Transcript Mechanics of the New Waiver Test

Mechanics of the New Waiver
Test
Brett McCone
Managing Director,
KPMG LLP
Discussion Overview
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Background
Financial Targets
Quality/Utilization Targets
Proposed Terms
Questions and Answers
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Background
• On October 10, 2013, the State of Maryland applied
to the Center for Medicare and Medicaid Innovation
(CMMI) for a demonstration project to improve
outcomes, to enhance patient experience and to
control costs.
• The application was approved on January 10, 2014
• The resulting All-Payer Model (“the Model”) shifts
the focus from historic price per encounter controls
to a focus on overall revenue growth, including
price and use.
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Background
• Under the historic model, hospitals in the State of Maryland
received a “waiver” from Medicare’s Inpatient and
Outpatient Prospective Payments Systems (IPPS and
OPPS) so as long as Maryland’s Medicare payment per
admission grew below the national average.
– The historic Waiver Test compared growth rates in Medicare
payment per admission since the CY1980 base period (33 years!)
– Price per Admission = Limited controls on utilization required under
the test (at least on admisions)
– No provision for outpatient price measurement
• Maryland’s previous Waiver was codified in Section
1814(b)(3) of the Social Security Act (SSA)
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Background
• The New Model includes the following provisions:
– Annual all-payer, per capita, total hospital cost growth limited
to 3.58%
– Maryland’s Medicare per beneficiary total hospital cost growth
rate must be below the national Medicare per beneficiary
average, resulting in $330m of Medicare savings over five
years
– 80% of Maryland hospital revenue shifted into global payment
models by year 5
– Maryland’s Medicare per beneficiary total cost growth rate
cannot exceed the national average by more than 1
percentage point, and must be “break even” with the national
average by year 4.
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Background
• The Model includes the following provisions (cont.):
– Maryland will reduce its 30-day Medicare readmission rate to
the national average in five years
– Annual Potentially Preventable Complication (PPC) reduction
of 6.89%, for a cumulative 5 year reduction of 30%.
– Maryland will propose a model extension at the start of Year 4
– Waives Section 1814(b)(3) of the SSA: Maryland’s historic
Waiver Test
• If the Model is not extended, or terminated early, Maryland hospitals
will transition to the national Medicare payment systems.
• …yes, we are working without a net.
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Financial Targets
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Financial Targets: All-Payer Test
• All-payer per capita growth rate of 3.58% is the ten
year average annual growth rate in Maryland Gross
State Product (GSP) per capita (2002 – 2012)
• 3.58% is fixed cap for years 1-3. In years 4 and 5,
Maryland may adjust the all-payer cap for more
recently available GSP data.
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Financial Targets: All-Payer Test
• The all-payer per capita growth rate is expected to
be calculated using:
– Regulated, inpatient and outpatient hospital charges,
from Maryland hospitals for Maryland residents receiving
services.
• Summarized from the new monthly hospital charge submissions
for Maryland and non-Maryland residents
– Population growth from the Maryland Department of
Planning.
• Interim population growth estimated from State projections
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Financial Targets: All-Payer Test
• Illustrative example:
(Dollars in Thousands)
Base Period Charges
$ 15,000
A
1,200
B
Less: Non-MD resident Charges
Net MD Base Period Charges
$ 13,800
Annual Revenue Growth Ceiling Factor
Revenue Ceiling prior to Population Adjustment
1.0358
$ 14,294
Maryland Annual Population Growth Factor (Estimated)
Revenue Ceiling for Maryland Residents
1.0060
$ 14,380
C = A-B
D
E = C*D
F
G = E*F
Source: HSCRC February 5, 2014 Staff Recommendations; Six month base estimates annualized.
