Additional Utilization-Based Payments for Local Health Departments

1. Additional Utilization-Based Payments for Local Health Departments Jim Flowers Associate Director, Provider Audit February 21, 2019

2. Agenda • Current State – Fee-For-Service Cost Settlement • Future State – Additional Utilization Based Payments (AUBPs) • What Changes • What Remains the Same • AUBP Payment Process • AUBP Calculation • Questions

3. Background • Local Health Departments (LHDs) have historically completed an annual Medicaid cost report and received a settlement for their allowable Medicaid and NC Health Choice (NCHC) cost. • In Managed Care, cost settlements are not permitted under 42 CFR § 438. • The Division is pursuing Additional Utilization Based Payments (AUBP) for LHD.

4. Current State Fee-for-Service Cost Settlement

5. Process • Annual Cost Reports • Medicaid and NCHC Allowable Costs • Cost Report Settlements (Clinic, Family Planning, NCHC). • Amounts Due To / Due From LHD • Beginning with State Fiscal Year (SFY) 2017, allowable costs included laboratory costs not to exceed the Medicare Fee Schedule.

6. Funding • Certified Public Expenditures (CPE) • NC State Plan, Attachment 4.19-B, Section 9 • 42 CFR §433.50 and 433.51 • Local Health Departments use CPEs for the Medicaid and NCHC allowable costs in the cost report. • By certifying these expenditures as governmental entities, the CPEs are used for the non-federal share match for the cost settlement payments to providers. • LHDs receive the net Federal Share of cost settlement.

7. Timeline and Data Sources • Annual cost reports cover services based on a SFY. (Date of Service) • Cost reports are due to the Division no later than eight months following the cost report period (on or before February 28each year). • Tentative Settlements, Desk Reviews, Field Audits • Primary data for cost reports from the provider’s accounts and records. • Medicaid and NCHC paid claims data for cost reports from the Division of Health Benefits (DHB).

8. Future State Additional Utilization-Based Payments

9. Additional Utilization-Based Payments • Under Managed Care, and with CMS approval, LHDs will qualify for AUBP. • 42 CFR § 438.6(c)(1)(iii)(B) • AUBPs for LHDs are based on provider specific Ratio of Costs to Charges (RCC). • AUBPs for LHDs are based on Medicaid and NCHC Claims paid by Prepaid Health Plans (PHPs). • AUBPs are in addition to base payments negotiated in contracts between PHPs and providers.

10. Additional Utilization-Based Payments Cont. • AUBP’s • Calculated quarterly by PHPs for each LHD • Based on claims paid by each PHP to LHDs during that quarter • Paid quarterly, in aggregate, by the Division to each PHP • Upon receipt of aggregate AUBP, each PHP then remits to each LHD their respective AUBP

11. What Changes

12. What Changes • AUBP Timeline • LHDs paid AUBP’s quarterly based on PHP paid claims compared to annual cost settlement. • LHD Funding of Non-Federal Share of AUBPs • Quarterly, LHDs transfer to the Division the Non-Federal Share of their AUBP prior to payment. • Accomplished by Intergovernmental Transfer (IGT). • Each LHD’s net payment is the Federal Share of the AUBP.

13. What Changes - Continued • Laboratory Reimbursement • To facilitate AUBPs, proposed State Plan Amendment (SPA) to Medicaid Lab Fee Schedule = Medicare Lab Fee Schedule for LHD’s. • Proposed contract amendment for PHPs to reimburse in-network LHDs providing lab services, as defined by the Department’s Laboratory fee schedule, at no less than 100 percent of the Medicare fee schedule unless the PHP and local health department have mutually agreed to an alternative reimbursement arrangement. • Cost Report Design (Beginning with SFY2020) • Modified to segregate Fee-for-Service and Managed Care costs • Modified to remove lab costs from cost settlement.

14. What Remains the Same

15. What Remains the Same • Annual Cost Reports • The annual Medicaid cost report and cost reporting process will continue for all LHDs pursuant to the NC State Plan. • Cost Report Settlement • Cost report settlements will continue pursuant to the NC State Plan for all Medicaid and NCHC fee-for-service claims activity. • Estimated between 5 to 10 percent of Clinic (non-dental) claims activity will remain fee-for-service and subject to cost settlement. • All Dental claims will remain fee-for-service and subject to cost settlement. Based on SFY2017, approximately 30 percent ($21M) of aggregate cost settlement was based on Dental claims.

16. What Remains the Same - Cont. • CPEs • CPEs will continue as the funding source for the non-federal share on fee-for-service cost settlements. • Annual Cost Report Reconciliation • Fee-for-service cost settlement • Ratio of Cost to Charges in Fee-For-Service Cost Reporting and Managed Care AUBP includes pharmacy costs and excludes charges.

17. AUBP Payment Process

18. AUBP Payment Process • Each PHP will submit the AUBP calculation quarterly by LHD to the Division. The calculation is based on claims paid by PHPs to LHDs in the preceding calendar quarter. • The Division will review and summarize the quarterly AUBP for each LHD. • The Division will verify and summarize the Federal and non-Federal share of each AUBP. • The Division will invoice each LHD for the non-Federal share of their AUBP which will be an IGT to the Division. This will used as the match to draw the Federal share (42 CFR§ 433.51).

19. AUBP Payment Process - Cont. • The Division will remit the AUBP (Federal and non-Federal share) to the PHPs via NCTracks check write. • The Division will direct each PHP to in turn remit the corresponding AUBP (Federal and non-Federal share) to each LHD. • The Division will request email confirmation from each LHD they have received their calculated AUBP from each PHP. • Quarterly AUBPs are paid on PHP reported claims (similar to a tentative settlement). Annual reconciliation performed by DHB to assure all PHP encounter claims have been received by Division.

20. Sample AUBP Payment Cycle - LHD

21. AUBP Calculation

22. Calculation of AUBP – Annual Cycle • AUBP calculation for LHDs is based on Billed Charges (excluding pharmacy) on Managed Care Claims * RCC less claims payment on Managed Care Claims • Base year for RCC calculation is SFY2017 which first incorporated the NC Health Choice cost settlement • Base Year RCC shall be increased or decreased to limit inflation of costs and charges to the Medicare Economic Index (MEI) • Division plans to furnish each LHD the Charge Master on file with the Division by March 1 prior to SFY. • Each LHD must update, certify and return Charge Master to Division by April 30 prior to SFY. • Division to furnish LHD specific RCCs to each PHP by June 1

23. Sample Calculation of AUBP

24. Comparison – FFS vs. Managed Care • NCTracks Paid Claims • Annual Cost Report Settlement • CPE for Non-Federal Share • Net LHD Payment is Federal Share of Cost Settlement • Annual Cost Report Reconciliation • Annual Cost Report Filing • Fee-For-Service • Managed Care • PHP Paid Claims • Quarterly AUBP • IGT for Non-Federal Share • Net LHD Payment is Federal Share of AUBP • Annual Reconciliation of Managed Care Encounter Claims • Annual Cost Report Filing

25. Questions