improving patient quality & cost outcomes and overall value in maryland american association of...
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Improving Patient Quality & Cost Outcomes and Overall Value in Maryland
American Association of Healthcare Administrative ManagementOctober 12, 2012
Patrick Redmon, PhD., Executive DirectorJerry Schmith, Deputy Director of Rate Setting
Sule Calikoglu, PhD. Assoc. Director of Performance Measurement
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Fragmented US Financing SystemBut Maryland’s System Harmonizes Payments
Public Payer 1
US Healthcare System
PrivatePayer 1
Private Payer 2
H
Maryland HSCRCResponsible for establishing Uniform All-Payer payment
levels and approved revenue Allocations based on
Reasonable relative resource Use by service and by
facility
Fragmented Payment System Creates many problems in the US and contributes to our country’s Fragmented and disjointed care deliverysystem
H H H H H HH
Public Payer 2
Pluralistic (fragmented) Financing System
All-Payer Unit Rates
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Health Services Cost Review Commission
• Origins– Hospitals needed a mechanism to financing Uncompensated Care– Business (trustees) wanted a way to contain costs (abandon cost-based
payment)– Maryland Hospital Association strongly supported legislation
• Enabling Legislation 1971– Enabling statute – very broad authority and language – Created a politically/legally independent agency (“HSCRC” or “Commission”)– Unique governance structure - 7 volunteer Commissioners– Small experienced staff 28 FTEs (core analytic staff of 10-12)
• Jurisdiction– Inpatient and outpatient hospital services (no Part B)– 46 Acute Care Hospitals - $14.5 billion in revenue
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Commission Statute• Broad powers - data collection & to set hospital payment levels (“rate
setting”)• Statute articulated economic principles to apply
– Prospective rates– Prices must reflect costs (efficient markets)– Fairness in pricing (no undue discrimination/preference)
• Otherwise no detailed rate methods in statute• Specified six primary policy goals:
– Efficiency (cost containment)– Access– Equity & Fairness – Accountability– Financial Stability/Sustainability – Effectiveness (quality)
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Bending the Cost Curve• Lowest Rate of Cost Growth of any State 1976-2010
• 1976: Maryland Cost per case was 25% ABOVE the US average• 2010: Maryland Hospital cost per case 3% BELOW the US average (1)
• Estimated $46 billion savings to the State over the period 1976-2010
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76 80 84 88 92 96 '00 '04
US hospital cost growth
Maryland hospital slower cost growth
Had Maryland grown at the more rapid US rate – hospital expenditures would have been $46 billion higher
“Bending the Curve”Growth in Hospital Costs per case (MD vs. US)
• Had the US grown at the slower Maryland rate of growth – hospital spending would have been $2.0 trillion lower
Note (1): Medpac identified a “most efficient” cohort of hospitals nationally with high quality scores – that are 9-11% below average US cost per adjusted admission
Indexed Rate of Growth
• Only caveat to this performance is savings is all “Per Case”
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Access, Stability & Accountability
• Access: Equitable Financing of Care to the Uninsured– Each hospital has a provision in its rates structure (add-on to rates) allow them
to generate extra funds sufficient to cover Uncompensated Care – UC varies by hospital – but financing is pooled and thus all payers are
contributing equally to this burden• High level of Financial Stability
– Very predictable system (prices known in advance – no discounting, UC and GME covered in rates, no worries about shifts in Payer mix)
– Highest % of investment grade hospitals of any State – 2006• High level of Accountability/Transparency
– Virtually all deliberations in public– All data and pricing information - publicly available – Performance reporting (financial performance, efficiency & quality)– Forum for payer, provider and regulator cooperative rule-making
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Payment Equity (continued)
Source: American Hospital Association statistics 1980 - 2009 7
• Chart shows Maryland has the lowest Markups and lowest charges in U.S.
