A View from the Horizon Long Term Care Financial and Legal Perspectives

1. A View from the HorizonLong Term Care Financial and Legal Perspectives Jim Gomez, CEO/President Mark Reagan, General Counsel Hooper, Lundy & Bookman Darryl Nixon, Director of Reimbursement

2. National Perspectives 2013 Medicare PPS • Market Basket • Sequestration • MedPac Recommendations Medicaid Changes • Provider Fees • Block Grants • Blended FMAP

3. Other Issues • Prompt Payment – HR 3587 • AHCA Initiatives • Re-hospitalization • Quality Initiative • Advancing Excellence • What Happens if Obama Care is Overturned?

4. State Perspectives • 2012-13 State Budget • 2% Increase Sweep to General Fund • 1% Rake Off to Q& A Program • Compromise • 10 % Payment Reductions • Collection Status • Repayment • 2011-12 Retro Rate Increase

5. Managed Care Implementation • Background • Impetus for Change • State Process • Demonstration Model • Covered Benefits • Long Term Care Services and Supports (LTSS) • Analysis/Impact • Demonstration/CCI Geography/Demographics • Expansion Analysis (Coordinated Care Initiative) • CAHF Strategy

6. Background • State Authority (SB 208, 2010): • Demonstration in up to four counties • One two-plan model county & one county organized health system county. • California is one of 15 states that received a $1 million contract to design an integrated care demonstration for duals. • Expansion – Governor’s Coordinated Care Initiative (CCI) 2012-13 Budget Act (Pending)

7. Impetus For ChangeDual Eligible Population • 1.1 million duals - 1/3 live in L.A. County • 2/3 are 65 and older • Roughly 14% of Medi-Cal population consume 25% of Medi-Cal costs. • < 20% enrolled in Medi-Cal managed care • $7.6 billion in state Medi-Cal costs ($20 billion with Medicare) • $3.2 billion in LTC costs = 75% of Medi-Cal total LTC spending

8. State Process • Draft Proposal to CMS submitted • Public stakeholder workgroups launched and active – CAHF is a participant in all groups. • LTSS Integration • Behavioral health coordination/integration • Beneficiary Notifications, Appeals and Protection • Quality and Evaluation Management • Fiscal and Rate Setting • Provider Outreach • Substance Abuse and Behavioral Health • MOU development between State DHCS & CMS • Health plan readiness reviews • Contracts • March 2013 enrollment

9. Proposed Demonstration Model • Population • Most full-benefit dual eligibles • No children under age 18 • No PACE, AIDS Health Care Foundation Enrollees • Enrollment • Passive enrollment with a voluntary opt out • Phased-in throughout 2013 • Financing • Capitated payment models with 3-way contracts between CMS, CA Department of Health Care Services, and health plans

10. Demonstration Covered Benefits • All Medicare Part C and D Benefits • All Medi-Cal Services currently required in managed care coverage • Long-term supports and services • Nursing facilities, • In-Home Supportive Services (IHSS), and • Five home-and community-based waiver services. • Coordination with mental health and substance use carved-out programs • Supplemental Benefits: Pending rates, health plans intend to offer dental, vision, transportation and possibly some housing alternatives

11. Long Term Care Services and Supports (LTSS) • All Medi-Cal benefits, including LTSS, would be included in the capitated payment to the health plans. • In Home Supportive Services (IHSS) • Community-Based Adult Services (CBAS) • Multi-purpose Senior Services Program (MSSP) • Nursing facilities • Five home- and community- based services 1915(c) waivers. • Medi-Cal beneficiaries would need to be enrolled in a Medi-Cal managed care plan to receive any Medi-Cal LTSS

12. Analysis Impact Perspective

13. Medi-Cal Managed CareGeographic Managed Care The Geographic Managed Care (GMC) program model was established to provide medical and dental care for Medi-Cal recipients for a capitated fee. This model is currently available in Sacramento and San Diego counties. The San Diego GMC program operates as “Healthy San Diego.”

