2009 Quarter 3 Report Health Safety Net September 2009

1. 2009 Quarter 3 Report Health Safety Net September 2009 Deval L. Patrick, GovernorCommonwealth of Massachusetts Timothy P. MurrayLieutenant Governor JudyAnn Bigby, M.D., SecretaryExecutive Office of Health and Human Services Sarah Iselin, CommissionerDivision of Health Care Finance and Policy

2. The Health Safety Net Introduction The Health Safety Net (HSN) reimburses acute care hospitals and community health centers (CHC) for a range of services provided to low-income uninsured and underinsured individuals. This report reflects HSN utilization and payments for the first nine months (October 1, 2008 through June 30, 2009) of Health Safety Net fiscal year 2009 (HSN09). In HSN09, data are reported using a new methodology. Previously, hospital payments were defined by the date of service on the claim, rather than the month in which the claim was submitted to the HSN. In the new model, the HSN averaged payments and volume under these two payment methodologies from October through January of HSN09. Beginning in February of HSN09, payments and volume were reported solely by the month in which the claim was submitted to the HSN. The new methodology enables more timely utilization reporting and allows payments to be reported in a manner that better aligns with service volume. Table of Contents Introduction 1 Volume and Payments 2 Service Patterns 9 User Demographics 13 Financing 17 Trend Highlights HSN hospital volume and payment declines achieved in Health Safety Net fiscal year 2008 (HSN08) have stabilized as expected in HSN09 after the implementation of major reform changes that occurred during the transition to the HSN. Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. HSN08 is Health Safety Net fiscal year 2008. HSN09 is Health Safety Net fiscal year 2009. Massachusetts Division of Health Care Finance and Policy

3. Volume and Payments HSN Total Payment Trends Health Safety Net (HSN) payments for hospitals and community health centers decreased by 2% in the first nine months of Health Safety Net fiscal year (HSN09) compared to the same period in the prior year. -41% -2% Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Hospital and community health center payments are reported in the month in which payment was made. Hospital and community health center payments include pharmacy payments. Numbers are rounded to the nearest million and may not sum due to rounding; percent changes are calculated prior to rounding. Source: DHCFP Health Safety Net Data Warehouse as of 07/07/09. Massachusetts Division of Health Care Finance and Policy

4. Volume and Payments HSN Total Service Volume Trends Health Safety Net (HSN) total volume for hospitals and community health centers increased by 3% in the first nine months of Health Safety Net fiscal year 2009 (HSN09) compared to the same period in the prior year. -38% +3% Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Hospital volume is the sum of inpatient discharges and outpatient visits for which payments were made to hospital providers in the months shown.Community health center volume is the sum of visits for which payments were made to community health center providers in the months shown. Hospital and community health center volume excludes pharmacy claims. Numbers are rounded to the nearest thousand and may not sum due to rounding; percent changes are calculated prior to rounding. Source: DHCFP Health Safety Net Data Warehouse as of 07/07/09. Massachusetts Division of Health Care Finance and Policy

5. Volume and Payments HSN Hospital Payment Trends Hospital payments declined by 3% in the first nine months of Health Safety Net fiscal year 2009 (HSN09) compared to the same period in the prior year. “Other HSN Payments” includes payment adjustments that are not attributable to a service category. -43% -3% Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Hospital payments are reported in the month in which payment was made. Hospital payments include pharmacy payments. Numbers are rounded to the nearest million and may not sum due to rounding; percent changes are calculated prior to rounding. Due to block-grant payment methodology used in PFY07, payment information is not available by service type. Source: DHCFP Health Safety Net Data Warehouse as of 07/07/09. Massachusetts Division of Health Care Finance and Policy