• As hospitals/physicians continue to consolidate –balance of market power has shifted in favor of providers – leads to also to higher payment levels
• In Maryland, the HSCRC controls the markup – prohibits “cost-shifting”
• Maryland free from anti-trust concerns related to price (GAO study)
2009 Cost to Charges as AverageState Charge Ratio % of Costs MarkupMaryland 80.32% 124.50% 24.50%Montana 53.79% 185.90% 85.90%Maine 52.60% 190.10% 90.10%Delaware 52.34% 191.06% 91.06%Wyoming 51.25% 195.14% 95.14%Oregon 49.37% 202.56% 102.56%Vermont 49.29% 202.90% 102.90%Massachusetts 46.93% 213.07% 113.07%Idaho 46.75% 213.92% 113.92%N. Dakota 46.35% 215.74% 115.74%Alaska 45.24% 221.05% 121.05%Hawaii 44.75% 223.46% 123.46%S. Dakota 44.72% 223.63% 123.63%Iowa 44.50% 224.71% 124.71%W. Virginia 44.35% 225.46% 125.46%Wisconsin 44.34% 225.54% 125.54%New York 42.35% 236.10% 136.10%Utah 41.05% 243.58% 143.58%Michigan 40.90% 244.52% 144.52%Rhode Island 40.89% 244.58% 144.58%New Hamphshire 40.72% 245.56% 145.56%Minnesota 40.54% 246.66% 146.66%Nebraska 40.05% 249.69% 149.69%Dis. Col. 39.83% 251.09% 151.09%Indiana 39.01% 256.36% 156.36%North Carolina 38.73% 258.21% 158.21%Connecticut 38.06% 262.74% 162.74%Washington 38.06% 262.75% 162.75%Missouri 37.90% 263.87% 163.87%Ohio 36.14% 276.70% 176.70%New Mexico 35.14% 284.55% 184.55%Kentucky 34.91% 286.47% 186.47%Kansas 34.68% 288.31% 188.31%Virginia 34.62% 288.87% 188.87%Arkansas 33.91% 294.92% 194.92%U.S. 33.53% 298.25% 198.25%Ilinois 33.49% 298.61% 198.61%Louisiana 33.47% 298.76% 198.76%Georgia 33.03% 302.80% 202.80%S. Carolina 31.57% 316.77% 216.77%Oklahoma 31.38% 318.72% 218.72%Mississippi 30.95% 323.10% 223.10%Colorado 29.97% 333.69% 233.69%Tennessee 29.65% 337.32% 237.32%Texas 28.23% 354.21% 254.21%California 27.90% 358.37% 258.37%Arizona 27.44% 364.37% 264.37%Penn. 26.89% 371.93% 271.93%Nevada 25.12% 398.01% 298.01%Alabama 25.10% 398.39% 298.39%Florida 24.42% 409.44% 309.44%New Jersey 22.87% 437.18% 337.18%
US Hospitalmarkups
MD Hospitalmarkups
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Summary of Key Benefits of this System
• System of rational prices that relate to actual costs• Prospective pricing – better incentives & allow for predictability• Uncompensated care & teaching costs covered (social mission)• Emphasis on rate compliance and DRG target compliance• Otherwise free to allocate resources and make management
decisions as they see fit• HMOs can manage utilization (aligned incentive with hospital)• High level of transparency and public accountability – prices all
known, DRG payments known, costs by hospital known• Data used most by hospitals themselves• Controlled per case cost growth and met other policy goals
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Steps in Development• Design a uniform system for data reporting (data is key)
– Commission’s system for cost reporting (prescribed reporting format)– Methods for reporting/allocating costs to “functional” departments
• Collect necessary data– Cost Reports (detailed direct/indirect costs & volumes)– Detailed patient level data (administrative or case mix data)– Other (wage/salary survey; trustee disclosures)
• Analyze data submissions; review variations in costs• Establish a methodology for establishing approved base costs and
rates (apply standards of “reasonableness”)• Establish a methodology for updating base rates annually• Compliance checks for data submitted and rates charged
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HSCRC Payment System
• Originally – a Unit Rate (Fee-for-service) payment system • HSCRC constrained unit rate growth year to year• Behavioral response by hospitals was to do more volume• HSCRC retained the Unit Rate Payment system (great
calibration system) but imposed a DRG constraint (or virtual DRG budget) for each patient
• Patient still charged their itemized bill• Hospital held to this per case budget or an overall weighted
charge per case budget (all rolled up)• Same incentives as Medicare per case system (IPPS)• HSCRC now building larger payment episodes
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Example of a Patient Bill under a Unit Rate Payment System (fee-for-service)
Medical/Surgical UnitIntensive Care UnitAdmissionOperating RoomRadiologyPulmonaryBloodLabPhysical TherapyCost of Drugs SoldMedical Supplies
Per dayPer dayPer casePer minuteRVURVURVURVURVUInvoice
costInvoice
cost
FunctionalCenter
ApprovedRate Unit$500$1,000$100$15$20$3.00$15$2.00$16$1,200$2,100
Units of Service
52115025105255patientpatient
XXXXXXXXXXX
= $2,500= 2,000= 100= 2,250 = 500= 30= 75= 50= 80= 1,200= 2,100 $10,885
Total Charge per case
Charge
