AHCCCS Hospital Provider Meeting

1. AHCCCS Hospital Provider Meeting February 22, 2012

2. AHCCCS Update Our first care is your health care arizona health care cost containment system

3. AHCCCS Budget Status Implemented $2.5 billion in budget changes – 21% reduction in FY 2012 Medicaid in FY 2012 is currently balanced Funds need to be moved between agencies Risks include ongoing lawsuits – one resolved Awaiting final approval on 25 day limit FY 2013 AHCCCS GF Request –historically low Growth returns in FY 2014 & 15 with ACA expansion Short term savings (rates–services-benefits) maxed Our first care is your health care arizona health care cost containment system 3

4. Total AHCCCS Population Our first care is your health care arizona health care cost containment system 4

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6. AHCCCS Budget Request Increases Our first care is your health care arizona health care cost containment system 6

7. AHCCCS Spending Our first care is your health care arizona health care cost containment system 7

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9. Future Challenges Our first care is your health care arizona health care cost containment system 9

10. Health Care Reform PPACA expands Medicaid to 133% of the federal poverty limit on January 1, 2014. Nationally Medicaid is estimated to grow by 16 million lives Create Health Exchange provide tax credit subsidy for individuals from 133% to 400% Nationally Exchanges are expected to cover 24 million lives by 2019 State needs to determine who will operate Exchange Made a number of commercial insurance reforms Established Individual Mandate Our first care is your health care arizona health care cost containment system 10

11. Federal Health Care Reform Our first care is your health care arizona health care cost containment system 11

12. Health Care Reform Est. Our first care is your health care arizona health care cost containment system 12

13. 10-1-13 Triple Crown of Contracting - Integration Efforts (5 year contracts) Behavioral Health – RBHA plus establish Single plan in Maricopa County responsible for all care for individuals with Serious Mental Illness Children’s Rehabilitative Services - Establish single plan for all services for children designated eligible for this program Acute - Unprecedented competition – Exchange-Medicaid continuum Our first care is your health care arizona health care cost containment system 13

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15. Dual Members Arizona has been leader with model to build on Unique historical opportunity to change structure Changes being made at federal level with new Office for the Duals Demonstration program available to states Establishes contract between Feds – State – Plans AHCCCS evaluating demo as opportunity to improve alignment Our first care is your health care arizona health care cost containment system 15

16. Other News Medicaid E.H.R Incentive Payments Thru Jan 2012 – 37 facilities paid - $43.7m Stakeholder Discussion Open door to address Issues Efficiencies established to date Payment reform opportunities

17. Questions??? Our first care is your health care arizona health care cost containment system

18. Proposition 202 into SNCP

19. Prop 202 into SNCP Doesn’t need statute or rule exemption Will be a separate attachment to the Waiver Standard Terms and Conditions, similar to DSH AHCCCS brought this idea to CMS in late 2011 and continues to work on specifics with CMS Will be in effect for FFY 2012 and 2013 only

20. Principles for Rule Notwithstanding the guideline under R-9-22-2101 through R9-22-2103, for federal fiscal years 2012 and 2013, the Administration shall pay the Trauma and Emergency Services Fund Payments under the arrangements pertaining to the Safety Net Care Pool. The calculation for the allocation of Trauma funds will be determined by the number and acuity of trauma cases. The proportion of each hospital’s share of the fund for trauma readiness will be allocated based upon the proportion each hospital’s acuity-adjusted volume to the total for trauma hospitals. The calculation for the allocation of Emergency funds will be determined by each hospital’s Emergency Services cost data as reported on the hospital’s Medicare Cost Report, Worksheet B, column 0, line 61. The percentage of each hospital’s share of the fund for uncovered emergency services will be allocated based upon the proportion of each hospital’s emergency services cost to the total emergency services costs for all hospitals in Arizona that have an Emergency Room. In line with Medicare cost principles, no hospital’s payment will exceed that hospital’s FFY OBRA limit and these payments will be reconciled in the federal fiscal year that is two years subsequent to the payment. Payments that exceed a hospital’s OBRA limit will be re-allocated.