6. Volume and Payments HSN Hospital Service Volume Trends Hospital volume increased by 5% in the first nine months of Health Safety Net fiscal year 2009 (HSN09) compared to the same period in the prior year. During the first nine months of HSN09, the volume of outpatient visits increased, while the volume of inpatient discharges remain unchanged compared to the same period in the prior year. -42% +5% Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Hospital volume is the sum of inpatient discharges and outpatient visits for which payments were made to hospital providers in the months shown.Hospital volume excludes pharmacy claims. Numbers are rounded to the nearest thousand and may not sum due to rounding; percent changes are calculated prior to rounding. Source: DHCFP Health Safety Net Data Warehouse as of 07/07/09. Massachusetts Division of Health Care Finance and Policy

7. Volume and Payments HSN Community Health CenterPayment Trends Community health center (CHC) payments increased by 13% in the first nine months of Health Safety Net 2009 (HSN09) compared to the same period in the prior year. The 13% increase in payments may be attributed to increased CHC dental and medical visit rates, as well as increased pharmacy payments resulting from the availability of new HSN pharmacies. -11% +13% Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Community health center payments are reported in the month in which payment was made. Community health center payments include pharmacy payments. Numbers are rounded to the nearest million and may not sum due to rounding; percent changes are calculated prior to rounding. Source: DHCFP Health Safety Net Data Warehouse as of 07/07/09. Massachusetts Division of Health Care Finance and Policy

8. Volume and Payments HSN Community Health CenterService Volume Trends Community health center (CHC) volume declined by 0.2% in the first nine months of Health Safety Net fiscal year 2009 (HSN09) compared to the same period in the prior year. -27% -0.2% Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Community health center volume is the sum of visits for which payments were made to community health center providers in the months shown. Community health center volume excludes pharmacy claims. Numbers are rounded to the nearest thousand and may not sum due to rounding; percent changes are calculated prior to rounding. Source: DHCFP Health Safety Net Data Warehouse as of 07/07/09. Massachusetts Division of Health Care Finance and Policy

9. Volume and Payments HSN Total Users Medical expenses for an estimated 227,000 individuals were billed to the Health Safety Net (HSN) in the first nine months of Health Safety Net fiscal year 2009 (HSN09). The number of users declined by 2% in the first nine months of HSN09 compared to the same period in the prior year. -34% -2% Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year.Users who receive a service in more than one setting (hospital, community health center or emergency room bad debt) are counted only once. Users are reported on claims for which payments were made to hospital and community health center providers in the months shown. Numbers are rounded to the nearest thousand; percent changes are calculated prior to rounding. Source: DHCFP Health Safety Net Data Warehouse as of 08/03/09. Massachusetts Division of Health Care Finance and Policy

10. Service Patterns Hospital Utilization and Payments by Service Type and Age Seventy-one percent of inpatient payments were for services provided to adults ages 27 to 64. Inpatient volume for this same population accounted for 61% of discharges. Because the Health Safety Net (HSN) is a secondary payer for low-income Medicare patients, adults ages 65 and older accounted for 21% of inpatient discharges but only 8% of inpatient payments. Notes: The Health Safety Net fiscal year (HSN) runs from October 1 through September 30 of the following year. Hospital volume is the sum of inpatient discharges and outpatient visits for which payments were made to hospital providers in the months shown.Hospital volume excludes pharmacy claims. Hospital payments are reported in the month in which payment was made. Hospital payments include pharmacy payments. Numbers are rounded to the nearest percent and may not sum to 100% due to rounding. Source: DHCFP Health Safety Net Data Warehouse as of 07/07/09. Massachusetts Division of Health Care Finance and Policy

