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Maryland Rate Regulation Overview and Potential Impact of Healthcare Reform. Michael A. Zito, Jr. Managing Director KPMG LLP March 30, 2012. Discussion Topics. Overview of HSCRC Medicare Waiver Test Current Regulatory Environment Impact of Healthcare Reform Q&A.
Michael A. Zito, Jr.
March 30, 2012
1971 – Initial legislation enacted by the General Assembly
1974 –HSCRC began setting unit rates for hospitals after 3 yr phase in
1977 –Maryland granted temporary “waiver” by federal govt. to test alternative payment approaches
1980 –Medicare exemption became permanent (with stipulations) in Maryland
First negotiated effective 7/1/77
“Waives” payment under the national PPS System and allows Medicare and Medicaid to pay under HSCRC rates
Continues today under special provisions of the Social Security Act which require the Maryland System to:
Ensure Equity / Fairness / Stability
Maximize Access to Care
Contain Hospital Costs / Total Costs are Reasonable
Unit rates are to be reasonably related to underlying costs
Inpatient charges are monitored based on a fixed amount per case
Includes approximately 95% of hospitals’ inpatient charges
Exclusions for certain types of cases and extremely high and low charge cases
Increase cases / decrease utilization / control costsCharge per Case (CPC)
Only 10 hospitals on TPR
Until 2010 only McCready and Garrett were on TPR
Fixed revenue cap for 100% of approved revenue
No adjustment for volume or case-mix change
Typically a rural hospital methodology
Annual adjustments for inflation, population and mark-up
Maintain / reduce volumes
Control costsTotal Patient Revenue (TPR)
Effective rate year – July 1 – June 30 for all hospitals
Unit rate compliance monitored throughout the rate year by the HSCRC staff
All payors are charged equal rates
Allowed minor payment discounts: 2% - 6% depending on payor
Rates are adjusted annually for update factor (inflation + or - ) and changes in mark-up (uncompensated care and payor mix)
By June 30 or each rate year, compliance is dually measured:
CPC/ARR and unit rates
TPR and unit ratesUnit Rate Order
TPR (1980 – Current)
(2000 – Current)
GIR (1985 – 2000)
Unit Rates (1974 – Current)
The “Waiver Test” is based on the average Medicare Payment per Inpatient Discharge
The “Waiver Test” does not measure outpatient payments
The last official Waiver Letter for the period ending September 30, 2010 reflected a Waiver Cushion of 9.55%.
However, since 2010, the Maryland Payment per Discharge has grown rapidly through 2011. This trend is expected to continue through at least 2012.
From FY2010 – FY2011, the Maryland Payment per Discharge grew 6.10%.
From FY2011 – FY2012, the Maryland Payment per Discharge is expected to grow by 7.8%.
Conversely, the National Payment per discharge grew 0.92% in FY2011, and it is expect to increase by only 0.43% in FY2012.
As a result, the Waiver Cushion is expected to be below 0.0% beginning in March 2012.
The Chart on the next page reflects this projection.Waiver Cushion Forecast
“The delivery of healthcare services will undergo much transformation in the era of healthcare reform. Those hospitals and health systems who can plan multi-year strategies and effectively change their business models and culture should be most able to adapt. Growth strategies, physician alignment and greater efficiencies, along with effective management and governance, will be integral in positioning the organization for payment reform.”
New Payment Structures
New Care Delivery Models
Financing Reform and Accountability
Other Transformation Initiatives