Overview of Maryland’s Quality Programs and Performance Based Payment Methodologies

1. Overview of Maryland’s Quality Programs and Performance Based Payment Methodologies Alyson Schuster, Associate Director, Health Services Cost Review Commission Traci La Valle, Vice President, Maryland Hospital Association August 21, 2015

2. Presentation Overview • Introduction • Current Programs and Year 1 Progress • HSCRC Current Priorities/Future Direction • Maryland Quality Approach Compared to National Medicare • MHA Quality Strategy and Rate Year 2018 Priorities • ICD-10 Transition and Grouper Versions

3. Maryland Hospitals are Exempt from CMS Quality Programs • All-payer demonstration agreement provides exemptions from CMS Hospital Acquired Conditions policy and CMS readmissions policies provided that Maryland meets annual performance targets. • Exemption from CMS Value Based Purchasing (VBP) program requires annual exemption request and performance evaluation. • Failure to meet quality tests does not result in loss of waiver, but may lead to loss of exemption from national quality programs.

4. Introduction Maryland’s hospital quality initiatives are part of overall efforts in the State to achieve the three-part aim of better care for individuals, better health for populations, and reduced costs for all patients. Since 2008, Maryland has steadily expanded the magnitude and scope of its quality payment reform initiatives to ensure they remain consistent in design and intent with Medicare’s quality programs. In addition, the HSCRC has implemented several payment strategies designed to reduce utilization and readmissions, and improve the efficiency and effectiveness of hospital care in the State. The HSCRC performance-based payment methodologies, magnitudes “at risk”, and global payment arrangements are important policy tools for to promote hospital quality improvement.

5. New Waiver Model • The new waiver contract requires that the breadth and impact of Maryland’s quality programs must meet or exceed Medicare’s quality programs in terms of measures and aggregate revenue at-risk. • The new waiver contract also sets specific targets for complications, readmissions, and overall cost-savings: • 30% reduction in hospital-acquired conditions across 65 PPCs • Reduction in Medicare readmissions rate to at or below national rates • $330M in Medicare savings under the national Medicare trend

6. Maryland Quality-Based Payment Programs Additional Performance-Based Payment Adjustments GBR Efficiency Adjustments Readmission Shared Savings

7. Quality Programs for FY 2017 Rates • QBR (2% penalty, 1% reward) • Changes in domain weighting, addition of more infection measures, and emphasis on HCAHPs • Relative scaling eliminated; predictable payment adjustments linked to score • MHAC (3% penalty, 1% reward) • Updated thresholds and benchmarks; CY2015 performance compared to FY2014 base period • 7% minimum statewide improvement target • Readmissions (2% penalty, 1% reward) • Added scaled penalties of up to 2% and rewards of up to 1% • 9.3% minimum reduction comparing CY2013 to CY2015

8. Potentially Avoidable Utilization (PAU) Definition: “Hospital care that is unplanned and can be prevented through improved care coordination, effective primary care and improved population health.” Components of PAU HSCRC Calculates Percent of Revenue Attributable to PAU

9. Year 1 Progress

10. Monthly Risk-Adjusted PPC Rates

11. Monthly Risk-Adjusted Readmission Rates

12. HSCRC Current Priorities • Readmissions: Modify payment methodology to measure both improvement and attainment. • Socio-demographic factors, Out-of-State Readmissions • MHAC: Update benchmarks, thresholds, and normative values based on FY2015 base period. • 3M Clinical Criteria Subgroup, Coding audits, ICD-10 • QBR: QBR Subgroup meeting to review FY18 measures and domain weighting. • PSI-90 may be suspended due to ICD-10, efficiency measure, patient and caregiver-centered experience of care/care coordination measures • PAU: Consider additional measures for PAU methodology

13. Future Direction:Patient Centered Outcomes • Measures specific to certain patient population • Cancer, Orthopedic Surgery, Colonoscopy, Deliveries etc. • Composite measures with different domains (e.g., STAR Rating) • Episode cost, quality outcomes, satisfaction, efficiency • Population based • Population health, provider alignment, cost per capita • Electronic Medical Records- clinical outcomes (Diabetes, hypertension control, etc.)

14. Maryland P4P Risk Compared to the Nation • All-payer demonstration contract language The state must ensure that the aggregate percentage of regulated revenue at risk for quality programs…is equal to or greater than the aggregate…at risk under national Medicare quality programs. • Compares the Maryland all-payer percent of inpatient revenue to the national Medicare inpatient revenue • Includes readmissions reduction policy and readmissions shared savings; complications; QBR/VBP; and for Maryland, PAU in the demographic adjustment • Federal regulators interpret this language to require 3 separate ways of evaluating amount at risk • Percent at risk for all programs, including readmissions, complications, and QBR/VBP is equivalent. Currently at 6 percent. • “Realized risk” or the percent of inpatient revenue actually awarded or penalized is equivalent to the nation. In this measure, it’s the absolute value of the risk, so a 1 percent reward and a 1 percent penalty add up to 2 percent. Currently, Maryland is estimated to be 0.23 percent above nation. • Cumulative percent at risk beginning with FY 2014. Currently Maryland risk is 2.72 percent above national

15. Maryland Quality Approach Compared to National Rewards Penalties Lowest quartile • Maryland sets performance expectations tied to specific, pre-determined payment consequences. National quality programs do not attempt to define performance targets, instead they penalize the lowest quartile of hospitals, regardless of score • All Maryland programs include penalties and rewards with the possibility that all hospitals achieving performance expectations can receive payment rewards. In Maryland, quality programs are designed to improve performance at all hospitals; not explicitly for the purpose of cost savings • Nationally, only the VBP program provides rewards; national HAC and readmissions programs are penalty-only and count penalties as “cost savings” to the system • Maryland performance targets are clear, predictable, and prospective