11. Service Patterns Hospital Utilization and Payments by Eligibility Group 100% 100% Approximately half of both hospital volume and payments were for individuals who were only eligible for the Health Safety Net (HSN) and had no other coverage. Approximately one-third of utilization and associated payments were for those who were either eligible for HSN temporary or secondary coverage. HSN temporary coverage includes patients awaiting enrollment in Commonwealth Care, MassHealth Basic, and MassHealth Essential. Eligibility Not Reported Emergency Room Bad Debt HSN Secondary: CommCare Dental Temporary Coverage HSN Secondary: Other HSN Secondary: MassHealth HSN Partial (200.1% to 400% FPL) HSN Primary (0% to 200% FPL) Notes: The Health Safety Net fiscal year (HSN) runs from October 1 through September 30 of the following year. Hospital volume is the sum of inpatient discharges and outpatient visits for which payments were made to hospital providers in the months shown.Hospital volume excludes pharmacy claims. Hospital payments are reported in the month in which payment was made. Hospital payments include pharmacy payments. HSN Secondary: Other includes coverage for both Medicare and private insurance patients. Numbers are rounded to the nearest percent and may not sum to 100% due to rounding. Numbers less than 1% are not displayed above. Source: DHCFP Health Safety Net Data Warehouse as of 07/07/09. Massachusetts Division of Health Care Finance and Policy

12. Service Patterns Hospital Inpatient Utilization and Paymentsby Admission Type Ninety-two percent of inpatient discharges and 92% of inpatient payments were for emergency and urgent care. Seven percent of inpatient discharges and 8% of inpatient payments were for scheduled or elective procedures. 100% 100% Scheduled Urgent Emergency Notes: The Health Safety Net fiscal year (HSN) runs from October 1 through September 30 of the following year. Hospital inpatient volume is inpatient discharges for which payments were made to hospital providers in the months shown.Hospital inpatient volume excludes pharmacy claims. Hospital inpatient payments are reported in the month in which payment was made. Hospital inpatient payments include pharmacy payments. Numbers are rounded to the nearest percent and may not sum to 100% due to rounding. Numbers less than 1% are not displayed above. Source: DHCFP Health Safety Net Data Warehouse as of 07/07/09. Massachusetts Division of Health Care Finance and Policy

13. Service Patterns Top Ten InpatientMajor Diagnostic Categories The top ten diagnostic categories accounted for 74% of inpatient discharges. Circulatory, digestive and mental diseases and disorders were the top three diagnostic categories among inpatient claims. These three diagnostic categories comprised 36% of inpatient volume and 34% of inpatient payments. Notes: The Health Safety Net fiscal year (HSN) runs from October 1 through September 30 of the following year. Inpatient claims are grouped into major diagnostic categories (MDC) using versions 24, 25, and 26 of the MS-DRG grouper. Hospital inpatient volume is inpatient discharges for which payments were made to hospital providers in the months shown.Hospital inpatient volume excludes pharmacy claims. Hospital inpatient payments are reported in the month in which payment was made. Hospital inpatient payments include pharmacy payments. Numbers are rounded to the nearest percent. Source: DHCFP Health Safety Net Data Warehouse as of 07/07/09. Massachusetts Division of Health Care Finance and Policy

14. User Demographics Hospital Utilization and Payments by Gender In the first nine months of Health Safety Net fiscal year 2009 (HSN09), men used fewer services than women, but payments for their care were higher, accounting for 36% of volume and 44% of payments. Gender data are reported on the patient’s Medical Benefit Request (MBR) application. There is no MBR information for emergency room bad debt (ERBD) claims. 100% 100% Gender Not Reported Emergency Room Bad Debt Female Male Notes: The Health Safety Net fiscal year (HSN) runs from October 1 through September 30 of the following year. Hospital volume is the sum of inpatient discharges and outpatient visits for which payments were made to hospital providers in the months shown.Hospital volume excludes pharmacy claims. Hospital payments are reported in the month in which payment was made. Hospital payments include pharmacy payments. Numbers are rounded to the nearest percent and may not sum to 100% due to rounding. Source: DHCFP Health Safety Net Data Warehouse as of 07/07/09. Massachusetts Division of Health Care Finance and Policy

