Strategic Healthcare Analytics

1. Presentation to HFMA Southern California August 16, 2012 Strategic Healthcare Analytics Medi-Cal Transformation: Understanding the risks and opportunities presented by the unprecedented transformation of the Medi-Cal Program HOOPER HEALTHCARE CONSULTING ABSHER HEALTHCARE CONSULTING MANAGED CARE SUPPORT SYSTEMS

2. Medi-CAL Many Moving pieces

3. Medi-CAL Many Moving pieces • Other Key Items Related to Medi-cal • Current Implementation of Low Income Health Program • Medicaid Expansion in 2014 • California Health Benefit Exchange • Establishment of a Basic Health Plan for those between 133-200% of FPL?

4. Medi-CAL Population Responsibility Source: OSHPD Annual Financial Data Reports

5. Medi-CAL Population Responsibility • DHCS indicates that 22% of acute Inpatient Days would shift to Managed Care as the patients are Classified as an Aid Code of Seniors and Persons with Disabilities. This is from 2009 Data Set • Makes financial planning much more difficult than in years past to determine impact of the transition and financial planning related to Utilization • The range across facilities of a percentage of SPDs varies widely from low of ~5% to high of 80% • Managed Care to be expanded into rural counties, plus recent expansion between 2010-2012 in other counties. Currently Managed Care available in 28 counties

6. California medi-cal FFS aprdrg • APRDRG – All Patient Refined DRG • Originally developed by 3M and National Association of Children’s Hospitals and Related Institutions • 314 Base DRGs, with 4 levels of severity assigned • 29 Base Neonate and Normal Newborn DRGs • 12 Base Obstetrics DRGs • Will require separate submission of mother and well baby claims • No interim bills less than 30 days • Discontinuation of daily TAR process • Impact of Medi-Cal Recovery Audit Contractor Program? • Contract Awarded in April 2012 • Beginning Scope is limited, but could expand

7. California medi-cal aprdrg • Intended as a “budget neutral” payment method • DSH and Supplemental funding excluded • Elements of California’s APRDRG payment method • DRG with national weights • Wage index adjuster • Outliers • Policy Adjusters • Rural designation – Adjustment – Attempt to hold harmless at 5% corridor for group

8. California medi-cal aprdrg • Program built based on 2009 database built by ACS/Xerox • Required significant integration of multiple data sources to assign the DRG • Will drive the financial exposure limits through transitional pricing corridors • Significant assumptions made including the methodology for eliminating the SPDs from the database and the exclusion of claims without a discharge • State will not update the data prior to implementation

9. California medi-cal aprdrg • Policy Adjusters • 1.25 for Neonate, Pediatric Care • 1.75 for Neonatal Care provided at a CCS Approved Neonatal Surgery NICUs • DHCS has stated intent to monitor continued appropriateness of policy adjusters related to patient access • Transfers • No post-acute transfer adjustments • Transfers to acute care subject to per diem based payment based on average length of stay

10. California medi-cal aprdrg • 4-year phased implementation beginning July 1, 2013 • Financial exposure mitigation through transitional pricing corridors: • +/- 5% maximum FY13-14 • +/- 10% maximum FY14-15 • +/- 15% maximum FY15-16 • Full DRG payment FY16-17 and beyond

11. DHCS database building blocks

12. Critical analytical shortcomings • Inadequacy of data used to build the program and potential ramifications – Inaccurate Base Rate Setting • Change in utilization of services since 2009 • Limitations on losses or gains as a result of transition • Key payment drivers (i.e., adjusters, outliers, wage index) • Impact of moving large FFS populations to managed care • Pilot enrollment of dual eligible population; prospects for expansion • Rogers rate implications • Adoption by managed care plans

13. medi-cal aprdrg DHCS DataSET • 48% of FFS Revenue will come from Obstetrics, nursery and neonatal care • However a significant amount of care will still be delivered through the FFS system for adults and pediatric cases.

14. State data vs. hospital data • What changes in case mix and services rendered to Fee-For-Service beneficiaries occurred in subsequent years? • State has signaled that they will not create databases for 2010, 2011, or 2012 • Has there been any change in the Fee-for-Service population at a given hospital?

15. Hospital data: 2009 vs. 2010

16. 2009 APRDRG Pricing – NON SPDs Critical to review services by Care Category to measure efficiencies, areas to improve in, and to consider adjusting

17. California medi-cal aprdrg: Managed Care • Rogers Rate: Plans to pay out of network providers at DRG rates • Plans to be paid based on projected expenses related to DRGs • Plausible that plans will shift to DRG based payment • Have seen this play out in other states • Potential Implications?

18. Dual eligible pilot projects • Dual Eligibles • Who are they? • There are 1.1 million dual eligibles in CA • What services are they utilizing? • What will be the impact on Utilization? • DHCS projects a 20% decrease in inpatient utilization by dual eligible beneficiaries enrolled in Medi-Cal HMOs • The state estimates $675 million in general fund savings in year 1 of demonstration

19. Dual Eligible Pilot Project • Implementation begins no earlier than March 2013 and no later than June 2013 • CA plans to start with following 8 counties: Los Angeles, Orange, San Diego, San Mateo, San Bernardino, Riverside, Alameda and Santa Clara • CMS has announced that they will likely limit Dual Pilots Nationwide to about 2 Million Enrollees (States have thus far proposed 3 Million Enrollees) • Possibility that some counties may not proceed as anticipated given CMS statements and increasing political pressure • Rate Setting and Contract Negotiations with plans September –October 2012 • Beneficiary and Provider Outreach – October 2012-June 2013

20. Dual Eligible Pilot Project

21. Dual Eligible Pilot Project What can hospitals do to monitor and act strategically?

22. Dual Eligible Pilot Project: California Statistics Medicare FFS Days The initial enrollment will include 685,000 beneficiaries

23. The perfect storm? Medi-Cal Managed Care Medi-Cal Expansion Changing Payor Mix Impact on Supplemental Funding Health Benefit Exchanges Medicare DSH Cuts Medi-Cal DSH Cuts Medi-Cal DRG Dual Eligible Pilots Quality Assurance Fee

24. Strategic Healthcare Analytics • Our Industry is data rich, but we continue to face many challenges using data effectively • With declining reimbursements, and growing demands from payers, effective, actionable analytics become all the more important • Integrating and analyzing data from disparate systems/sources can be the key to creating useful analytics

25. Utilizing analytics

26. Where do you go from here?

27. Contact Information Bryan Hooper Hooper Healthcare Consulting, LLC Email:bhooper@hhcllc.us.com Phone: (714) 871-3494 Matt Absher Absher Healthcare Consulting, LLC Email: matt@absherconsulting.com Phone: (530) 231-5305