TRANSITION TO APRDRGs MARCH 31 2014 Hartford Connecticut Agenda Welcome and introductions Goals and objectives Background and guiding principles Methodology overview Data overview Next steps ID: 1044156
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1. STATE OF CONNECTICUT HOSPITAL PAYMENT MODERNIZATIONTRANSITION TO APR-DRGsMARCH 31, 2014Hartford, Connecticut
2. AgendaWelcome and introductions.Goals and objectives.Background and guiding principles.Methodology overview.Data overview.Next steps.1March 31, 2014
3. Medicaid Reform StrategiesMarch 31, 20142
4. What is our conceptual framework?DSS is motivated and guided by the Centers for Medicare and Medicaid Services (CMS) “Triple Aim”:improving the patient experience of care (including quality and satisfaction)improving the health of the populationreducing the per capita cost of health careMarch 31, 20143
5. We are also influenced by a value-based purchasing orientation. The Centers for Medicare and Medicaid Services (CMS) define value-based purchasing as a method that provides for:Linking provider payments to improved performance by health care providers. This form of payment holds health care providers accountable for both the cost and quality of care they provide. It attempts to reduce inappropriate care and to identify and reward the best-performing providers.March 31, 20144
6. Improving the Patient Experience Of CareIssues PresentedDSS StrategiesAnticipated ResultIndividuals face access barriers to gaining coverage for Medicaid servicesConneCTMAGI income eligibilityIntegrated eligibility process with Access Health CTStreamlined eligibility process that optimizes use of public and private sources of paymentIndividuals have difficulty in connecting with providersASO primary care attribution process and member support with provider referralsSupport for primary care providers (PCMH, EHR, ACA rate increase)DSS will help to increase capacity of primary care network and to connect Medicaid beneficiaries with medical homes and consistent sources of specialty careIndividuals struggle to integrate and coordinate their health careASO predictive modeling and Intensive Care Management (ICM)Duals demonstrationHealth home initiativeIndividuals with complex health profiles and/or co-occurring medical and behavioral health conditions will have needed supportMarch 31, 20145
7. Improving the Health of PopulationsIssues PresentedDSS StrategiesAnticipated ResultA significant percentage of Connecticut residents do not have health insuranceMedicaid expansionIntegrated eligibility determination with Access Health CTIncreased incidence of individuals covered by either Medicaid or an Exchange policyMany Connecticut residents do not regularly use preventative primary care Primary Care Medical Home (PCMH) initiative in partnership with State Employee Health Plan PCMHIncreased regular use of primary care; early identification of conditions and improved support for chronic conditionsMany health indicators for Medicaid beneficiaries are in need of improvement, and Medicaid has the opportunity to influence other payers Behavioral health screening for childrenRewards to Quit incentive-based tobacco cessation initiativeObstetrics and behavioral health P4P initiativesImprovement in key indicators for Medicaid beneficiaries; greater consistency in program design, performance metrics and payment methods among public/private payersMarch 31, 20146
8. Reducing the Per Capita Cost of CareIssues PresentedDSS StrategiesAnticipated ResultConnecticut’s historical experience with managed care did not yield the cost savings that were anticipatedConversion to managed fee-for-service approach using ASOs Administrative fee withhold and performance metricsDSS and OPM will have immediate access to data with which to assess cost trends and align strategies and performance metrics in support of theseConnecticut Medicaid’s fee-for-service reimbursement structure promotes volume over valuePCMH performance incentivesDuals demonstration performance incentives and shared savingsEvolution toward value-based reimbursement that relies on performance against established metricsConnecticut Medicaid’s means of paying for hospital care is outmoded and impreciseConversion of means of making inpatient payments to DRGs and making outpatient payments to APCsDSS will be more equipped to assess the adequacy of hospital payments and will be able to move toward consideration of episode-based approachesMarch 31, 20147
9. Issues PresentedDSS StrategiesAnticipated ResultConnecticut expends a high percentage of its Medicaid budget on a small percentage of individuals who require long-term services and supports; historically, this has primarily been in institutional settingsConsumers strongly prefer to receive these services at homeStrategic Rebalancing Initiative (State Balancing Incentive Payments Program, Money Follows the Person, nursing home diversification funding, workforce analysis, My Place campaign)Duals demonstration payments for care coordinationConnecticut will achieve the stated policy goal of making more than half of its expenditures for long-term services and supports at lower cost in home and community-based settingsReducing the Per Capita Cost of Care (cont'd.)March 31, 20148