15. User Demographics Hospital Utilization and Payments by Age The non-elderly adult population (ages 19 to 64) accounted for 81% of hospital volume and 85% of hospital payments. Age data are reported on the patient’s Medical Benefit Request (MBR) application. There is no MBR information for emergency room bad debt (ERBD) claims. 100% 100% Age Not Reported Emergency Room Bad Debt Ages 65 and Older Ages 45-64 Ages 27-44 Ages 19-26 Ages 0-18 Notes: The Health Safety Net fiscal year (HSN) runs from October 1 through September 30 of the following year. Hospital volume is the sum of inpatient discharges and outpatient visits for which payments were made to hospital providers in the months shown.Hospital volume excludes pharmacy claims. Hospital payments are reported in the month in which payment was made. Hospital payments include pharmacy payments. Numbers are rounded to the nearest percent and may not sum to 100% due to rounding. Source: DHCFP Health Safety Net Data Warehouse as of 07/07/09. Massachusetts Division of Health Care Finance and Policy

16. User Demographics Hospital Utilization and Paymentsby Family Income Individuals eligible for Health Safety Net (HSN) primary, those with income less than 200% of the federal poverty level (FPL), received services accounting for 81% of volume and 80% of payments. Users with no income received the most costly services, comprising 37% of service volume that generated 46% of payments. Users with income between 100.1% and 200% of the FPL used the least costly service mix, accounting for 33% of volume and 25% of payments. Income data are reported on the patient’s Medical Benefit Request (MBR) application. There is no MBR information for emergency room bad debt (ERBD) claims. 100% 100% Income Not Reported Emergency Room Bad Debt 200.1% to 400% FPL 100.1% to 200% FPL Up to 100% FPL No Income Notes: The Health Safety Net fiscal year (HSN) runs from October 1 through September 30 of the following year. Hospital volume is the sum of inpatient discharges and outpatient visits for which payments were made to hospital providers in the months shown.Hospital volume excludes pharmacy claims. Hospital payments are reported in the month in which payment was made. Hospital payments include pharmacy payments. Numbers are rounded to the nearest percent and may not sum to 100% due to rounding. Source: DHCFP Health Safety Net Data Warehouse as of 07/07/09. Massachusetts Division of Health Care Finance and Policy

17. User Demographics Hospital Utilization and Paymentsby Family Size Single adults accounted for 58% of hospital volume and 64% of hospital payments. Family size data are reported on the patient’s Medical Benefit Request (MBR) application. There is no MBR information for emergency room bad debt (ERBD) claims. 100% 100% Family Size Not Reported Emergency Room Bad Debt Family Size of 4 or More Family Size of 3 Family Size of 2 Family Size of 1 Notes: The Health Safety Net fiscal year (HSN) runs from October 1 through September 30 of the following year. Hospital volume is the sum of inpatient discharges and outpatient visits for which payments were made to hospital providers in the months shown.Hospital volume excludes pharmacy claims. Hospital payments are reported in the month in which payment was made. Hospital payments include pharmacy payments. Numbers are rounded to the nearest percent and may not sum to 100% due to rounding. Source: DHCFP Health Safety Net Data Warehouse as of 07/07/09. Massachusetts Division of Health Care Finance and Policy

18. Financing HSN09 Hospital Payment Rates As of Health Safety Net fiscal year 2009 (HSN09), payments are based on Medicare payment principles. Payment rates range according to the variation in case mix among hospitals. Hospitals that treat a greater number of more complex cases are paid higher rates reflective of this complexity. The table shows the minimum, median, mean, and maximum payment rates for each payment category across all hospitals that provide services in each payment category. Notes: The Health Safety Net fiscal year (HSN) runs from October 1 through September 30 of the following year.Payment rates effective October 1, 2008 for Health Safety Net fiscal year 2009 (HSN09). Payment on Account factor is used for secondary claims and inpatient physician services provided by hospital-based physicians. Only rates for PPS-exempt and Critical Access Hospitals are listed. All other hospitals are paid using Medicare DRG or psychiatric per diem rates that will vary by claim. Dental services are paid according to the fees established in 114.3 CMR 14.00: Dental Services. Massachusetts Division of Health Care Finance and Policy