In Maryland all-patients pay approved charge
This system also Helped hospitals Better understand Their cost structures
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HSCRC Moved to a DRG Constraint System
• Fee-for-service system didn’t control costs per case• So HSCRC imposed DRG constraints on hospitals (virtual
DRG budgets for each case) • Retained the Unit Rate Payment system (great calibration
system and forced hospitals to know their unit costs) • Patient still charged their itemized bill• But hospital held to per case (DRG) budget for all patients • Same incentives as Medicare per case payment system• More equitable system for patients and payers• Payers retain incentive to help hospital manage care/case
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Illustration of DRG ConstraintHospital’s Experience Over the Entire Year with all Patients in DRG 237
State-wide DRG budget (“constraint”) . . . . . . . . . . . . . . . $9,500 per caseAverage hospital charges for all patients in DRG 237 . . . $10,885
Hospital over charged its DRG 237 budget by $277,000
Recouped through an adjustment at year end
Later calculated “real-time” during the course of the year and applied inthat same year
Hospital A has 200 patients in DRG 237So the actual charges for all these patients was: 200 x $10,885 = $2,177,000
But the budget for all DRG 237 patients was: 200 x $9,500 = $1,900,000
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Two Voluntary Payment Policies
• Total Patient Revenue (TPR)– All inpatient and outpatient admissions– Began with one hospital over twenty years ago – Expanded to 10 hospitals (mostly rural) in FY 2011
• Admission Readmission Revenue (ARR)– Same hospital all-cause 30 day readmissions– Began in FY 2012– 31 hospitals
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Percent Revenue with ARR and TPR Arrangements in FY 2011
Percent Revenue by Payment Types Inpatient Outpatient TotalUnder ARR Agreements* 83% 0% 54%Under TPR Agreements 9% 12% 10%Not Under ARR or TPR Agreements 8% 88% 36%
*Includes all inpatient revenue for ARR hospitals.
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Total Patient Revenue Program
• Population Based Rate method offered to 10 rural hospitals• Establishes an annual global budget for facility (all inpatient
and outpatient facility revenue) independent of volume• Strong incentives to control unnecessary admissions,
readmissions and shift care to less-costly outpatient settings• Consistent with these hospitals’ mission to service the health
needs of a “community”• Platform for inclusion of physician and non-hospital services • Voluntary 3-year arrangements; transitional funding offered
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Garret Co.
W. Maryland HS
Meritus MC.
Carroll Co.
Union of Cecil
Chester River
Mem. Easton
Dochester
McCready
Calvert
TPR Hospitals
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Annual Changes in Utilization with TPR
Inpatient AdmissionsBefore TPR(FY2010)
First Year of TPR (FY2011) Difference
TPR 3.1% -2.0% -5.1%
Non-TPR -1.9% -4.1% -2.2%
Outpatient VisitsBefore TPR (FY2010)
First Year of TPR (FY2011) Difference
TPR 1.7% 34.6% 32.9%
Non-TPR 1.9% 1.8% -0.1%
Source: HSCRC Inpatient Discharge Database
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ARR vs. CMS Readmission Policy• ARR
– Bundling of payments based on payment weights
– Keep the savings from reduced readmissions based on historical performance
– Seed-funding for initial year – Inclusive-all conditions, few
exemptions – Case-mix adjusted
• CMS
– Ranking of performance compared to the nation
– Penalties for the worse performers (1% penalty for the first year)
– 3 conditions (AMI, HF, PN)– Risk Adjustment using
historical information
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ARR Structure • In July, Maryland establish an episode-based payment that covers both the
initial admission and any subsequent re-admission
Acute Hospitalization
DRG pmt
Readmission 1 Readmission 2
DRG pmt DRG pmt
Each paid separately under current system =More payment for more volume
Establish a “DRG” payment amount or “weight” that covers both the initial admission and ALL subsequent re-admissions
HSCRC establishes an expanded Episode
Bundle
$10,000 $9,000 $6,000
Hospital receives “credit” for $25,000 and keeps savings fromEliminating readmissions
30 day “window”
Broader “Scope” – multiple hospitalizations
Previously….. Expanded Time Frame
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30-Day All-Cause Readmission Rates-MD vs. US Medicare
