Health Care Reform – The Health Care Reform – The View from MarylandView from Maryland

AAHAM Monthly MeetingOctober 21, 2011

Valerie Shearer Overton

Health Reform – Driving Change

• Exponential growth in health care costs

• Better access to insurance coverage

• Connecting spending and quality

• Improving the health of the community

Key Components – PPACA

• Medicaid Expansion--U.S. citizens up to 133% of FPL (Maryland currently at 116%)

• Health Insurance Exchange--individuals and small businesses

• Federal Subsidies--individuals between100-400% FPL

• Individual Insurance Mandate

Key Components – PPACA

• Insurance Market Reforms--guaranteed issue, no pre-ex, no annual/lifetime caps

• Medicare pilots (Readmissions, Value Based Purchasing, ACOs, HAI)

• Community Benefits:

– Community health needs assessments

Reform in Maryland

• Estimated to cut the uninsured rate by half (14% to 6.7%); estimated $829 million in state savings between FY 2011 - FY 2020

• Set against existing State budget challenges

– Initial $1.6 billion FY 12 structural deficit

– In FY 12, Medicaid must identify an additional $40 million savings

– $1.2 billion FY 13 structural deficit

Reform in Maryland

• Over $650 million in hospital assessments annually:

– Medicaid expansion to 116% FPG (2008)

– Medicaid budget assessment

– Maryland Health Insurance Program (MHIP) State’s high risk pool

HCRCC Established

• Health Care Reform Coordinating Council

• Created by Executive Order--March 2010

• Charged with coordinating state agency activity and identifying/developing recommendations on issues critical to successful reform implementation

• Reported to General Assembly January 1, 2011

Established Six Work Groups

• Exchange and Insurance Markets

• Entry into Coverage

• Education and Outreach

• Public Health, Safety Net and Special Populations

• Health Care Workforce

• Health Care Delivery System

Exchange/Insurance Markets

First items to be addressed by states under PPACA

• Exchange (SB 182/HB 166):

– How exchange should be developed to advance goal of expanding access and affordability and to function in concert with the state’s existing insurance markets, including Medicaid

Exchange/Insurance Markets

• Established governance structure, functions mandated by PPACA, and areas of study (by 12/2011):

– Market rules inside and outside Exchange

– Navigator and consumer assistance program

– SHOP Exchange

– Financial model (self sustaining by 2015)

– Communications and Marketing

– Transformation to nonprofit (2015)

Exchange/Insurance Markets

• Insurance Market Reforms:

– Benefit Expansion (lifetime max, children to 26, elimination of pre-exs under 18)

– Disclosure of insurance information to enrollees

– MLR (80% SGM and IND in 2011, 85% LGM)

– Premium rate review

Premium Rate Review

• Carriers must publicly disclose any proposed rate increase of 10% or more in the individual or small group market

• Reviewed by state or federal regulators (state regulators in MD)

• Grant monies to “enhance and increase transparency” of Maryland’s rate review process

• FY 2012 State budget language directs MIA to develop a mechanism to identify hospital assessments and rate increases in insurer premiums (Report due to General Assembly 12/2011)

Workforce

• Charge is to strengthen Maryland workforce capacity

• Recommended solutions on:

– Recruitment/retention

– Education/training (LARP)

– Improved medical liability climate

– GWIB September interim report

Public Health, Safety Net andSpecial Populations

• Focus is on role of public health in a reformed health care system

• Emerging themes:

– Health care reform will leave approximately 400,000 uninsured Marylanders - safety net will still have a role

Public Health, Safety Net andSpecial Populations

• Emerging themes Cont.:

– Health IT will play an important role to enable seamless, integrated care for those who fall in and out of coverage

– Medicaid reimbursement will need to reflect the true cost of providing care

– Need for the state to invest in community-based mental health resources

Delivery System Changes - Focus

• Electronic medical records (CRISP, state payor incentives for PCPs)

• Payment system:

– HSCRC bundled payments:

Phase I – Total Patient Revenue (TPR)

Phase II – Voluntary Admissions/Readmissions

Phase III – Statewide TPR

Delivery System Changes - Focus

• Patient Centered Medical Homes (CareFirst and MHCC pilots)

• ACOs?