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Financial Targets: All-Payer Test
• Compliance calculation – Example 1:
(Dollars in Thousands)
Base Period Charges (CY2013)
$
Less: Non-MD resident Charges (CY2013)
Net MD Base Period Charges
$
Actual MD Resident Charges (CY2014)
Actual MD Resident Charges Adjusted for Estimated MD Population Growth
Actual Growth Factor Adjusted for MD Population Growth
Actual Growth Factor Above Below/Revenue Ceiling Growth Factor
1,200
B
C = A-B
1.0358
D
14,294
E = C*D
1.0060
F
$
14,380
G = E*F
$
14,100
H
14,016
I = H/F
1.0156
J = I/C
-1.95%
K = J/D-1
$
Maryland Annual Population Growth Factor (Estimated)
Revenue Ceiling for Maryland Residents
A
13,800
Annual Revenue Growth Ceiling Factor
Revenue Ceiling prior to Population Adjustment
15,000
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Financial Targets: All-Payer Test
• Compliance calculation – Example 2:
(Dollars in Thousands)
Base Period Charges (CY2013)
$
Less: Non-MD resident Charges (CY2013)
Net MD Base Period Charges
$
Actual MD Resident Charges (CY2014)
% Actual MD Resident Charges Above / (Below) Revenue Ceiling
1,200
B
C = A-B
1.0358
D
14,294
E = C*D
1.0060
F
$
14,380
G = E*F
$
14,100
H
-1.95%
I = H/G -1
$
Maryland Annual Population Growth Factor (Estimated)
Revenue Ceiling for Maryland Residents
A
13,800
Annual Revenue Growth Ceiling Factor
Revenue Ceiling prior to Population Adjustment
15,000
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Financial Targets: All-Payer Test
• Points to consider
– Timeliness and accuracy of monthly data reported
• MD Resident vs. Non-MD Resident charges
– Population estimates versus actual experience
– Variable changes in rates (assessments, UCC, etc.)
– Use of charges versus payments (Not a significant risk
unless the differential changes)
• Monitoring compared to other data sources
(CRISP, etc.)
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Financial Targets: Medicare Test
• From the October 11, 2013 Application:
– “In addition to limiting…cost growth for all payers…Maryland
will limit its Medicare per beneficiary total hospital cost
(payment) growth…to produce $330m in Medicare savings
over five years.”
– “CMS will calculate Medicare savings by establishing a
baseline that is the actual Medicare per beneficiary total
hospital expenditures (payments) for Maryland Medicare feefor-service beneficiaries in 2013 trended forward by the
national average growth rate in Medicare per beneficiary
hospital expenditures (payments) to each year of the model
and comparing Maryland’s annual Medicare per beneficiary
hospital expenditures…”
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Financial Targets: Medicare Test
• Baseline = CY2013 Medicare hospital payments for Maryland
Medicare beneficiaries
– Medicare hospital payments = Inpatient and outpatient hospital
payments
• Medicare claim type 60 (Inpatient) and claim type 40 (Outpatient), TOB = 11X
• Includes: short term general hospitals, multiple hospital component in a medical
complex, Alcohol/drug hospitals
• Excludes reference lab (unregulated)
• Excludes 72x bill type (ESRD clinics)
• Refer to CMS application, page 53 for guidance
– Maryland Medicare beneficiaries = All Maryland residents who are
(Medicare) fee-for-service beneficiaries enrolled in Part A and/or Part B
– Includes all geographic service locations: in-state and out-of-state
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Financial Targets: Medicare Test
National
Inpatient Hospital Payments
US MC Part A Beneficiaries
Outpatient Hospital Payments
US MC Part B Beneficiaries
Total Hospital Payment per
US MC Beneficiary
Maryland
Inpatient Hospital Payments
Maryland MC Part A Beneficiaries
Outpatient Hospital Payments
Maryland MC Part B Beneficiaries
Total Payment per
Maryland MC Beneficiaries
Inpatient Cost: All fee-for-service claims with a claim code = "60"
Outpatient Cost: All fee-for-service claims with a claim code = "40"
Serial Numbers:
0001-0879 (Short-term general and specialty hospitals where TOB = 11x)
0900-0999 (Multiple hospital component in a medical complex, numbers retired, where TOB = 11x)
1200-1224 (Alcohol/drug hospitals, excluded from PPS-numbers retired, where TOB = 11x)
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Financial Targets: Medicare Test
• A CY2013 baseline will also be established for the national average
• The savings test will compare the actual growth rate of the Maryland
hospital payment per beneficiary versus the applied national (actual)
growth rate to the baseline Maryland hospital payment per beneficiary.
• The growth rate differential applied to the Maryland beneficiary total will
compute the annual savings
• The October 11, 2013 application reflects savings targets (p. 16) that
assume no savings in year 1 and approximately 0.5% below the national
trend in years 2-5.
• The assumptions and charts on the next several pages reflect
illustrative, example calculations. The figures are NOT EXACT and
are examples only.