14. Medi-Cal Managed CareTwo Plan Model Managed Care Two-Plan Model (DHCS) contracts with two managed care plans in 14 California counties. • Each county offers a local initiative and a commercial plan. • Local initiative plans are operated by a locally developed comprehensive managed care organization. • Commercial plans are operated by non-governmental managed health care organizations. • Medi-Cal recipients may enroll in either plan. • Counties participating in the “Two-Plan Model” are Alameda, Contra Costa, Fresno, Kern, Kings, Los Angeles, Madera, Riverside, San Bernardino, San Francisco, San Joaquin, Santa Clara, Stanislaus and Tulare.

15. Medi-Cal Managed Care (COHS) • A County Organized Health System (COHS) is a local agency created by a county board of supervisors to contract with the Medi-Cal program. Enrolled recipients choose their health care provider from among all COHS providers. Currently 6 COHS serve 14 counties covered by COHS are: • CalOPTIMA (Orange) • Central California Alliance for Health (Merced, Monterey, and Santa Cruz). • Health Plan of San Mateo (San Mateo). • Partnership HealthPlan of California (PHC) (Marin, Mendocino, Napa, Solano, Sonoma, and Yolo). • CenCal Health (San Luis Obispo and Santa Barbara). • Gold Coast Health Plan (Ventura).

16. Medi-Cal Managed CareExpansion Counties The following 28 counties are not currently Covered under Medi-Cal Managed and would be included and phased in under the CCI: Alpine, Amador, Butte, Calaveras, Colusa, Del Norte, El Dorado, Glenn, Humboldt, Imperial, Inyo, Lake, Lassen, Mariposa, Modoc, Mono, Nevada, Placer, Plumas, San Benito, Shasta, Sierra, Siskiyou, Sutter, Tehema, Trinity, Tuolumne, and Yuba.

17. Medi-Cal Managed CareCurrent Landscape California = 58 Counties/121,700 Total Beds • Managed Care = 30 Counties /114,470 Beds • Geographic Managed Care (GMC) = 2/ 13,300 Beds • Two Plan Model = 14/ 78,170 Beds • County Organized Health System (COHS) = 14/ 23,000 Beds • Non Managed Care = 28 Counties / 7230 Beds • SNF Benefit Counties* = 14 (COHS) /23,000 Beds • Current Non SNF Benefit Beds (FFS) = 98,700 = 81% * Note – All managed care counties have SNF benefit but only COHS pay for more than 60 days.

18. CCI Expansion • The TBL proposes phasing in LTSS integration over a three-year period. LTSS will become a Medi-Cal benefit covered under every managed care health plan contract and available only through managed care health plans, in Medi-Cal managed care counties. • Beginning July 1, 2012, CBAS will be the first LTSS to be integrated. • Beginning no sooner than March 1, 2013, with federal approval, the department will implement LTSS integration and the Duals Demonstration in up to eight counties. • Beginning no sooner than January 1, 2014, the department may expand provision of LTSS through managed care plans into all remaining counties that currently provide Medi-Cal through managed care. • Beginning no sooner than January 1, 2015, the department will expand the provision of LTSS through managed care plans into all remaining counties, consistent with the proposal to expand.

19. CCI Transition AnalysisFFS to Managed Care • Impact – Timeline ? • Current Percentage of Beds with LTSS Benefit 23,000 = 19% (2012) • Initial Phase (Additional beds to LTSS = 91,470) = 94% (2013 - 14) • Future Phase (Additional beds to LTSS = 7230) = 100% (2015)

20. Demonstration Geography • Eight (8) Counties proposed in 2013 • Current State Authority for Four Counties: • Los Angeles (370,000) • Orange (71,000) • San Diego (75,000) • San Mateo (15,000) • Four (4) additional proposed, pending further authority and readiness: Alameda, Santa Clara, San Bernardino, Riverside

21. Los Angeles CountyDemographics - Plans Demographics • Duals Population - 370,000 Duals • Average Monthly Users • All LTC = 173,800 • SNF = 23,100 (SNF Beds=39,200) • IHSS = 129,500 • Health Net and LA Care

22. San Diego CountyDemographics - Plans Demographics • Duals Population – 75,000 Duals • Average Monthly Users • All LTC = 26,600 • SNF = 5,100 (SNF Beds = 9,400) • IHSS = 17,000 • Molina, Care 1st, Community Health Group, Health Net

