Maryland's New Demonstration Waiver

Michael B. Robbins, Senior Vice President

April 28, 2015

• History – What is the Maryland “waiver?”

• New waiver’s key metrics

• How the Affordable Care Act interacts with the waiver

• How does this impact your community?

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AGENDA

• Health Services Cost Review Commission (HSCRC) created in 1971 with jurisdiction over hospital costs (IP & OP facility only) with rate setting authority for commercial payers

• Began negotiations with Medicare (HCFA) in 1972 for an all-payer waiver (in effect when all hospital rates set: 1977)

• The “Medicare waiver” (initially a demonstration waiver) made the system “all-payer” allowing for Medicare and Medicaid to be paid using rates set by the HSCRC

• System was based on historical costs – (with a focus on outliers)

• Established a prospective rate setting system - annual rate updates

• System of Financing “reasonable” Uncompensated Care”

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History

• Maryland – only state where hospitals don’t decide how much to charge for care

• Allows Maryland to “waive” Medicare payment rules, set rates hospitals charge

• As long as we meet waiver “test” Growth in Medicare spending per inpatient hospital

stay less than nation

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History

• Emphasis on Quality and Payment Changes nationally spurred a round of similar change in Maryland 2003-2011

• Quality Related Programs:

• Quality-Based Reimbursement (P4P system of rewards and penalties for performing evidence-based process measures), similar to national VBP program

• Maryland Hospital Acquired Conditions Policy (P4P system of significant rewards/penalties for risk adjusted rates of complications across 65 categories)

• Cost/Utilization Programs:

• Admission-Readmission Revenue (ARR) policy which bundled admissions and all-cause readmissions (31 of 46 hospitals adopted)

• One-day Stay Policy

• Re-instituted Volume Adjustment at 85% VC and 15% FC

• Negotiated 10 Total Patient Revenue (TPR) agreements

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History

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History

The 40-year-old waiver “test” quickly becomes out of date, a new five-year demonstration waiver is approved

Through 12/31/14

As of 1/1/14

Inpatient care All hospital care

Medicare only All payers

Cost of care per hospital stay

Cost and quality of care

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New Waiver Objectives

Opportunity for Maryland to continue to be a NATIONAL LEADERin health care

CHANGEthe way we pay for and provide health care

BUILDon the great system we have and make it even better: • More affordable • Safer • A healthier Maryland

• Work together to slow growth in spending for hospital care

• Continue Maryland’s unique way of setting hospital prices

• Change how hospitals are paid, to reward the right things

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Starts with Hospital Care

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New Waiver Financial Tests

Annual hospital SPENDING CAP − 3.58% all payer per capita growth

Medicare dynamic hospital SAVINGS TARGET − $330 million over 5 years

GROWTH in total Maryland Medicare spending per capita cannot exceed national rate of growth

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New Waiver Quality Targets

READMISSIONS: patients who return to the hospital within 30 days of hospital discharge

Maryland ranks poorly(almost last)– 49 of 51 states and D.C.

Bring Maryland readmission rates to NATIONALAVERAGE in 5 years

Better, SAFER care

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New Waiver Quality Targets

HOSPITAL ACQUIRED CONDITIONS: patients who get infections while in the hospital

Maryland rates of infection HIGHER than nation

REDUCE infections and other “hospital-acquired conditions” by 30% in5 years

Better, SAFER care

Change how hospitals are paid to reward the right things•Volume – no; Value - YES

•Success under new spending caps requires volume control and cost reduction

•The key: population health management

•Care for patients in the community lower cost settings; reduce unnecessary care

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A Healthier Maryland

• Never been tried or tested before on a scale of this magnitude

• Hospitals in serious financial condition – 40% losing money at the time waiver was approved

• New hospital spending limits tight

• Will require hospitals to redefine themselves

• Will require hospitals to develop new partnerships

• Will require communities to work together to keep people healthy

• Will require patients and families to truly engage in their care

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Challenges

• Continue our unique hospital rate-setting system

• More equitable care for low income and uninsured people

• Should lead to slower growth in insurance premiums

• Lead nation in reforming health care

• Statewide focus on quality and safety

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Opportunities

• Rate-Setting Commission implements numerous policy changes through multi-stakeholder work group process (Including new work groups on Consumer Engagement and Care Coordination)

• Hospitals negotiate and adopt global budgets, and begin to invest in IT, care coordinators, and more to help manage community health

• Hospitals look to develop new partnerships15

Initial Steps

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Early Results To Date

• Expansion of coverage: enrollment in Medicaid has grown by 300,000 since January 1, 2014

• Estimated 100,000 enrollees in private exchange plans

• The result: significant reduction in hospital uncompensated care

• HSCRC reduced amounts in hospital rates by 1% in 2015; with another reduction of about 1% expected for next year

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Affordable Care Act Impact

• What is hospital source of funding for innovation in a world where total revenue growth is constrained?

• How do we insure that the promise of targeted disease management is realized?

• Opportunities to partner: Population health management and funding opportunities outside of the rate regulatory process

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Impact on Manufacturers

• Railroads went out of business because they thought they were in the railroad business instead of recognizing they were in the transportation business

• Hospitals realize they are in the health care business, not the hospital business

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“Railroad Moment”

Source: 2012 Kaufman, Hall & Associates, Inc; Jason Sussman

QUESTIONS?

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Maryland's New Demonstration Waiver

Michael B. Robbins, Senior Vice President

April 28, 2015