FY 2010 Readmission Rates MD USReadmission per 1,000 Medicare FFS Beneficiaries 18.94 14.45Readmission as a % of Total Discharges 21.2% 18.5%Same-Hospital Readmission as a % of Total Discharges 15.4% Not Available
Source: Delmarva Foundation, Analysis of Medicare Claims
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Trends in 30-Day All-Cause Same-Hospital Readmission Rates as Percent of Discharges, Maryland
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2FY2009 FY2010 FY2011 FY2012
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
9.8% 9.8% 9.9% 9.8% 9.6% 9.7% 9.9% 9.7% 9.5% 9.7% 9.6% 9.4% 9.5%
9.6%10.4% 10.7% 10.5%
11.0% 11.1%11.5%
11.1% 10.7% 10.9% 11.1% 10.8% 10.7%
13.9% 14.0% 14.0% 13.8%13.3% 13.7% 14.0% 13.8%
13.3% 13.3% 13.5% 13.2% 13.3%
All-PayerMedicaidMedicare
Source: HSCRC Inpatient Discharge Database based on ARR technical specifications
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Quality Initiatives
• Phase I: Quality-Based Purchasing linked to payment (QBR)– Hospital Quality Alliance (HQA)/Joint Commission/CMS Clinical Care process
measures for: • heart attack
• heart failure
• pneumonia
• surgical care improvement program
– Patient Experience of Care (HCAHPS)
• Phase II: Maryland Hospital Acquired Conditions (MHAC)• 49 Potentially Preventable Complication Categories
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QBR Performance
CLINICAL SCORE• Opportunity Score
– Percent of patients receiving each core measure
• Appropriateness Score– Percent of patients in each
domain receiving ALL indicated care (Perfect Care)
HCAHPS • Performance Score
– Percent of top box answers (always) for each dimension
• Consistency Score– Measure whether hospitals
are meeting the achievement thresholds across the eight proposed HCAHPS dimensions
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QBR MEASURES AND DOMAINSOPPORUNITY MEASURESAMI-1 Aspirin at ArrivalAMI-2 Aspirin prescribed at dischargeAMI-3 ACEI or ARB for LVSDAMI-5 Beta blocker prescribed at dischargeAMI-8a - Primary PCI Received Within 90 Minutes of Hospital Arrival
CAC-1a - Relievers for Inpatient Asthma (age 2 through 17 years) – Overall Rate
CAC-2a - Systemic Corticosteroids for Inpatient Asthma (age 2 through 17 years) – Overall Rate
CAC-3-Home Management Plan of Care (HMPC) Document Given to Patient/CaregiverHF-1 Discharge instructionsHF-2 Left ventricular systolic function (LVSF) assessmentHF-3 ACEI or ARB for LVSDPN-3b Blood culture before first antibiotic – PneumoniaPN-6 Initial Antibiotic Selection for CAP in Immunocompetent Patient
SCIP CARD 2 Surgery Patients on Beta-Blocker Therapy Prior to Admission Who Received a Beta-Blocker During the Perioperative PeriodSCIP INF 1- Antibiotic given within 1 hour prior to surgical incisionSCIP INF 2- Antibiotic selection
SCIP INF 3- Antibiotic discontinuance within appropriate time period postoperatively
SCIP INF 4- Cardiac Surgery Patients with Controlled 6 A.M. Postoperative Serum GlucoseSCIP INF 6- Surgery Patients with Appropriate Hair Removal
SCIP VTE 1- Surgery Patients with Recommended Venous Thromboembolism Prophylaxis Ordered
SCIP VTE 2 - Surgery Patients with Recommended Venous Thromboembolism Prophylaxis Given 24 hours prior and after surgery
HCAHPS DIMENSIONS
Cleanliness and Quietness of Hospital Envr
Communication About Medicines (Q16-Q17)
Communication With Doctors (Q5-Q7)
Communication With Nurses (Q1-Q3)
Discharge Information (Q19-Q20)
Overall Rating of this Hospital
Pain Management (Q13-Q14)
Responsiveness of Hospital Staff (Q4,Q11)
APPROPRIATNESS DOMAINAMICACHFSCIP
Clinical Process of Care Do-mains 70%
HACHPS Domain 30%
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QBR Results for FY2013Total Amount Redistributed=$7.9 million
HOSPITAL NAMEQBR FINAL
SCORE
Penalty/Reward as % of Total
Inpatient Revenue
Penalty/Reward in $
Southern Maryland Hospital Center 0.4096 -0.50% -$730,413Greater Baltimore Medical Center 0.4099 -0.50% -$1,043,091Prince Georges Hospital Center 0.4106 -0.50% -$874,760Sinai Hospital 0.4338 -0.45% -$1,644,016Atlantic General Hospital 0.4638 -0.39% -$138,255.. .. .. .... .. .. .... .. .. ..Dorchester General Hospital 0.8005 0.28% $106,058Baltimore Washington Medical Center 0.83 0.34% $643,512Maryland General Hospital 0.8301 0.34% $408,057St. Mary's Hospital 0.905 0.49% $265,070McCready Memorial Hospital 0.923 0.52% $27,012
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Maryland Hospital Acquired Conditions Initiative• Implemented in July 2009 • PPCs are defined as harmful events (accidental laceration
during a procedure) or negative outcomes (hospital acquired pneumonia) that may result from the process of care and treatment rather than from a natural progression of underlying disease.
