2008 Annual Report Health Safety Net December 8, 2008

1. 2008 Annual Report Health Safety Net December 8, 2008 Deval L. Patrick, GovernorCommonwealth of Massachusetts Timothy P. MurrayLieutenant Governor JudyAnn Bigby, SecretaryExecutive Office of Health and Human Services Sarah Iselin, CommissionerDivision of Health Care Finance and Policy

2. The Health Safety Net Introduction The Massachusetts health care reform law, Chapter 58 of the Acts of 2006, was designed with the goal of achieving near universal coverage. This landmark legislation uses expansion of Medicaid eligibility, government subsidies, insurance market reform, and mandates to ensure affordability. Moreover, in order to ensure access to essential health care services for uninsured or underinsured residents, Chapter 58 created the Health Safety Net (HSN) to replace the Uncompensated Care Pool (UCP). The HSN, like its predecessor, reimburses acute care hospitals and community health centers for allowable services provided to this population. Since the implementation of health care reform, Massachusetts has achieved not only an increase of 442,000 additional people with health insurance coverage, but also a dramatic reduction in safety net utilization and payments. Table of Contents Health Safety Net 1 Volume and Payments 5 Service Patterns 13 User Demographics 22 Financing 27 The transition of the Uncompensated Care Pool to the Health Safety Net included several initiatives designed to promote enrollment in health insurance coverage and align policies with those of other state health programs (MassHealth and Commonwealth Care). These improvements were based in three core areas: ensuring access to the appropriate program; ensuring fair and reasonable payment; and maintaining quality of care. This report outlines the initial effects of these efforts during the first transition year of the Health Safety Net. In addition, pursuant to Chapter 182 of the Acts of 2008, this report provides details on the demographics and utilization patterns of individuals whose medical care was paid for by the Health Safety Net in HSN fiscal year 2008 (October 1, 2007 to September 30, 2008). Massachusetts Division of Health Care Finance and Policy

3. The Health Safety Net Access Chapter 58 required that the Health Safety Net (HSN) develop regulations to define eligibility for health services funded by the HSN. In HSN fiscal year 2008 (HSN08), the Division of Health Care Finance and Policy (DHCFP) developed eligibility policies to promote enrollment in affordable health insurance options. To ensure that residents are enrolled in the most appropriate program, residents must apply for coverage through a common application process used by MassHealth, Commonwealth Care, and the Health Safety Net. Since January 2005, most HSN determinations have been completed using the MassHealth Virtual Gateway application process initiated at a hospital or community health center. Between October 2006 and September 2008, more than 90,000 individuals who were formerly eligible for the Uncompensated Care Pool were determined eligible for Commonwealth Care. Massachusetts residents who are uninsured or underinsured and have income up to 200% of the Federal Poverty Level (FPL) are eligible for full HSN primary or secondary coverage. If residents have income between 201% and 400% of the FPL and do not have access to affordable health insurance, they are eligible for partial HSN coverage, which includes a sliding scale deductible. Residents who are eligible for affordable employer-sponsored insurance, MassHealth, or Commonwealth Care insurance coverage are not eligible for the HSN. Individuals who are enrolled in programs may be eligible for HSN secondary coverage for certain services not covered by their primary insurance. In order to support enrollment in Commonwealth Care, individuals are eligible for the HSN during the Commonwealth Care enrollment process. Individuals who have been determined eligible for Commonwealth Care but do not complete the enrollment process lose their HSN eligibility. In the transition from the Uncompensated Care Pool to the Health Safety Net, DHCFP expanded the Medical Hardship provisions by eliminating the asset test and applying a sliding scale income test. This expansion allows individuals who are temporarily uninsured to fill gaps in coverage that many residents experience when they have lost coverage or are switching coverage due to changes in employment or family situations. Medical Hardship provisions allow individuals of any income to have all or a portion of their medical costs at acute care hospitals and community health centers paid for by the HSN. Massachusetts Division of Health Care Finance and Policy