23. Orange County Demographics - Plan Demographics • Duals Population - 71,000 Duals • Average Monthly Users • All LTC = 21,300 • SNF = 4,100 (SNF Beds = 8,200) • IHSS = 13,400 • CalOptima

24. San Mateo CountyDemographics - Plan Demographics • Duals Population – 15,000 Duals • Average Monthly Users • All LTC = 5,000 • SNF = 900 (SNF Beds = 1,970) • IHSS = 2,300 • Health Plan of San Mateo

25. CCI Expansion Riverside County Demographics • Duals Population – 50,000 Duals • Average Monthly Users • All LTC = 17,000 • SNF = 2,600 (SNF Beds = 4,620) • IHSS = 11,400 • Tentative Plans Inland Empire Health Plan (IEHP), Molina Healthcare

26. CCI ExpansionSan Bernardino County Demographics • Duals Population – 55,000 Duals • Average Monthly Users • All LTC = 18,300 • SNF = 2,800 (SNF Beds = 5,040) • IHSS = 12,800 • Tentative Plans - Inland Empire Health Plan (IEHP), Molina Healthcare

27. CCI ExpansionSanta Clara County Demographics • Duals Population – 50,400 Duals • Average Monthly Users • All LTC = 19,000 • SNF = 2,900 (SNF Beds = 5,300) • IHSS = 12,900 • Tentative Plans – Anthem Blue Cross and Santa Clara Family Health Plan

28. CCI ExpansionAlameda County Demographics • Duals Population – 48,300 • Average Monthly Users • All LTC = 18,600 • SNF = 3,100 (SNF Beds = 5,740) • IHSS = 12,500 • Tentative Plans – Alameda Alliance for Health and Anthem Blue Cross

29. Provider Issues/Concerns • Payments • Benefits/Coverage • Passive Enrollment • Network • Discharge/Transfer • Continuity of Care – Lock In • Quality Review • Contractual Disputes • Business Continuity/Disaster Preparedness

30. CAHF Strategy • Member Advisory Group • Identify Key Protections • Monitor State’s Expansion • Conduct Forums and Educate Members • Develop Resource Guides and Member Tools • Expand and Strengthen Relationships

31. Legal Perspectives Mark Reagan Hooper, Lundy and Bookman

32. Legal Perspectives • Managed Care Expansion Implications/Considerations • 60 Day Rule • RACs/ZPICs/OIG • Other Issues

33. Implications of Managed Care Penetration • Network Formation • Plans will utilize networks • Built on existing networks • Medicare Part C • Medi-Cal SPD pilot • “Any Willing Provider” Proposal • Not certain to be adopted • More likely for existing residents • Would not guarantee referrals

34. Identification Plans • Primary plans • Subcontracted plans • Plan focus • Medical groups first • “Ancillary “ providers thereafter/Summer of 2012? • Economic relationships under health plans • Likely plan relationships with medical groups • Some groups will subcapitate and at risk for some institutional services • Others will have fee-for-service arrangements with risk pools

35. Likely plan relationships with skilled nursing facilities • Primarily fee-for-service • Risk contracting in the future • “ACO-like” strictures down the road” • Marketing Challenges and Opportunities • Best practices • Length of stay – Medicare • Outcomes and readmissions • Quality and referral risks

36. Contractual Issues • Rate proposals for Medicare and Medi-Cal rates to set the “floor” and description of services • What’s “carved” in? • What’s “carved” out? • How will differences in program coverage be handled? • Medicare Part A • Medi-Cal • Medicare Part B • Medicare Part D • Handling of out of network claims

37. Prior Authorizations and Length of Stays • How determined/timelines • Who determines/plan or medical group? • Time to react to plan/medical group decisions/transfer and discharge • Timely Payment • Legal requirements • Contractual provisions

38. Care transitions and levels of care • Payment during appeals • Payment across “levels of care” • Contractual precision is very important • Other issues • Share of cost • Plan policies and procedures • Appeals and dispute resolution

