The Maryland “Experiment” Evolution of Maryland’s Medicare Waiver

1. The Maryland “Experiment”Evolution of Maryland’s Medicare Waiver Brian Sims Maryland Hospital Association November 17, 2017

2. Objective Pre- and Initial Waiver Environment System Redesign New All-Payer Model Enhanced Total Cost of Care Model

3. Pre- and Initial Waiver Environment (1970’s-2000)

4. Maryland Pre-Waiver Healthcare Environment • Significant amount of inefficiency in delivery system (Late 60’s early 70’s) • Over utilization • Length of stay for patients exceeded national averages • Weak financial performance for Maryland Hospitals • Inconsistent access to hospital care for the poor and uninsured • By 1971, hospital cost per case in Maryland exceeded the National average by 25%!

5. The Formation of the Health Services Cost Review Commission (HSCRC) • 1971 - Initial legislation enacted by the General Assembly • Independent body within the Department of Health and Mental Hygiene • HSCRC given the authority to establish hospital rates • 1974 –HSCRC began setting unit rates for hospitals after 3 year phase-in • Authority extended only to non-federal insurers (commercial payers) • 1977 –Maryland granted temporary “waiver” by federal government to test alternative payment approaches • Exempted the state from national Medicare and Medicaid reimbursement requirements • Base rates created • 1980 –Medicare exemption became “permanent” in Maryland • Continue to be the only state with this “waiver” • But, there’s a “catch”!

6. The “Waiver Test” On-going demonstration that the cumulativerate of growth in Medicare inpatient payments per admission to Maryland hospitals is no greater than the cumulative rate of growth in Medicare inpatient payments per admission to hospitals nationally over the same time period Maryland inpatient costs per case had improved dramatically from 25% higher than nation to 12% below in 1992

7. HSCRC Regulatory Jurisdiction • Hospital Rates: • Includes: • Inpatient services • Hospital-based outpatient services • Excludes: • Physician / Professional Fee / Part B Activity • Other operating revenue • Non-operating revenue

8. All-Payer Hospital Rate Setting System • HSCRC • Establish and approve rates for each unit of service (Room and Board, imaging, lab, etc.) • Hospital specific • Unit rates are to be reasonably related to underlying costs • Hospitals • Required to charge ALL payers at HSCRC approved unit rates • Payers (All) • Required to pay hospitals based on each hospitals approved unit rates • Payers given the ability to deny payment of care for lack of medical necessity

9. System Redesign(2000-2013)

10. After more than 25 years of sustained success, widespread support for redesign gained momentum Goals of the redesign included: Provide predictability and stability Be prospective in nature Recognize input cost inflation Streamlined approach Reflective of the national experience Initial System Redesign (2000)

11. Modern System Redesign Around 2010 we began to experience further and rapid deterioration of our waiver cushion Projections of the future rate of deterioration demonstrated a likely failure of the waiver test by 2013

12. Overarching Concern for Maryland Hospitals • Changes to the healthcare delivery system that challenged the waiver test: • Less expensive care shifted to outpatient settings or outside of the hospital • Shift of cases to observation increases the average charge per admission in Maryland • Medicaid budget issues • New payment initiatives designed to control volume

13. Initiatives Designed to Control Spending • Quality Related Programs • Maryland Hospital Acquired Condition (MHAC) program • Designed to incentivize hospitals to reduce Potentially Preventable Complications • Hospitals are rewarded or penalized based on performance relative to their peers • Quality-Based Reimbursement (QBR) program • Pay-for-performance system of rewards/penalties using evidence-based process of care measures • Similar to MHAC, hospital scores are scaled based on relative performance • Expansion of Total Patient Revenue (“TPR”) Methodology

14. New All-Payer Model(2014-2018)

15. Birth of a New Model Lower Costs Better Care Better Health • On October 10, 2013, the State of Maryland applied to the Center for Medicare and Medicaid Innovation (CMMI) for a demonstration project focusing on The “Triple Aim”: • To improve outcomes / quality • To enhance patient experience • To reduce the cost of care • The application was approved on January 10, 2014 • The Beginning of the “New” All-Payer Model

16. New All-Payer Model OLD NEW

17. New All-Payer Model: Financial Tests Medicare dynamic hospital SAVINGS TARGET − $330 million over 5 years Medicare Total Cost of Care (TCOC) spending GROWTH per beneficiary not to exceed the Nation Annual All-Payer hospital SPENDING CAP − 3.58% all payer per capita growth

18. New All-Payer Model: Quality Targets Reduction of 30-day Medicare READMISSION rate to the national average in 5 years. 30% Reduction of Potentially Preventable Complications (PPC) over 5 years.