• Relies on Present on Admission Indicators (POA) for secondary diagnosis
• During fiscal year 2008, these hospital-based preventable complications were present in approximately 53,000 of the State’s total 800,000 inpatient cases represented approximately $500 million in potentially preventable hospital payments.
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MHAC Results
Complication rates declined by 20% in the first two years of the program.
Estimated total cost savings due to reductions in complication rates in the initial two years were $105.4 million.
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MHAC Results FY2012Total Amount Redistributed=12.5 million
Hospital Name MHAC Score
Penalty/Reward as % of Total
Inpatient Revenue
Penalty/Reward in $
Franklin Square Hospital 1.60% -1.000% -2,510,509Prince Georges Hospital 1.42% -0.887% -1,522,691Chester River Hospital Center 1.37% -0.856% -235,028Fort Washington Medical Center 1.14% -0.713% -158,139Shady Grove Adventist Hospital 1.00% -0.625% -1,304,663.. .. .. .... .. .. ..Maryland General Hospital -2.37% 0.475% 599,438Carroll County General Hospital -2.52% 0.505% 633,155Dorchester General Hospital -2.73% 0.547% 157,183St. Marys Hospital -2.74% 0.549% 325,953McCready Foundation, Inc. -3.05% 0.611% 29,117
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Value Index – Cost per Case & Complications
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-4.00% -2.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00%
-12.00%
-10.00%
-8.00%
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
RO
C
Po
siti
on
Low cost - higherquality hospitals
High cost
Low cost
Balanced Portfolio of Quality & Patient Satisfaction Metrics
High Quality
Lower QualityHigh rate of complications
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After 30 Years, HSCRC’s Medicare Waiver Requires Realignment
• Current waiver measured on a per-discharge basis – Maryland compared to national growth
• Margin between Maryland and US is slim, decreasing over the last several years
• Medicare waiver test has failed to keep up with changes in payment policies and best practices in hospital reimbursement
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Maryland’s Medicare Waiver
• The current waiver– Measures cumulative growth in Maryland payments per
Medicare discharge versus US payments per Medicare discharge.
• As of June 30, 2011 – US cumulative growth stood at 362.34%– Maryland cumulative growth was 342.61%.
• Relative waiver margin of 4.5%• Expected waiver margin of as low as 0.6% for FY2013.
– Causes of this deterioration• One day stay policy• Assessments• ARR and TPR
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Waiver Status
YE J03 YE J04 YE J05 YE J06 YE J07 YE J08 YE J09 YE J10 YE J11 YE J12 YE J13 YE J140.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%Relative Waiver Test
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Waiver Modernization
• A Modernized Waiver– Principles
• Transformative• Accountable for the total cost of care• Capable of being evaluated• Broad-based• Patient-centered
– Overall goal – to achieve the triple aim of healthcare report• Patient centered care• Improved population health • Bend the cost curve
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HSCRC Engaged with CMS to Develop a Modernized Demonstration
• Ongoing dialog among stakeholders• CMS has provided Maryland a potential
demonstration option outside of Center for Medicare & Medicaid Innovation’s (CMMI’s) State Innovation Models– Maryland stakeholders are reviewing additional
opportunities through CMMI’s State Innovation Models