The View From Washington

The View From Washington Cynthia K. Morton, MPA Executive Vice PresidentNational Association for the Support of Long Term Care eHDS User Group MeetingJune 8, 2011

Today’s Session • Where have we been? • Where are we now? • Where are we headed?

Where have we been? MAJOR MEDICARE CUTS

SNFs have absorbed major Medicare cuts in the last two years

Medicare Cuts • 2010 Regulation • Decrease of $12.1 billion over 10 years from the forecast error adjustment; 3.2% reduction in 2010 • Patient Protection and Affordable Care Act (ACA) • Decrease of $16.9 billion over 10 years from productivity adjustments/reductions in the market basket update starting in FY2012 • 2011 Regulation • Decrease of $2.2 billion over 10 years from the 0.6% reduction in the market basket update for 2011 • Decrease of 7-8% in Part B therapy payments to SNFs in 2011 (Multiple Procedure Payment Reduction) • Increased administrative burden from Minimum Data Set 3.0 • 2012 Proposed Regulation – 2 options • Market basket increase 2.7%- 1.2% productivity adjustment = 1.5% increase ($530 million) • $4.47 billion reduction of the case mix adjustment to account for spike in claims that differs greatly from CMS forecast for first three months

SNF PPS Proposed Rule - FY 2012 • Very problematic for SNFs! • 3 months of FY 2011 claims show spike in nursing home payments • Actual RUG IV patterns differed significantly in first quarter than forecast • Transition was supposed to be budget neutral • CMS imposes a reduction to ensure parity between RUG III and RUG IV

SNF PPS Proposed Rule continued • Patients are classified into highest paying RUG IV therapy group more than 40 % as compared to 10% as projected by CMS. • Group Therapy-- patient’s time divided by 4 • End of Therapy OMRA– completed when therapy ceases for 3 days • Change of Therapy OMRA – rolling 7 day assessment

Medicaid Payment Shortfalls Exacerbate SNF Funding Problems Shortfall per Medicaid Resident Day, All States, 1999-2010 Source: Eljay, LLC . A Report on Shortfalls in Medicaid Funding for Nursing Home Care. American Health Care Association. 2010. *Notes: 2010 data are projected. These data show the shortfall between Medicaid reimbursement and allowable Medicaid costs.

Shortfall Will Continue to Grow as the Number of States Implementing Rate Restrictions Increases… Source: National Governors Association and National Association of State Budget Officers, The Fiscal Survey of the States June, 2011

Lower Medicaid Rates Are Correlated with Lower Quality Care Performance on Selected Quality Indicators, by Medicaid Payment Rate, 1998 Source: David C. Grabowski, et al. Medicaid Payment and Risk-Adjusted Nursing Home Quality Measures. Health Affairs 23.5 (2004) Note: Data are adjusted for facility ownership, size, market wage index, and other factors.

Lower Medicaid Rates Are Also Correlated with Higher Hospitalization Rates Each $10 increase in the daily Medicaid payment level above the national average is strongly associated with 5 to 9 percent lower odds of hospitalization Source: Gruneir, Andrea, et al. “Hospitalization of Nursing Home Residents with Cognitive Impairments: The Influence of Organizational Features and State Policies.” Gerontologist 47.4 (2007)

Nursing Facility Operating Margins, Which Include Medicaid, Are Barely Positive Nursing facilities rely on Medicare to fill the Medicaid shortfall, so Medicare reductions will reduce already low overall margins Source: FY 2008 Cost Reports *Inpatient operating costs are not adjusted for private beds and facilities in the top and the bottom 10% of the individual margin distribution (outliers) were removed ** Almost two-thirds of non-Medicare days are Medicaid days and the remainder are out-of-pocket, private insurance and other days. Facilities in the top and the bottom 10% of the individual margin distribution (outliers) were removed *** Facilities in the top and the bottom 10% of the individual margin distribution (outliers) were removed