19. Financing Hospital Payment to Cost Ratios (Oct – Jun) Notes: The Health Safety Net fiscal year (HSN) runs from October 1 through September 30 of the following year. Health Safety Net fiscal year 2009 (HSN09) measures payments made in the months of October 2008 through June 2009. Costs determined using a total cost-to-charge ratio derived from the fiscal year 2008 HCF-403 data. Blanks indicate the hospital did not have data for that category. Source: DHCFP Health Safety Net Data Warehouse as of 06/10/09.

20. Financing Median Hospital Payment to Cost Ratios by Service Type As of Health Safety Net fiscal year 2009 (HSN09), payments are based on Medicare payment principles. Medicare payment rates typically demonstrate higher inpatient rates and lower outpatient rates. Payment to cost ratios for HSN09 have fluctuated by 7% or less compared to the same period in the prior year. Notes: The Health Safety Net fiscal year (HSN) runs from October 1 through September 30 of the following year. Health Safety Net fiscal year 2008 (HSN08) measures payments for dates of service from October 2007 through March 2008 which formed the basis for twelve months of payment.Health Safety Net fiscal year 2009 (HSN09) measures payments made in the months of October 2008 through June 2009. Costs determined using a total cost-to-charge ratio derived from the fiscal year 2008 HCF-403 data.  Source: DHCFP Health Safety Net Data Warehouse as of 06/10/09.

21. Financing Sources and Uses The Health Safety Net (HSN) is primarily funded from three sources: an assessment on acute hospitals’ private sector charges; a surcharge on payments made to hospitals and ambulatory surgical centers by HMOs, insurers, and individuals; and an annual appropriation from the Commonwealth’s General Fund. Hospital Assessments The total amount paid by hospitals into the HSN is established by the legislature. The fiscal year 2009 (FY09) state budget established a total hospital assessment of $180.0 million, $20.0 million of which will be transferred to the Commonwealth Care Trust Fund. Each hospital’s assessment is calculated by multiplying its private sector charges by the uniform percentage, which is calculated by dividing the total assessment ($180.0 million) by the total private sector charges from all hospitals statewide. Since each hospital’s liability is based on its private sector charges, hospitals that treat more private patients make larger payments to the HSN. Surcharge Collections The total amount collected through the surcharge is established by the Massachusetts legislature. The Division sets the surcharge percentage at a level to produce the total amount specified by the legislature. For Health Safety Net fiscal year 2009 (HSN09), that amount totaled $160.0 million. General Fund The Commonwealth also makes a General Fund contribution to the HSN. In HSN09 the total General Fund contribution amount was originally $63.0 million. A supplemental budget decreased this amount to $48.0 million. Additional Funding for Uncompensated Care In HSN09, offset payments totaling $70 million will be paid from the Medical Assistance Trust Fund to Boston Medical Center ($20.0 million) and Cambridge Health Alliance ($50.0 million). These payments offset allowable HSN services. Massachusetts Division of Health Care Finance and Policy

22. Financing HSN09 Sources and Projected Uses Notes: Dollars in millions. Estimated hospital payments include allowance of $17.3 million for denied claims that may remediate and have been reduced by $10.9 million to reflect recoveries and income. Estimated hospital payments are based on October 2008 through July 2009 actual payment amounts trended forward to reflect Medicare 2009 rates and project a 3% increase in service volume. The Governor's supplemental budget, Chapter 26 of the Acts of 2009, reduced the original HSN09 General Fund contribution of $63 million by $15 million, leaving the total contribution at $48 million. Massachusetts Division of Health Care Finance and Policy

23. Division of Health Care Finance and Policy Two Boylston Street Boston, MA 02116 Phone: (627) 988-3100 Fax: (617) 727-7662 Website: www.mass.gov/dhcfp Publication Number: 09-243-HCF-01