Transcript Slide 1

The 2011 Legislative Session in Review
Highlights and Issues of Importance to Hospitals
Dan Stultz, M.D., FACP, FACHE
President/CEO
Texas Hospital Association
Texas State University HCA Students-Annual Conference
October 21, 2011
2012-2013 State Budget
 House and Senate both filed initial versions of budget that
assume no new revenue
 Projected $72B in available revenue to fund an estimated
$99B in current services
 Shortfall approximately $27B
– Current services impacted by Medicaid caseload
growth, public school enrollment, etc.
– Loss of Federal stimulus funding
 Historically dire budget situation – 2003 shortfall was
“only” $10B resulting in significant cuts
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Factors driving the shortfall
 Structural deficit – business margins tax
 Sales tax projections down over biennium
– Sales taxes are 56% of state revenue
 Teacher and state employee retirement and
health care costs have skyrocketed
 Increased demand for services as state
population grows, ages
 Loss of enhanced FMAP
under federal stimulus act
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Factors driving the shortfall (cont.)
 Missed projections for Medicaid caseload,
service utilization in 2010-2011
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No Political Will to Address Revenue
 Nov. 4, 2010 elections
– 101/150 Republicans in House
– Tea Party effect on “no new revenue”, no RDF
 Rainy Day Fund only used for current biennial shortfalls
 Focus on temporary “non-tax revenue”
 Payment deferrals
 Unwillingness to modify margins tax
 Focus on “administrative efficiency:”
– Higher and public education
– Medicaid
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Spreading the Pain?
 $4 billion cut from public schools
 $4.8 billion unfunded in Medicaid
 $1 billion cut to higher education, including
financial aid and institutional funding
 $2.2 billion ”smoke and mirrors” deferred
payments to the Foundation School Program
 $0 appropriated from $6.6 billion Rainy Day
Fund for the current biennium
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Budget Overview - Medicaid
 Substantial $4.8B under-funding of program
– Expected to be made up thru supplemental
appropriation in 2013 (Rainy Day Fund)
 True spending reductions
– Cost-containment initiatives
– Medicaid managed care expansion statewide
 Gray area
– Cost-containment for federal “flexibility”
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Budget – Hospital Impact
 8% rate cut for hospitals (added to 2% cut in
2010-11)
 No rate cut for doctors (had 2% cut in 2010-11)
 Statewide Hospital SDA ($30 M savings - $20M
mitigation)
 Expansion of Medicaid managed care ($272 M
in savings)
 Potentially punitive UPL riders replaced with
enhanced HHSC data collection requirements
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Cost Containment Riders in Budget
 Rider 61 requires HHSC to achieve $450m
GR funds through: (of 30 items)
– Payment reform and quality based payments
– Increasing neonatal intensive care management
– More appropriate ER rates for non-emergent care
– Maximizing copays in Medicaid
– Improving birth outcomes by reducing birth trauma
and elective inductions
– Increasing fraud, waste and abuse detection
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Cost Containment Riders in Budget
 Rider 59 requires HHSC to save $700m GR
funds by pursuing a waiver from CMS to
allow Medicaid flexibility including:
– Greater flexibility in standards and levels of eligibility
– Better designed benefit packages to meet
demographic needs of Texas
– Use of co-pays
– Consolidation of funding streams for transparency and
accountability
– Assumed responsibility by the Feds of 100% of the
health care costs of unauthorized immigrants.
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Concerns with Hospital Payment System
 Impact of rebasing / SDA system that pays
similar hospitals differently
 Unequal ways to access supplemental
payments (reimbursement = 61% of costs)
 “Inability” of state to adequately fund
program
 Limited interest in provider tax
 “Transparency” of local UPL programs
 Need to protect of UPL under Medicaid
managed care expansion
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Nursing & Trauma Funding
 Nursing Shortage Reduction Fund = $30 M total for the
biennium – will allow nursing schools to maintain
increased enrollment
 Nursing education received $5-6 million from tobacco
settlement funds
 Provides for $57.5 million per year in funding for
designated trauma facilities, which is a 23 percent
reduction from the $75 million per year originally
appropriated for the current biennium.
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Next Steps
 Keep an eye on D.C.
- Deficit reduction = cuts to hospitals
- “Medicaid reform”
 Continued discussions about hospital
payment reform
- UPL waiver
- Provider tax
 Develop coalitions to address state’s
structural revenue deficit
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THA Mission
THA brings value to Texas
hospitals by leading change that
enhances access to safe,
affordable, quality health care.
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Key Implications and Questions for
Hospitals That Are Troublesome
1) Delivery System Reform or Payment Reform
2) Is it or isn’t it reform? Feels “stalled”.
3) Managing in transition; budgeting in change.
4) Acquisition and consolidation of hospitals and systems
will continue.
5) New models of care delivery
6) Physician alignment strategy - issues
7) Can we pay the physicians in a way that incentivizes
the right behavior and care, that “gets them in the
game?”
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Key Implications and Questions for
Hospitals
Payment System Reform
 UPL Waiver – monitoring, input; the need for the
government to work this out with us.
 The Provider Tax issue and the need for an in-depth
analysis
 State DSH Program
 Federal Payment Cuts
 The Future of Medicaid and Medicare – are they
sustainable?
 Bundling of Payments and Other “Ideas” to Reduce the
Costs or to Reduce the Reimbursement to Providers
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Key Implications and Questions for
Hospitals
The Elephants In The Room:
 There are unnecessary and duplicative costs in the
system.
 There is high variation in all parts of the country and all
parts of the state.
 We know the physicians are key, but no one (very few)
has changed the payment system to control costs.
 UPL in Texas is a publically, not well known, huge
financing vehicle that keeps hospitals above water.
Tremendous anxiety over this issue is in the state now.
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Overview: Market Changes
 Realignment of capital investments
 Constrained reimbursement levels from state and
federal pressure
 Passive payers transitioning to active purchasers
 Market consolidation
 Growth in physician employment – at what rate?
 Workforce shortages
 Careful watch by financial groups, banks, markets
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Mandatory Medicare Quality P4P
Initiatives – Still Coming
FFY 2013
Inpatient
Readmissions
• Implemented
October 1, 2012
(FFY 2013)
• Reduces Medicare
reimbursement by
$7 billion / 10 years
nationwide
Inpatient ValueBased Purchasing
• Implemented
October 1, 2012
(FFY 2013)
• Budget neutral;
redistributive within
PPS system
FFY 2015
Health CareEHR Meaningful
Acquired
Use (ARRA)
Conditions
• Medicare payment
• Implemented
penalties assessed
October 1, 2014
against eligible
(FFY 2015)
hospitals and
physicians that
• Reduces Medicare
fail to be
inpatient hospital
meaningful users
reimbursement by
by October 1, 2014
$ 1.4 billion /
(FFY 2015)
10 years
nationwide
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The Future For You
 Manpower Needs
 Response to Care/Evidence Based
 Physician Comp Formulas that
Incentivizes the Right Behavior
 It has to change
 Get rid of the elephants in the room
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Questions?
Dan Stultz
[email protected]
512-465-1012