Washington state Health care authority

1. Washington state Health care authority WSHA Rebasing Task Force Meeting July 15, 2013

2. Table of contents Section 1 » Updates to Inpatient Models Section 2 » Inpatient Specialty Service Per Diems Section 3 » Outpatient Model Results Section 4 » Next Steps

3. Updates to inpatient models

4. Updates to inpatient models Inpatient Model Changes • Models use 3M APR-DRG “standard” national weights • All Transplant/CUP/Bariatric services and psychiatric/LTAC provider claims with acute DRGs carved out of the DRG system • Direct Medical Education portion of Medical Education adjustments revised to match the current HCA outpatient GME adjustments • Inpatient DME adjustments have not changed since 2007 • HCA regularly updates the outpatient GME adjustment (based on direct medical education costs as a percent of total costs) using the most recently available Medicare cost report • Inpatient DME adjustments follow the same methodology as the outpatient GME adjustment

5. Updates to inpatient models Pros and Cons of “Standard” versus “HSRV” National Weights

6. Updates to inpatient models Inpatient Model Changes – Outlier Assumptions • Outlier fixed loss threshold set to $50,000 to achieve approximately 11-12% outlier payments as a percent of total • Handout 1: Outlier marginal cost factor of 95% applied to patients age 17 and under (80% for all other services) • Handout 2: Outlier marginal cost factor of 95% applied to claims with severity of illness (SOI) level of 3 or 4 (80% for all other services)

7. Updates to inpatient models Pros and Cons of “SOI-Tiered” versus “Service-Tiered” MCF

8. Updates to inpatient models Inpatient Model Changes – Inlier Assumptions • Charge cap on claim payments (modeled payments limited to billed charges, inflated to SFY 2014) • Latest models (along with prior model versions) include an “inlier” adjustment, which is like an inverse outlier payment: Inlier threshold = claim costs + $50,000 If the claim payment exceeds the Inlier threshold, then the inlier reduction = (Claim payment – Inlier threshold) * Marginal cost factor

9. Inpatient specialty service per diems

10. Inpatient specialty service per diems Current System Inpatient Specialty Service Per Diems • Under the current system, psychiatric per diem rates are based on the greater of provider specific per diem rate and the statewide average cost per day • Provider specific rates for freestanding/DPU psych hospitals and non-DPU hospitals with at least 200 days based on the provider-specific average Medicaid cost per day, adjusted for wage index, IME and DME • Rates for non-DPU hospitals with less than 200 days based on the weighted average Medicaid cost per day for the providers listed above, adjusted for wage index, IME and DME • Under the current system, rehabilitation and substance abuse per diem rates are based on statewide standardized amounts, adjusted for wage index, IME and DME

11. Inpatient specialty service per diems Inpatient Model Specialty Service Per Diems • Inpatient models currently contain a baseline approach for psychiatric, rehabilitation and substance abuse services using standardized per diem rates adjusted for wage index (without further adjustments) • For evaluation purposes only – not HCA’s recommended approach • Options for additional adjustments: • Medical education • Provider costs • Tiers for freestanding vs. DPU vs. non-DPU providers

12. outpatient model results

13. Outpatient model Potential Outpatient Model Adjustments • Model currently does not contain adjustments except for teaching and wage index • Potential service level policy adjusters include: • Drug EAPG or high cost drug/chemotherapy adjustment • Ancillary packaging adjustments

14. Next steps

15. Next steps • Inpatient model: • Specialty per diem rates • Out-of-state hospital approach • Coding and documentation improvement • Outpatient model: • Potential policy adjusters • DME/therapy approach • Excluded services