21. Trauma Calculation Existing calculation uses acuity-adjusted volume (using injury severity score) and the lesser of direct readiness and total trauma unrecovered costs reported by hospitals on application. SNCP calculation would use acuity-adjusted volume as basis for distribution Allocations very closely mirror current distribution percentages

22. ED Calculation Current calculation uses charity care and bad debt from UAR SNCP calculation will use Emergency Department Expense recorded on MCR Worksheet B, Part I, column 0, line 61

23. Trauma Fund Splits AHCCCS posted several options on the web Other options can be considered

24. Questions???Comments??? Our first care is your health care arizona health care cost containment system

25. Supplemental Payment Timeline CAH – 1st Payment Feb. 24, 2012; 2nd Payment August 2012 SNCP and Prop 202 funds mid-summer 2012 DSH 2010 Pool 5 – All partnership arrangements approved by CMS as of April 15, 2012. Final distribution of 2010 funds in June DSH 2011 Pool 5 – All partnership arrangements approved by CMS as of April 15, 2013. Final distribution of 2011 in 2013 DSH 2012 – Applications due Feb. 29, 2012 GME – Data due by April 1, 2012. RHIF – Distributed in June via MCOs EHR – Payments made within 45 days of a clean application

26. Potentially Preventable Readmissions

27. AHCCCS Readmissions Like CMS and other Medicaid states, AHCCCS is reviewing hospital readmission rates and associated costs AHCCCS engaged national consultants, Sellers Dorsey, to examine 2 years of claims/encounter data Draft Report was distributed to all hospitals and provides the definitions, methodology and exclusions (Final Report will be posted to web) Analysis shows that 5% of hospital inpatient readmissions were potentially preventable

28. National Efforts to Reduce Readmissions CMS – 12th Scope of Work – Health Services Advisory Group No Place Like Home campaign Statewide effort to engage hospitals, SNFs, hospice, clinician practices, pharmacies, health plans and other health care providers in an effort to reduce avoidable hospital readmissions that occur within 30 days of hospital discharge CMS Payment Adjustments

29. AHCCCS Efforts to Reduce Readmissions Contractor Performance Improvement Projects (PIPs) Decrease the rate of inpatient readmissions within 15 and 30 days of a previous admission in order to improve quality of life, promote patient-centered care, and reduce unnecessary health care utilization and costs AHCCCS will develop contractually-mandated Contractor performance measurements

30. AHCCCS Efforts to Reduce Readmissions AHCCCS and Contractors will have increased focus on discharge planning AHCCCS and Contractors participating in HSAG campaign AHCCCS will consider future reimbursement strategy to assist with reducing readmissions

31. Inpatient Hospital Reimbursement Methodology

32. AHCCCS Activity AHCCCS exploring options for budget-neutral, revised inpatient hospital reimbursement methodology HB 2534 introduced in 2012 Session would: eliminate the requirement to use a tiered per diem methodology for inpatient hospital reimbursement effective 9/30/13 allow AHCCCS to utilize a reimbursement methodology consistent with Title XIX of the Social Security Act, effective October 1, 2013 Hired national consulting group, Navigant

33. AHCCCS Tiered Per Diem Methodology Tiered Per Diem rates were last rebased in 1998 using 1996 data Rates are stale and in need of update Per diem rates focus on quantity rather than quality Outliers were eliminated by Legislature in 2011 Session thus AHCCCS must take some action

34. AHCCCS Options – Inpatient Payment Methodologies Rebase Tiered Per Diem rates Easily understood in Arizona Little system change required Operational procedures/payment policies already established Doesn’t change focus from quantity!! Costly Lengthy

35. AHCCCS Options – Inpatient Payment Methodologies DRG-based rates Align incentives towards quality of care and improved efficiency Not a unique methodology - hospitals and commercial plans already use Improved ability to implement quality and efficiency measures (e.g. HCAC, readmissions) Eliminates need for limits on inpatient days System changes required Operational procedures/payment policies to be established Lengthy

36. AHCCCS Options –DRG-Based Rates If HB 2534 signed into law, Navigant recommends APR-DRG payment model Approximately 6 state’s Medicaid programs using APR-DRG rates Approximately 6 more states moving to APR-DRG rates APR-DRG rates intended for all patients – unrelated to Medicare (elderly and disabled) 1258 DRGs as opposed to 746 DRGs in CMS’ MS-DRGs for Medicare

37. AHCCCS Options –DRG-Based Rates APR-DRG has the greatest number of newborn DRGs of all options Preferred by childrens’ hospitals Decisions would need to be made: Regarding which services, if not all, to be paid under this methodology Regarding which providers, if not all, to be paid under this methodology Regarding outlier and transfer adjustments And a myriad of other payment policy issues…

38. Next Steps AHCCCS will monitor progress of HB 2534 If signed into law, AHCCCS will: Form two workgroups: One for hospitals AzHHA and non-AzHHA representatives Cross-section of urban and rural facilities One for health plans Work toward 10/1/13 implementation date to coincide with effective date of new AHCCCS Acute Care contracts

39. Please watch the AHCCCS website www.azahcccs.gov for up-to-date information when availableQuestions??? Our first care is your health care arizona health care cost containment system