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Financial Targets: Medicare Test
• Assumptions:
– Maryland Medicare beneficiaries remain fixed for all periods at 845,000
• Table 2.8 at http://cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-andReports/MedicareMedicaidStatSupp/2013.html
– Example Maryland per beneficiary base = $6,545
• Source: 10/11/13 CMS application
– Fixes national payment per beneficiary growth at 1.0% per year (general
assumption for illustrative purposes)
• Scenarios:
–
–
–
–
“A” Targeted growth rates to achieve CMS application annual targets
“B” Straight line savings beginning in CY2015 to achieve $330m savings target
“C” Straight line savings beginning in CY2014 to achieve $330m savings target
“D” Straight line savings beginning in CY2014 with a fixed 0.5% savings per
year
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Scenario “A” Targeted growth rates to achieve CMS application annual targets
Rate of Growth and
$330m Savings Projection
$140.0
Growth Rate
1.50%
$120.0
$115.5
1.25%
$100.0
$82.5
1.00%
$82.5
0.75%
$60.0
$49.5
0.50%
$40.0
0.25%
0.00%
$80.0
$20.0
$0.0
CY2014
Annual Medicare Savings
1.75%
$0.0
CY2015
CY2016
Maryland (imputed)
Maryland
Maryland @ U.S. Growth Rate
Maryland (above)/below U.S.
Total MD Medicare Beneficiaries
Annual Savings (in millions)
Cummulative Medicare Savings (in millions)
Maryland (imputed)
U.S.
MD (above)/below National
Base
$6,545
$6,545
Base
0.00%
0.00%
0.00%
U.S.
CY2017
CY2018
Annual Savings (in millions)
Medicare Hospital Cost Per Beneficiary
CY2014
CY2015
CY2016
CY2017
$6,610
$6,618
$6,646
$6,674
$6,610
$6,677
$6,743
$6,811
$0
$59
$98
$137
845,000
845,000
845,000
845,000
$0.0
$49.5
$82.5
$115.5
$49.5
$132.0
$247.5
CY2018
$6,781
$6,879
$98
845,000
$82.5
$330.0
Medicare Hospital Payment Growth Rate
CY2014
CY2015
CY2016
CY2017
1.00%
0.11%
0.42%
0.43%
1.00%
1.00%
1.00%
1.00%
0.00%
0.89%
0.58%
0.57%
CY2018
1.61%
1.00%
-0.61%
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Scenario “B” Straight line savings beginning in CY2015 to achieve $330m savings target
Rate of Growth and
$330m Savings Projection
$132.9
$120.0
Growth Rate
1.00%
$100.0
$99.0
0.75%
$80.0
$65.5
0.50%
$60.0
$40.0
$32.5
0.25%
0.00%
$140.0
$20.0
$0.0
CY2014
Annual Medicare Savings
1.25%
$0.0
CY2015
CY2016
Maryland (imputed)
Maryland
Maryland @ U.S. Growth Rate
Maryland (above)/below U.S.
Total MD Medicare Beneficiaries
Annual Savings (in millions)
Cummulative Medicare Savings (in millions)
Maryland (imputed)
U.S.
MD (above)/below National
Base
$6,545
$6,545
Base
0.00%
0.00%
0.00%
U.S.
CY2017
CY2018
Annual Savings (in millions)
Medicare Hospital Cost Per Beneficiary
CY2014
CY2015
CY2016
CY2017
$6,610
$6,638
$6,666
$6,694
$6,610
$6,677
$6,743
$6,811
$0
$39
$78
$117
845,000
845,000
845,000
845,000
$0.0
$32.5
$65.5
$99.0
$32.5
$98.1
$197.1
CY2018
$6,722
$6,879
$157
845,000
$132.9
$330.0
Medicare Hospital Payment Growth Rate
CY2014
CY2015
CY2016
CY2017
1.00%
0.42%
0.42%
0.42%
1.00%
1.00%
1.00%
1.00%
0.00%
0.58%
0.58%
0.58%
CY2018
0.42%
1.00%
0.58%
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Scenario “C” Straight line savings beginning in CY2014 to achieve $330m savings target
Rate of Growth and
$330m Savings Projection
1.25%
$120.0
$100.0
Growth Rate
1.00%
$88.2
0.75%
$65.6
0.50%
0.25%
$80.0
$60.0
$43.4
$40.0
$21.5
$20.0
0.00%
Annual Medicare Savings
$111.2
$0.0
CY2014
CY2015
CY2016
Maryland (imputed)
Maryland
Maryland @ U.S. Growth Rate
Maryland (above)/below U.S.
Total MD Medicare Beneficiaries
Annual Savings (in millions)
Cummulative Medicare Savings (in millions)
Maryland (imputed)
U.S.
MD (above)/below National
U.S.