HSCRC Payment Reforms

Phase I: Global Budgets for 10-13 Rural Hospitals (2010)

Phase II: Admission-Readmission Episode Payment for 25 Urban/Suburban Hospitals (2011)

Phase III: Extend Global Budget Incentives to other Suburban Hospitals (Population Based Rate Setting) (2012)

Phase I - TPR

TPR =

Regulated Total Gross Patient Revenue

Excludes: Unregulated Services

Overview - TPR

• TPR is a fixed revenue base, regardless of:

– Increase or Decrease in Volumes– Change in patient acuity– Inpatient / Outpatient Mix

• Adjustments are made for the following:

– Annual Payment Update Factor– Changes in Uncompensated Care– Population Change

Overview - TPR

• Effective and efficient use of health care services in the market is required to reduce hospital costs under the fixed cap

• Wholesale shifting of services to an unregulated setting is prohibited:

– Volume increases in existing unregulated services, and, expanded use of alternative care settings is encouraged

• Physician relationships are critical to the success of TPR

Garret Co. $42m

W. Maryland HS $291m

Wash. Co. $248m

Carroll Co.$202m

Union of Cecil $128m

Chester River $56m

Mem. Easton $160m

Dochester $52m

McCready $19m

Atlantic Gen. $85m

St. Mary’s $126m

Calvert $118m

Civista $111m

Total Patient Revenue Hospitals & Possible Candidates for TPR

Total Patient Revenue Model

Permanent Permanent Total Permanent HOSPITAL I/P Revenue O/P Revenue Revenue

Carroll County Hospital $146,741,631 $55,504,189 $202,245,819Garrrett Memorial $20,932,418 $21,413,706 $42,346,124Washington County Hospital $164,548,244 $83,356,668 $247,904,912Western Md. Health Hospital $175,657,849 $115,140,741 $290,798,590

$783,295,445

Dorchester General $30,254,946 $22,165,665 $52,420,611Easton Memorial $95,070,026 $65,340,852 $160,410,878Union of Cecil $67,713,507 $60,261,085 $127,974,592Chester River $30,080,490 $25,872,486 $55,952,976McCready $6,627,281 $12,054,183 $18,681,464Atlantic General $40,472,843 $44,859,105 $85,331,948

$500,772,469

St. Mary's $65,060,302 $60,818,160 $125,878,462Civista $74,346,774 $36,922,960 $111,269,734Calvert Memorial Hospital $60,854,007 $56,971,854 $117,825,861

$354,974,057

Current Revenue under TPR $1,316,561,827

Potential Revenue under TPR $1,639,041,971

HSCRC has established a fixed payment now for all Hospital services in 3 large regions of the State

$500 Mill.

$355 Mill.

$783 Mill.

Phase II - ARR

• Currently negotiating with 25 hospitals to establish a 30-day admission/readmission constraint

• Constitutes a large expansion of the payment bundle (beyond single admission) for a substantial portion of the industry ($7.2 billion in inpatient revenue)

• Actual revenue at risk = 8-9% of total revenue

Phase II - ARR

• HSCRC believes 30-50% reductions are possible = savings of between $200 and $325 million per year for candidate hospitals (hospitals indicate more in the 20-30% range)

• HSCRC then has ability to “bend overall cost curve” (annual payment updates)

Challenges - ARR

• Transitional care (labor intensive) requires funding

• Fragmented care, inadequate chronic care

• Patient compliance

• Payors do not pay for care coordination and transitional care (including Medicare)

Quality of Care Initiatives

Phase I: Value-Based Purchasing linked to payment 2008

• 19 core measures--4 clinical domains & patient experience of care

• Relative performance linked to rewards/penalties in annual inflation update

• Includes hospital scores on Patient Satisfaction measures as well

Quality of Care Initiatives

Phase II: Maryland Hospital Acquired Conditions2009

• 49 Potentially Preventable Complication Categories

• Payment Incentives linked to relative hospital performance on risk-adjusted rates of complications (not present on admission)

• HSCRC reports a 12% reduction in complication rates from 2009 to 2010

• Estimated savings of $62.5 million in cost out of total complication related costs of $552 million

Quality of Care Initiatives

Phase III: Maryland Hospital All-Cause Readmissions

Phase IV: Working toward establishing a Balanced Portfolio of Quality-Related Measures

HSCRC Value Index – Cost per Case & Complications

Low cost - higherquality hospitals

High cost

Low cost

High Quality

Lower Quality

Maryland Medical Home Pilot Program

• CareFirst pilot underway January 2010

• MHCC pilot launched July 2010

• Fifty practices, 200 providers, and 200,000 patients

• NCQA Level I recognition within 6 months and Level II within 18 months

• Practices receive fixed payment + incentive payment

• MHCC attempting to enroll self-funded employers

Health Care Delivery System - Focus Remains

• Creation of new Payment Delivery System Reform Subcommittee under the HCRCC

• MHA submitted potential nominees

• Will examine projects that improve the patient experience, reduce costs, or improve health outcomes:

– Secretary has already suggested TPR, ARR and PCMH as areas of immediate interest

What Does Reform Mean for Maryland?

• Additional pressure on our waiver

– Modernization efforts underway– Higher quality and efficiency expectations

than the nation

• Lower overall HSCRC rate updates

• Newly insured patients--sustained and increased state budget pressures (Medicaid, small group and individual)

Questions?