16. MHA Quality-Related Policy Strategy • Focus on the complications that really make a difference in health care outcomes, health care costs and people’s lives • Sharpen focus on Medicare readmissions and continue to measure all-payer readmissions • Structure payment policies to support good performance on those metrics • Continue to build on progress in reducing complications and readmissions, where it is appropriate and beneficial to patient outcomes

17. MHA Quality Priorities for FY 2018 (CY 2016 Measurement) • Readmission payment policies • Recognize attainment and improvement • Important to consider other factors in evaluating actual readmission rate • Consider: payer-mix, presence of a behavioral health or substance abuse diagnosis, patient’s age and socioeconomic status, and possibly others in addition to variation by case-mix and severity of illness • Coordinate with HSCRC socio-demographic sub-group and other work HSCRC may be doing separately to revise readmissions policy • Maintain incentive to address health disparities • Hospitals must be able to monitor status with monthly data • Complications • Maryland hospitals have met the 30% MHAC reduction target • Focus on PPCs with greatest clinical opportunity to improve patient outcomes and cost savings • Continue to work with hospitals and 3M on MHAC definitions

18. Enhance Readmissions Policy The goals of the MHA recommendations are to: • Develop a readmissions policy that provides additional incentives beyond global budgets to lower the statewide readmission rate to the national rate • Take into account factors that hospitals can control and recognize other factors, especially sociodemographic, that are harder to influence • Ensure hospitals that have achieved a clinically optimal number of readmissions are not penalized by the program Validating the measurement of Maryland Medicare readmission rate compared to the nation is a separate, but related, work effort.

19. Enhance Readmissions Policy • Barriers: • Data limitations, especially on the social factors that influence readmissions, such as support at home, health literacy, family income • If this was easy, it would already have been done Threshold question: do we think we can improve on existing methodology?

20. Enhance Readmissions Policy • Hospitals with similar composite risks (category or percentile range) • Similar readmission policy targets • Evaluate risk-adjusted readmission rates within broad ranges • Adjust penalties based on composite risk

21. MHAC and Readmissions Policy Timeline January 1 New performance year begins

22. ICD-10 Transition: Timing and Grouper Versions Payment methodologies relay on APR and PPC software • APR-DRG, SOI and PPC assignment directly impact HSCRC market shift and MHAC payment methodologies • APR-DRG, SOI, and Risk of Mortality assignment is used to risk adjust measurement of readmission rates and mortality rates (within QBR) • CPT assignment also affects PQI identification, which is included in the HSCRC’s demographic adjustment to Global Budgets Facts about 3M software versions • Version 33, available October 2015, only accepts I-10; there is no I-9 version 33 grouper. Version 33 maps to version 32 in I-9. • Version 33 will include the most updated ICD-10 codes. Version 32 will not be maintained after October 2015 • Version 34 available October 2016, incorporates new logic • There will be new PPC inclusions and exclusions to learn in version 34

23. ICD-10 Transition: Timing and Grouper Version Options

24. Speaker Biographies • Alyson Schuster, PhD, MPH, MBA is the Associate Director of Performance Measurement at the Health Services Cost Review Commission. In this role, Alyson oversees hospital quality-based payment initiatives designed to improve hospital quality and reduce costs. Prior to joining the HSCRC, she managed a team of analysts responsible for implementing and evaluating care management interventions at a managed care organization. Alyson has a doctorate in health services research from Johns Hopkins Bloomberg School of Public Health. • Traci La Valleis Vice President, Rate Setting, at the Maryland Hospital Association where she advocates for Maryland's hospitals, health systems, communities, and patients primarily before state regulatory bodies. In her role, she works to ensure fair and reasonable hospital payment policies that provide appropriate incentives to improve quality and reduce avoidable costs. In her twelve years at MHA, she has held progressively responsible roles covering a range of issues that affect Maryland hospitals’ finances. Most recently, she worked with hospital representatives and state regulators to restructure the incentives to reduce hospital complications and is currently revising policies related to readmission measurement and related payment incentives. Traci has a Master of Public Health and a Certificate in Health Finance and Management from Johns Hopkins School of Public Health, and a Bachelor of Science in Physical Therapy from Temple University. 

25. Appendix

26. Inpatient Revenue at Risk on Quality (1)Individual hospital risk / maximum penalty limited to 3.5% of total revenue *Readmissions shared savings amounts are permanent adjustments, however, the statewide average amount from the prior year is added back in the annual payment update calculation. The annual statewide incremental increase is 0.33% of inpatient revenue.

27. Maryland Hospitals’ Pay for Performance Risk is Higher Compared to the Nation • For Maryland, penalties affect all inpatient revenue under global budgets • For hospitals in the rest of the nation, penalties only affect Medicare inpatient revenue When the dollar value of potential penalties is considered against total annual revenue, the Maryland hospital in this example would have $8.4 million or 4.2 percent of total revenue at risk versus $2.3 million or 1.2 percent of revenue at risk for the same hospital located elsewhere in the nation The 3.5 percent of total revenue cap would limit the risk to $7.0 million--still a substantially higher amount of risk compared to hospitals under national Medicare programs. *Revenues are hypothetical and roughly based on known proportions of inpatient revenue, Medicare inpatient revenue and base MS-DRG revenue relative to total hospital revenue

28. Increased Revenue At Risk for Quality Under new waiver, aggregate at-risk based on quality must meet or exceed CMS programs.