Base
$6,545
$6,545
Base
0.00%
0.00%
0.00%
CY2017
CY2018
Annual Savings (in millions)
Medicare Hospital Cost Per Beneficiary
CY2014
CY2015
CY2016
CY2017
$6,585
$6,625
$6,666
$6,706
$6,610
$6,677
$6,743
$6,811
$25
$51
$78
$104
845,000
845,000
845,000
845,000
$21.5
$43.4
$65.6
$88.2
$64.9
$130.6
$218.8
CY2018
$6,747
$6,879
$132
845,000
$111.2
$330.0
Medicare Hospital Payment Growth Rate
CY2014
CY2015
CY2016
CY2017
0.61%
0.61%
0.61%
0.61%
1.00%
1.00%
1.00%
1.00%
0.39%
0.39%
0.39%
0.39%
CY2018
0.61%
1.00%
0.39%
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Scenario “D” Straight line savings beginning in CY2014 with a fixed 0.5% savings per year
Rate of Growth and
Medicare Savings Projection
$160.0
$142.5
Growth Rate
1.00%
$120.0
$113.1
$100.0
0.75%
$84.2
0.50%
0.25%
$140.0
$80.0
$60.0
$55.7
$40.0
$27.7
$20.0
0.00%
Annual Medicare Savings
1.25%
$0.0
CY2014
CY2015
CY2016
Maryland (fixed)
Maryland
Maryland @ U.S. Growth Rate
Maryland (above)/below U.S.
Total MD Medicare Beneficiaries
Annual Savings (in millions)
Cummulative Medicare Savings (in millions)
Maryland (fixed)
U.S.
MD (above)/below National
Base
$6,545
$6,545
Base
0.00%
0.00%
0.00%
U.S.
CY2017
CY2018
Annual Savings (in millions)
Medicare Hospital Cost Per Beneficiary
CY2014
CY2015
CY2016
CY2017
$6,578
$6,611
$6,644
$6,677
$6,610
$6,677
$6,743
$6,811
$33
$66
$100
$134
845,000
845,000
845,000
845,000
$27.7
$55.7
$84.2
$113.1
$83.4
$167.6
$280.7
CY2018
$6,710
$6,879
$169
845,000
$142.5
$423.2
Medicare Hospital Payment Growth Rate
CY2014
CY2015
CY2016
CY2017
0.50%
0.50%
0.50%
0.50%
1.00%
1.00%
1.00%
1.00%
0.50%
0.50%
0.50%
0.50%
CY2018
0.50%
1.00%
0.50%
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Financial Targets: Medicare Test
• Points to consider:
– Uncertainty of national growth rate
– Impact of the ACA (coverage expansion, etc.)
– Localized clinical epidemic
– Inclusion of unregulated services in the hospital measure
– MD vs. national percentage of Medicare Part B to
Medicare Part A beneficiaries
– Relationship of All Payer ceiling to Medicare savings
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Quality Targets: Readmissions
• Maryland maintains its waiver from the CMS Hospital Readmission
Reduction Program.
• To do so, Maryland will reduce 30-day Medicare readmission rate to the
national average in five years
– Most recent Medicare readmission rates:
• Maryland = 20.5% vs. national = 18.5%
• Based on the most recent data, a 0.5 percentage point reduction in the
rate each year of the agreement is required
• Appendix B of the application (p. 55) outlines the readmission
calculation
– Monthly readmissions rate = Readmissions during the 30 day period / index
admissions that occurred during the month
– Readmission occurs if first day of a stay occurred within 30 days of the last
service date of an index admission
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Quality Targets: MHAC/PPC
• Maryland maintains its waiver from the CMS
Hospital Acquired Conditions Program.
• Maryland will achieve an annual, aggregate
reduction of 6.89% in 65 Potentially Preventable
Complications (PPCs)
– PPCs, not MHACs
– 30% reduction over 5 years
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Proposed Terms
• During the five year period, there are specific events that will lead to
further review by CMS and potentially early termination. (Application p.
17) They are:
– Failure to achieve (Medicare) savings for two consecutive years
– Failure to meet the cumulative (Medicare) savings target by $100m or more at
any point during the life of the model
– Annual growth in Maryland Medicare per beneficiary total cost that is more than
1% point greater than the national average
– Determination of significant quality of care deterioration
• Should any of these occur, CMS will provide notice to Maryland.
– Maryland has 90 days to respond, with CMS having 90 days to accept the
response or request a corrective action plan, due in 30 days.
– If the corrective action plan is not implemented successfully within 1 year of
notification, CMS may terminate the agreement.
– See flowchart in Application, page 18.
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Questions and Answers
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Thank You
Brett McCone
Managing Director,
KPMG LLP
410 949 8538
[email protected]
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