Where are we now? POST HEALTH CARE REFORM

Common Themes • Centers for Medicare & Medicaid Services (CMS) GOAL: Lower Costs and Improve Care • Office of the National Coordinator (ONC) GOAL: “Triple Aim” Improve population health, Improve care, and Reduce costs • Center for Medicare and Medicaid Innovation (CMI): Better healthcare, better health and reduced costs through improvement

Efforts to Improve Medicare Program Accountable Care Organizations

Areas of Focus • Patient Care Models (The right care at the right time, in the right setting) • Partnership for Patients • Seamless and Coordinated Care Models (Coordinating care to improve health outcomes for patients) • Accelerated Development Learning Sessions • Advance Payment • Pioneer ACO Model • State Demonstrations to Integrate Care for Dual Eligible Individuals • Community and Population Health Models (Exploring steps to improve public health for Medicare, Medicaid, and CHIP beneficiaries and make communities healthier and stronger.) • More information available at http://Innovations.cms.gov

Partnership for PatientsFocus on Care Transitions • $1 Billion in new funding from ACA • Split evenly between Partnership for Patients and Community-Based Care Transition Program • Public-private partnership • Goals: • Keep patients from getting injured or sicker. By the end of 2013, preventable hospital-acquired conditions would decrease by 40% compared to 2010. • Help patients heal without complication. By the end of 2013, preventable complications during a transition from one care setting to another would be decreased so that all hospital readmissions would be reduced by 20% compared to 2010. • Clear role for LTC • Patient transition from a hospital to LTC facility

Link to Health Information Technology • ONC Efforts • Regional Extension Centers (RECs) • Beacon Communities • State Health Information Exchange (HIE) • EHR Incentive Program • Meaningful Use of Certified EHRs

Accountable Care Organizations

ACOs in the Affordable Care Act • Part of Medicare – Not Pilot Program • Wide range of provider groups meeting certain criteria can implement an ACO outside of traditional CMS demonstration process through shared savings program • Can collaborate or build upon private-sector and state-based ACOs • Performance Based on Pre-Specified Benchmarks • New law authorizes pre-post budget projection approach that uses historical spending and utilization data to develop quantitative, pre-specified targets to track ACO performance • Broad Range of ACO Payment Models • Broader than current Medicare shared savings demonstrations • Benchmark based on projected absolute growth in national per capita expenditures • One-sided and two-sided/symmetric shared savings models • Range of partial capitation models can be established to replace a portion of fee-for-service payments

Medicare Shared Savings Program • Medicare Shared Savings Program Starts Jan. 1, 2012 (Sec. 3022) • Qualifying Medicare ACO requirements: • Willingness to be accountable for quality, cost, and overall care of Medicare fee-for-service beneficiaries for a minimum of three years • Have a formal legal structure to receive and distribute shared savings • Have at least 5,000 assigned beneficiaries with sufficient number of primary care ACO professionals • Report on quality, cost, and care coordination measures and meet patient-centeredness criteria set forth by the HHS Secretary • May initially focus on one-sided shared savings models

Key Elements of an ACO 1 2 3 • Important Caveats • ACOs are not gatekeepers • ACOs do not require changes to benefit structures • ACOs do not require exclusive patient enrollment

Accountable Care Organizations • Will they happen? • Medicare Shared Savings Program Website: www.cms.gov/sharedsavingsprogram

CARE Tool (Continuity Assessment Record and Evaluation tool) • Part of the Post Acute Care Payment Reform Demonstration (PAC-PRD) • Used at acute hospital discharge and at PAC admission and discharge • Intent is to replace the MDS, IRF-PAI and OASIS • Measures health and functional status of Medicare acute discharges and measures changes in severity and other outcomes for Medicare PAC patients • Five versions : • one pertaining to acute hospital patients, • one for PAC admissions, • one for PAC discharges, • one for interim/change in condition, and • a very short one for patients who are deceased. • Current versions of the CARE Tool are available at http://www.pacdemo.rti.org/meetingInfo.cfm?cid=caretool

