide to the Medicaid Rural Service Areas (MRSA)

– MRSA Central, MRSA Northeast and MRSA West

Estimated to serve an additional 80,000 members in STAR+PLUS

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STAR+PLUS Expansion

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Additional September 1, 2014 Implementation

Two additional behavioral health services will be added to Medicaid Managed Care:

– Mental health rehabilitation and mental health targeted case management for persons that have severe and persistent mental illness or 3-17 yrs old with mental health diagnosis or exhibit serious emotional disturbance (Currently provided through FFS and delivered through the Local Mental Health Authorities (LMHAs))

Integration of acute care for clients with Intellectual and Developmental Disabilities (IDD)

– Excludes Dual Eligibles, Individuals residing in state supported living center, and persons under 21 receiving voluntary SSI or SSI-related benefits.

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Nursing Home Carve-in Postponed

HHSC announced on March 18 that expansion of Medicaid Managed Care to nursing homes would be postponed until March 2015

– Was scheduled for September 2014

– Nursing facility services will be provided through STAR+PLUS statewide

– Intended to improve quality of care and promote care in the least restrictive, most appropriate setting

– Between 50,000 - 60,000 nursing facility residents will transition to STAR+PLUS

DSH Part I

Appropriates up to $300M as DSH or rate payments– $160M – 2014

– $140M – 2015

Appropriations linked to:– 2014 – HHSC’s progress towards development of a

plan

– 2015 – Finalization of the plan

DSH Part II

Plan to address:– Appropriate balance/proportional allocation of DSH

and UC among large publics, small publics, and non-publics

– Medicaid shortfall and its impact on DSH and UC

– Managed care payment mechanisms

– The need for supplemental payments to cover Medicaid and UC shortfalls

– Plan to transition from supplemental payments to rates

– Elimination of state GR for DSH after 2015

HHSC Initiatives

Sunset Commission ReviewDual Eligibles Demonstration Presumptive Eligibility84th Texas Legislature – January 2015

Perinatal Advisory Council

PAC Working on GuidelinesRules are NOT GuidelinesRules later this summer

Dual Eligible Demonstration

6 CountiesBlended RatesSTAR+PLUS MMPsWide Latitude for Care

Presumptive Eligibility

Jan 1 2015Restrictive CriteriaWork with CMS to improve State plan

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Advisory Committees – Recommending New Policy?

Medicaid/CHIP Quality-Based Payment Advisory Committee

STAR+PLUS Quality Council

Hospital Payment Advisory Committee

Physician Payment Advisory Committee

Perinatal Advisory Council

Electronic Health Information Exchange System Advisory Committee

Medicaid and CHIP Regional Advisory Committees

Medical Care Advisory Committee

State Medicaid Managed Care Advisory Committee

HHSC Payment Reform: Opportunities/Challenges - Multiple Payors/Systems

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RHP DSRIP Hospital and Other Performing

Provider Quality Measures and

Processes(PPEs, NCQA, NQF,

Other)

Medicaid FFS Hospital Quality Measures and

Processes (PPR, PPC)

Commercial Carriers Quality Measures and

Processes (PPEs, NCQA, NQF,

Cost of Care, etc.)

Medicare Quality Measures and

Processes (Value-Based Purchasing,

Readmissions)

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Sunset Review

Audit of each state agency’s functions and effectiveness to determine if the agency should be reauthorized, reorganized, or allowed to expire after (generally) a 12-year period

Concurrent review of the Health & Safety Code was announced to “clean up” inconsistencies with current practices

Healthcare-related agencies under review:

– Health and Human Services Commission; Department of State Health Services; Department of Aging and Disability Services; Department of Assistive and Rehabilitative Services; Texas Health Services Authority; Texas Health Care Information Council; and Interagency Task Force for Children With Special Needs

– Hearings in late June and August

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Questions?

Michelle Apodaca, JDWaller 512.685.6406 Michelle.Apodaca@wallerlaw.com

John BertaTexas Hospital Association512.465.1556 jberta@tha.com