AAHAM Spring Meeting MHA UPDATE March 15, 2013 Anne Hubbard, Assistant Vice President, Financial Policy & Advocacy

1. AAHAM Spring Meeting MHA UPDATE March 15, 2013 Anne Hubbard, Assistant Vice President, Financial Policy & Advocacy

2. MHA Update Agenda • Wavier Modernization Update • Medicaid Budget Update • Proposed Federal FAP Rules

3. Waiver Cushion 3

4. Current Test vs. New Test Current TestNew Test Medicare Inpatient Payment per Discharge Medicare Inpatient and Outpatient Payment per Beneficiary Cumulative Rate of Growth (1981 to present) Annual Rate of Growth Base Year 1981 MD vs. National Growth Target MD vs. MD 4 4

5. The Structure Two three-year demonstrations – “3 + 3” • First three-year demonstration • 2013 – 2015 • More clear • Second three-year demonstration • 2016 – 2018 • Less clear

6. The “Goal” First three-year demonstration • The Goal – • By the end of the first three years; • Limit the rate of growth in; • Total per capita inpatient and outpatient regulated hospital revenue; • To 3.57% or less

7. The “Goal” • Based on 10-year historical average annual growth in Gross State Product (GSP) • GSP averaged 3.6% • Hospital regulated revenue averaged 6.8% • But projected revenue growth (2013 – 2015) is 3.5%

8. The “Test” First three-year demonstration • The Test – • By the end of the first three years; • Limit the rate of growth in; • Medicare per beneficiary inpatient and outpatient regulated hospital revenue; • To 2.62% or less (takes into account that Medicare grows slower than GSP)

9. The “Tools” • Total Patient Revenue (TPR) – new models • Admissions Readmissions (ARR) • Volume Adjustments • Primary Care Medical Home • More links between payment and quality • Accountable Care Organization options • New “bundled” payment approaches • Physician gain sharing

10. The “Transition” • Protection from current waiver test • Improved hospital annual updates • Process to articulate second three years • Insurance premium rate alignment • Review uncompensated care policy • Broaden HSCRC governance

11. MHA Objectives • Retain as much of the waiver subsidy as possible • Pursue innovation in care delivery • Our “critical few” • Get out from under the existing waiver and payback provisions • Implement real care delivery tools • Protection from Medicaid assessments • Improved update • Differential used as lever to achieve success under new waiver

12. Next Steps • State to submit proposal – April 1 • Federal government review and reply • 2-6 month turn around • Hospitals must assess support • Failure will be painful; new waiver may be painful • Regardless, hospitals must prepare

13. FY 2014 State Medicaid Budget

14. FY 2014 Maryland Budget • Governor’s Budget - $32B • Introduced to the General Assembly Jan. 6th • The Legislature can cut the budget but they cannot add to it without taking funds from other programs. • Budget must be finalized by April 1st

15. Medicaid Budget • Maryland Medical Assistance Program - $7.4 billion budget request • No deficit expected • FY 2013 will close out with a surplus. • FY 2013 Medicaid expenditures will be reduced by $94 million to reflect lower than anticipated expenditures due to lower enrollment, favorable case mix changes and utilization trends and a 2013 reduction in MCO rates.

16. Medicaid Budget Growth

17. FY 2014 Medicaid Budget Growth • The budget grows by $300 million or 4.4%, due to expansion of Medicaid to 138% FPL, as specified under ACA. Most of this increase is federal funding, as the expansion population will be entirely covered by the federal government through FY 2017.

18. Medicaid Enrollment Growth

19. Medicaid Assessment

20. Medicaid Assessment • Medicaid Assessment set at $389M for FY 2014 • Other cost containment actions: • Tiering of outpatient rates and ED services (study required to define savings) • Study required to define savings associated with this action. If $30M anticipated is not realized, HSCRC can take action to generate necessary savings. .

21. Federal Proposed FAP Rules

22. Federal Proposed FAP Rules • ACA requires hospitals to have Financial Assistance Policies. • The Department of Treasury and the IRS issued proposed rules in June 2012. Comments were due September 2012.

23. Key differences Between MD and FAP Federal Policies • Notification – community based and on hospital websites • Application – FAP must apply to emergency and medically necessary care (MD policy doesn’t apply to medically necessary care) • Collection – Debts can’t be collected in the ED • Language – FAP must be issued in languages representing 10% or more of the PSA • Reasonable effort – 120 days – 3 billing statements + copy of FAP • Application Period – 240 day period

24. Federal Limitation on Charges Policy Two Methods: Look Back & Prospective Medicare • The “look back” method would allow for the amount generally billed to be determined based on a blend of public and private payor payments; thus, the reduced-cost care would likely be between 94 and 98 percent of charges in Maryland. • The “prospective method” would set reduced cost rates at 94 percent of charges in Maryland, because the method is based on Medicare payments.

25. Questions?