10. Hospital Payment ModernizationThe State of Connecticut’s Medicaid fee-for-service (FFS) payment systems are aging and becoming less useful.At the same time, they are assuming increasing importance with the move to the Administrative Services Organization (ASO) model.With everything FFS, it is important that those schedules are fair, rational, well understood by all parties, and easily updateable.Need to support policy initiatives to improve incentives and link pay to performance.The current systems have been stressed by the move to ASO and the rate meld process.Major stakeholders like the Connecticut Hospital Association have suggested the same kind of modernization anticipated in this project.March 31, 201499
11. Project Goals and ObjectivesImplement payment methods that can support quality health outcomes and efficiency.Create systems that establish a sound financial basis for the changing environment, including state and federal policy goals.Stakeholder communication should be of a shared vision of equity and transparency.Design, develop, and implement a complete rebuild of both hospital payment systems.Implement new prospective payment systems that are international statistical classification of diseases and related health problems (ICD-10) capable.Systems that are more precise in the recognition of acuity for both inpatient and outpatient hospital services.Provide payment structures that promote proper delivery of health care in the most appropriate setting.Promote more predictable and transparent payment processes for hospitals.10March 31, 2014
12. Guiding PrinciplesMaintain a long-term commitment to goals of improved accuracy, predictability, equity, timeliness, and transparency of hospital payments for all Medicaid beneficiaries in the State of Connecticut — however, expedite short-term focus on technology and mechanics of payment.11March 31, 2014
13. Guiding Principles (cont’d)Focus on method of payment, not level of payment:Project modeling will be based on state budget neutrality.Initial implementation will target revenue neutrality for each hospital.12March 31, 2014
14. Guiding Principles (cont'd.)Anticipate need for a phased-in approach with respect to various aspects of implementation.13March 31, 2014
15. Guiding Principles (cont'd.)Over arching policy direction of consistency with industry standard payment practices and, specifically, Medicare payment policy.14March 31, 2014
16. Guiding Principles (cont'd.)Use the best available data for system development:– Rely on complete and accurate data sets for analysis and payment administration. – Modify data requests and requirements, as necessary, to provide robust analytics.15March 31, 2014
17. Guiding Principles (cont'd.)Be mindful of the need to update payment systems as soon as possible, yet coordinate with other Connecticut Department of Social Services (DSS) priorities, such as implementation of ICD-10 in October 2014.16March 31, 2014
18. Guiding Principles (cont'd.)Develop the most robust and comprehensive system possible while allowing flexibility to handle exceptions in an equitable and efficient manner.17March 31, 2014
19. Project PhasesPhase One: Inpatient.Phase Two: Outpatient.The focus for this presentation is Phase One: Inpatient.18March 31, 2014
20. Inpatient Timeline19March 31, 2014
21. Methodology OverviewAPR-DRG Payment MethodologyAll Patient Refined Diagnosis Related Groups (APR-DRG) Grouper:Consistent with project goals and guiding principles.ICD-10 capable.Promotes more predictable and transparent payment processes for hospitals.Supports quality health outcomes and efficiency.Aligns with industry standard payment practices and, specifically, Medicare payment policy.Allows flexibility — updates for new technology and phase-in capability.20March 31, 2014
22. Methodology Overview (cont’d)APR-DRG Rate Setting21March 31, 2014TopicApproachIncluded hospitals.General acute care hospitals.Excluded hospitals.Rehabilitation, psychiatric, long-term acute care, critical access hospitals, other specialty hospitals.Out-of-state and border hospitals.DRGs based on statewide average.Claim period for rate setting.CY 2012 paid claims.Base rate determination.Hospital-specific base rates with revenue neutral targets.Capital and operating costs.Capital and operating costs will be combined and included in base rates.Outlier methodology.Cost outlier with statistical basis with minimum threshold.Same day stays/short stay outliers.Average per diem for DRG.Indirect medical education factor.Rate adjustment factor based on Medicare formula.
23. Methodology Overview (cont’d)APR-DRG Weight Setting22March 31, 2014TopicApproachDRG grouper.APR-DRGs.Claim period for weight setting.CY2012 paid claims.DRG weight determinations for low-volume DRGs.Based on 3M standard APR-DRG weights.Cost reports to estimate costs.Medicare cost report with period ending in CY2012, adjusted to a common point.Estimated cost of each claim.Revenue code-specific per diems and CCRs based on provider crosswalks.Time limit to identify readmissions as part of the initial admission.Claims with readmission within three days are combined into a single claim.