39. ZONE PROGRAM INTEGRITY CONTRACTORS (ZPICS): WHAT DO THEY DO? • ZPICs are responsible for preventing, detecting and deterring Medicare fraud. • Different from the Medical Review program which is primarily concerned with preventing and identifying errors • ZPICs request medical records and conduct medical review to evaluate the identified potential fraud • ZPICs may also refer to the OIG and DOJ for further investigation

40. RECOVERY AUDIT CONTRACTORS • Who is the RAC? • Region D: HealthDataInsights, Inc. • Working in AK, AZ, CA, IA, KS, MO, MT, ND, NE, NV, OR, SD, UT, WA, WY, Guam, American Samoa and Northern Marianas • http://racinfo.healthdatainsights.com/home.aspx • What is the RAC? • Now called a Recovery Auditor (”RA”) • Contingency Fee Contractors • Overpayments made by Medicare

41. WHAT’S COMING? • Unannounced audits of SNFs by ZPICs • Claims for Ultra-High RUGs • 8 to 10 individuals • Voluminous document request • Interviews of employees behind-closed-doors • Record requests by RAC on “medical necessity” • Limitations on records requests • 45-day Turnaround • Preparation • Self-audit • Employee rights and responsibilities for ZPIC audits • Review therapy contracts

42. RECENT DEVELOPMENTS OF SIGNIFICANCE Region B RAC “test claims” of “ ultra high” therapy scores CMS must approve audit issues before the RACs may pursue them RACs may audit a limited number of “test claims” in order to seek CMS approval of proposed issues

43. RECENT DEVELOPMENTS OF SIGNIFICANCE (cont.) Region B RAC began to submit record requests for "test claims" associated with the issue of ultra-high therapy scores for Part A SNF charges. Tied to recent OIG report criticizing the handling of Part A charges by SNFs and CMS rulemaking on Part A payments for FY 2013. 43

44. RECENT DEVELOPMENTS OF SIGNIFICANCE • ZPIC audits on Part A claims with an emphasis on ultra-high therapy scores. • Storming through Florida and elsewhere • ZPIC audits on Part A claims with an emphasis on ultra-high therapy scores. • OIG/DOJ investigations in this area, false claims cases expected

45. 60-DAY RULE ACA Requires ID and reimbursement of overpayment within 60 days If not done, overpayment becomes “obligation” for false claims purposes CMS issued proposed rule in February 2012 (NPRM) 10-year “look back” Investigation must be expeditious Other elements and implications 45

46. NPRM applies only to Medicare Part A/B providers and suppliers (together “providers” unless otherwise noted) • Overpayment retained after deadline under NPRM creates an “obligation” for purposes of the federal FCA • Providers still potentially liable under other laws even with timely report/repayment • Federal FCA • Civil Monetary Penalty Law

47. A person “identifies” an overpayment if the person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment • Oddly, statute defines, but does not use, “knowing” and “knowingly” • CMS believes FCA’s “deliberate ignorance or reckless disregard” standard encourages self-directed compliance • May impact future rulemaking around compliance programs

48. OVERPAYMENT EXAMPLES • Medicare payments for non-covered services • Medicare payments in excess of the allowable amount for an identified covered service • Errors and non-reimbursable expenditures in cost reports • Duplicate payments • Receipt of Medicare payment when another payor had the primary responsibility for payment

49. WHAT DOES “IDENTIFIED” MEAN TO CMS? Provider receives an anonymous compliance hotline complaint about a potential overpayment and fails to make a reasonable inquiry into the complaint Provider or supplier reviews billing or payment records and learns that it incorrectly coded certain services, resulting in increased reimbursement Provider or supplier learns that a patient death occurred prior to the service date on a claim that has been submitted for payment

50. NPRM EXAMPLES OF “IDENTIFIED” • Provider or supplier learns that services were provided by an unlicensed or excluded individual on its behalf • A provider of services or supplier performs an internal audit and discovers that overpayments exist • A provider of services or supplier is informed by a government agency of an audit that discovered a potential overpayment, and the provider or supplier fails to make a reasonable inquiry • Duty to make reasonable inquiry • “All deliberate speed”