19. Maryland Waiver Performance DashboardCumulative Performance – Jan 2014 to Most Recent Data Available

20. HSCRC Policy Impacts • Under Global Budget Revenue (GBR), hospitals receive annual adjustments for: • Inflation • Change in markup (payer mix and UCC via the UCC pool) • Population/Demographics • Market Shift • Infrastructure • There are no explicit adjustments for changes in: • Volume (I/P or O/P) • Case Mix/Severity

21. Future Initiatives: Enhancement of the All-Payer Model • Align Measures and Incentives • Align updated measures across providers and programs • Increased physician engagement • Payment and Delivery System Transformation • Promote innovation • Development of additional initiatives focused on Behavioral Health and Post-Acute Care • Foster Accountability • Enhance provider accountability for population health through value-based incentives • Increased Consumer Engagement

22. Enhanced Total Cost of Care Model (2019-)

23. Enhanced Total Cost of Care Model • Term sheet in clearance process; when approved, next step would be developing contract for state/federal signature • Policy Development: Current Model • Policy Development: Enhanced Model • Changes/Challenges: Enhanced Model

24. Policy Development: Current Model • Full rate review application regulations and update to HSCRC’s Inter-hospital Cost Comparison (ICC) methodology • Capital funding approach • Update to market shift methodology • Unit rate compliance • Data availability and access

25. Care Redesign • Care Redesign Amendment to the All-Payer Model Agreement • Addresses need for greater provider alignment and transformation tools under the All-Payer Model • The Amendment aims to modify the All-Payer Model by supporting: • Effective care management and population health activities • Improvement in care for high and rising risk populations • Efforts to provide high quality, efficient, well-coordinated episodes of care • Hospitals and their Care Partners in monitoring and controlling Medicare beneficiaries' Total Cost of Care (TCOC) growth  • The Amendment proposes two voluntary, hospital-led programs, which align hospitals and their Care Partners through common goals and incentives.  The Hospital Care Improvement Program (HCIP) and Complex and Chronic Care Improvement Program (CCIP)

26. Care Redesign Programs: HCIP • Hospital Care Improvement Program (HCIP) to be implemented by participant hospitals and hospital-based providers  • Aims to: • Improve inpatient medical and surgical care deliveryProvide effective transitions of care • Ensure an effective delivery of care during acute care events, beyond hospital walls • Encourage the effective management of inpatient resourcesReduced potentially avoidable utilization with a byproduct of reduced cost per acute care event

27. Care Redesign Programs: HCIP • Examples of categories of care redesign interventions in the HCIP include:   • care coordination • discharge planning • clinical care • patient safety • patient and caregiver experience • population health • efficiency and cost reduction 

28. Care Redesign Programs: CCIP • Complex and Chronic Care Improvement Program (CCIP), to be implemented by participant hospitals and community providers and practitioners • Aims to: • Strengthen primary care supports for complex and chronic patients in order to reduce avoidable hospital utilization • Enhance care management through tools such as effective risk stratification, health risk assessments, and patient-driven care profiles and plans • Facilitate overall practice transformation towards person-centered care that produced improved outcomes and meets or exceed quality standards.

29. Care Redesign Programs: CCIP • Examples of categories of Care Redesign Interventions in the CCIP include: • care management, • workforce capacity development • health information technologies.

30. Policy Development: Enhanced Model • Medicare Performance Adjustment (MPA) • Management of TCOC savings • Medicare discount / differential • Health care services supply alignment with the Model • Policies to implement the Maryland Primary Care Program • Policies regarding hospital accountability for population health metrics • Updates to quality programs with “aggressive and progressive” targets • State/CMS policy on access to patient-identifiable data needed to manage TCOC

31. Enhanced Model Operational Changes/Challenges Building/strengthening provider alignment Workforce shortages and workforce development Developing capability to utilize data to strategically manage population health, including behavioral health Continued cultural change (internal and in the community) of movement from volume to value Cost management strategies, particularly regarding capital structure Adequacy of revenues within a capped system

32. Enhanced Model at a Glance

33. Enhanced Model at a Glance • Current Model

34. Enhanced Model at a Glance • Current Model

35. National Policy and Trend Implications Medicare IPPS/OPPS rate updates Growth in total Medicare beneficiaries: MD vs. Nation Growth in Medicare Advantage participants: MD vs. Nation Population growth: MD vs. Nation Growth in non-hospital spending: MD vs. Nation Medicaid expansion Affordable Care Act repeal / replacement

36. Questions? Contact: Brian Sims bsims@mhaonline.org 35