Not to mention... • CARE Tool • Medicaid and CHIP Payment and Access Commission (MACPAC) • Meaningful engagement (not just meetings, policy substance) • MedPAC/MACPAC coordination • Dual Eligibles • Growing focus of Innovation Center, among others • State Demonstrations to Integrate Care for Dual Eligible Individuals Program www.cms.gov/dualeligible • CLASS Act (on life support) • Independent Payment Advisory Board (IPAB) • Begins work in 2012 with recommendations possible September 2014 • Significant threat to SNF payments – hospitals exempt for 10 years • Value based purchasing (VBP) and related quality efforts • Transparency provisions require new info that could inform quality metrics • Public reporting of QIs off-line due to MDS 3.0; likely revamped metrics will be similar and not validated; likely to be in place by 2QFY2012 • ACA requires stakeholder process through NQF to develop SNF quality metrics, but no timeframe attached • CMS report to Congress due October 2011; still requires legislation • Risks include absence of robust post-acute metrics and that VBP proceeds on inappropriate metrics not subject to validation

Where Are We Headed?

Care CoordinationReal vs. Idyllic

Post-Acute Care Payment Bundling (PPACA, §§3023 and 10308) • By January 1, 2013, Secretary to establish 5-year pilot program covering hospitals, physicians, SNFs, and home health • Episode is 3 days prior to admission and 30 days post • Will focus on 1 to 10 conditions

Where are we headed? POLITICAL CONTEXT

Key Risks Facing SNFs • FY 2012 Medicare Proposed rule is a significant hit • MedPAC recommended to eliminate Medicare Market Basket increase for FY 2012 • Enhanced Medicaid (FMAP) expires June 30, 2011 • Potential Part B therapy payment reforms in Physician Fee Schedule • Possible additional changes to Multiple Procedure Payment Reduction (MPPR) policy • Possible alternative payment methodology for therapy services

“Era of Deficit Reduction” • President’s budget – includes 2 year “Doc Fix” $62 billion • House-Passed FY 2012 Budget April 15th; 235-193 • Senate– no budget yet. Senator Conrad does not have the votes. • Gang of 6 – in near collapse • Vice President Biden– everything rides on this group • Key date is August 2nd -- federal debt ceiling is hit • 100 House conservatives signed letter • 87 House freshmen • 5 Senators up for re-election sent letter to Biden saying not to cut beneficiaries for seniors

The RISK for SNFs • The key here is what will be traded to raise the debt ceiling? • What entitlement programs will be cut to “pay for” raising the debt ceiling? • We anticipate several cuts, not one large package. • If major Medicaid cuts are made in August, then that leaves major Medicare cuts to be made at the end of the year when Congress turns to fixing the SGR for docs… and extending the therapy cap exceptions process.

Political Context: The 2012 Election • Frames the Discussion • House, Senate, White House Carefully Calibrating Posture and Actions • If entitlement programs escape cuts this year, they will be cut if Senate and White House are controlled by Republicans • High Stakes • President’s Favorability, Which Hit Pre-Election Lows in 2010, Rebounding • Retirements of Many Senators Signal Bruising Election Environment Ahead • 29 Senators Facing Re-election – Dems more threatened than Reps

Political Context:The House of Representatives • Republican Majority • Largest Influx of New Members in Decades • 35 have never held elective office • Tea Party Effect – not political party; movement • Republicans more conservative, Democrats more liberal

Political Context: The Senate • 13 New Senators, Several House Veterans • First-Term Democratic Senators Challenging Status Quo • Seeking Chairmanships by Caucus Election • Urging Focus on Spending Cuts • Organizing Stronger Messaging and Voter Outreach • First-Term Republican Senators Also Challenging Status Quo – Tea Party conservatives

Advocacy! • Write letters www.capwiz.com/nasl • Invite Members of Congress to see your place of business • Develop a relationship with a member of Congress and or their staff person • Show your support of post acute care…if we don’t stand up for it, nobody else in Washington will do so

Questions? Cynthia Morton, MPA Executive Vice President National Association for the Support of Long Term Care (NASL) cynthia@nasl.org The leading national organization representing providers and suppliers of healthcare services and products in the long term and post-acute sector including therapy, medical products, diagnostic testing and information systems. www.nasl.org

The View From Washington