24. Methodology Overview (cont'd.)Hospital Revenue MapRevenues included in APR-DRG payment:Current case rate payments.Capital pass through.Burn pass through.23March 31, 2014
25. Methodology OverviewHospital Revenue Map (cont'd.)Revenues not included in APR-DRG payment:Physician payments for hospital based physicians.Indemnity payments.Heart and liver transplants.Organ acquisition.Graduate medical education — direct.Adult behavioral health.Children’s behavioral health.All supplemental payments (disproportionate share hospital, etc.).24March 31, 2014
26. Data OverviewDRG ReimbursementData sources:Cost reports.Claim set.Costing process:Routine line items.Ancillary items.Weight setting:Average cost per DRG versus overall average cost. Basic DRG payment example:Inlier formula.Outlier formula.March 31, 201425
27. Data Overview (cont'd.)State of Connecticut Cost ReportsMarch 31, 201426
28. Data Overview (cont'd.)Data Set — Claim FiltersClaims from 1/1/2012–12/31/201227March 31, 2014Medicaid NumberMedicare NumberNameBeginning Claim CountDischarge Status 30UngroupablePsych and Rehab DRGsFinal Claim Count404161270001Hospital of Saint Raphael2,7756613842,324404162070002Saint Francis Hospital8,03086128347,098404163870003Day Kimball Hospital1,336343251,004422180070004Sharon Hospital179 - 2 - 177404165370005Waterbury Hospital3,37315155432,800404166170006Stamford Hospital3,27142222462,961404167970007Lawrence & Memorial Hospital3,2446763332,838404168770008Johnson Memorial Hospital5771 - 126450404170370010Bridgeport Hospital5,859120114905,238404171170011Charlotte Hungerford Hospital1,154132183956404172970012Rockville General Hospital2671 - 1265404175270015New Milford Hospital297 - - - 297404176070016Saint Mary's Hospital3,2741552113,043404177870017Midstate Medical Center2,2542071052,122404178670018Greenwich Hospital4462 - 2442404179470019Milford Hospital284 - - - 284404181070020Middlesex Hospital2,405493172,075404182870021Windham Community Memorial Hospital967 - 41962404183670022Yale-New Haven Hospital18,763292471,76116,663404185170024William W. Backus Hospital2,3552622312,096404186970025Hartford Hospital8,8798191,8766,913404188570027Manchester Memorial Hospital2,1193346241,458404189370028Saint Vincent's Medical Center4,89590281,1103,667404190170029Bristol Hospital1,6273103211,293404192770031Griffin Hospital1,282 - 21091,171404193570033Danbury Hospital3,28454112372,982404194370034Norwalk Hospital3,0462031242,899404195070035Hospital of Central Connecticut4,51926102834,200404196870036John Dempsey Hospital2,25410512621,886415996073300Connecticut Children's Medical Center3,50847 - 123,449 Total96,5231,23222711,05184,013
29. Data Overview (cont'd.)Cost of ClaimsHospital provided revenue code crosswalk — used if available.Routine cost centers — used per diems for revenue codes less than 220.Ancillary cost centers — used CCRs for revenue codes greater than or equal to 220.Claim costs inflated to common period.March 31, 201428
30. Data Overview (cont'd.)Revenue Code Crosswalk Example29March 31, 2014
31. Data Overview (cont'd.)Costing Example30March 31, 2014
32. Data Overview (cont'd.)DRG Weight Setting TableWeights determined using average cost of inlier claims.Standard 3M APR-DRG weights used for low-volume DRGs.Weight set normalized after inclusion of external low-volume DRG weights.Clinical cohesiveness addressed for DRG severity of illness mismatches.Statistical cost outlier.March 31, 201431
33. Data Overview (cont'd.)DRG Statistics32March 31, 2014
34. Data OverviewDRG Statistics (cont'd.)33March 31, 2014
35. Data Overview (cont'd.)Basic DRG Payment ParametersInlier DRG:Hospital base rate.Indirect medical education.DRG weight.Outlier:Billed charges.CCRs.Outlier threshold.Outlier payment percentage.34March 31, 2014
36. Data Overview (cont'd.)DRG Payment Example35March 31, 2014DRG Payment DeterminationHospital base rate$5,710.54 IME adjustmentX1.153205 DRG weightX7.3086 DRG payment=$48,130.22 Outlier Add On DeterminationTotal charges$500,000.00 Non-covered charges-$3,000.00 Allowed charges$497,000.00 Hospital cost to charge ratioX0.289271 Estimated cost=$143,767.69 DRG outlier threshold-$129,050.22 Marginal cost=$14,717.47 Outlier payment percentageX80%Outlier add on=$11,773.98
37. Next StepsOperational changes.Timeline.Website.Questions.36March 31, 2014
38. Next Steps (cont’d.)Operational ChangesPhysician billing number requirements.Elimination of interim claims.Reduced need for annual cost settlement.37March 31, 2014
39. Next Steps (cont’d.)Inpatient Timeline38March 31, 2014
40. Next Steps (cont’d.)Reimbursement Modernization WebsiteConnecticut Department of Social Services website:http://www.ct.gov/dss/cwp/view.asp?a=4598&q=53825639March 31, 2014
41. 40March 31, 2014Questions?
42. Please address any additional questions in writing to: Kate McEvoy, DSS Medicaid Director25 Sigourney StreetHartford, CT 06106-503341March 31, 2014
43. Services provided by Mercer Health & Benefits LLC.