4. The Health Safety Net Payment Prior to Health Safety Net (HSN) fiscal year 2008, hospital payments were made using a block grant system in which rate year payments were based on prior period hospital charges reported to the Uncompensated Care Pool (UCP). Available UCP funding was allocated among providers based on their prospective share of estimated statewide free care costs. Hospitals that served a high proportion of low-income patients were paid a specific percentage of their free care costs. Community health centers (CHCs) were paid based on a fee schedule. While this system allocated payments based on a hospital’s share of free care expenses, it resulted in a wide variation of payment rates among hospitals. As mandated by Chapter 58, the Health Safety Net pays hospitals based on adjudicated claims, after verifying the patient is eligible and the services are covered. HSN payment rates are based on Medicare payment principles. Inpatient services are paid using hospital-specific rates, adjusted for variations in patient acuity, teaching status, and percent of low-income patients. Outpatient services are paid using a per-visit rate, developed by estimating the amount Medicare would have paid for comparable services. Additional outpatient adjustments are made for disproportionate share and community hospitals. HSN payments cannot exceed available funding for a given year. If a projected shortfall in payments is anticipated, hospital payments are subject to reduction using the greater proportional need method of shortfall distribution. Community health centers are paid by the HSN using the federally qualified health center (FQHC) medical visit rate. Ancillary services provided by CHCs are paid at MassHealth payment rates including all applicable rate enhancements. Outpatient prescription drugs for eligible hospitals are paid using the pharmacy online payment system (POPS) used by the MassHealth program. The use of this system is aimed at improving utilization controls and ensuring an appropriate level of payment. Pharmacy claims are priced through POPS using the MassHealth fee schedule, then data is transmitted to the HSN to make monthly payment to hospitals and CHCs for pharmacy services. Massachusetts Division of Health Care Finance and Policy

5. The Health Safety Net Program Management Enhancements The Health Safety Net (HSN) has adopted a number of program management enhancements to ensure appropriate payment for eligible services. These enhancements will allow HSN to operate at a higher level of efficiency, and promote consistency in coverage and eligibility policies with the Commonwealth Connector products and MassHealth. Where possible, the HSN leveraged existing programs in place at other state agencies, such as MassHealth, thereby reducing administrative duplication. • Covered Services: In HSN08, DHCFP adopted the MassHealth Standard benefit package as the package of services covered under HSN. MassHealth Standard is the most extensive of any MassHealth benefit program, resulting in a comprehensive scope of services allowable under the HSN. Only those MassHealth Standard services that can be provided in a hospital or a community health center setting are covered by HSN. • Utilization Review: In conjunction with MassHealth, the HSN uses a Drug Utilization Review (DUR) program, which includes prior authorization for specific drugs and the ability to leverage MassHealth clinical protocols to ensure appropriate and cost-effective prescribing. The HSN will also be implementing a clinical utilization review program. This program will add assurance that the HSN is billed for appropriate clinical services, and will identify quality and cost drivers to promote policy development aimed at improved health outcomes and cost containment. • Standardized Claims Submission: In alignment with the Commonwealth’s health care cost containment goals, the HSN is transitioning to standardized electronic formats for claims submission. To improve processing efficiency, accuracy and timeliness, DHCFP requires hospitals to submit claims in the industry standard 837 format. Community health centers will also transition to standard 837 electronic claims submissions in HSN09. • Caseload Management (Annual Re-determination): In collaboration with MassHealth, the HSN will redetermine eligibility for all HSN-eligible individuals at least annually, to ensure that services are appropriately provided. • ERBD Evidence Requirements: The HSN adopted stricter emergency room bad debt (ERBD) evidence submission requirements to ensure that proper collection action has been pursued for ERBD claims prior to payment. • Financial Auditing: The financial audits were enhanced to help ensure regulatory compliance. • Third Party Liability and Access to Affordable Health Insurance: This program allows identification of cases in which another insurer should serve as primary payer and reduces inappropriate payments from the HSN. Individuals with access to affordable insurance must enroll in an affordable plan before they access the HSN as secondary payer, subject to income guidelines, in alignment with the objective of encouraging uptake of affordable insurance. Massachusetts Division of Health Care Finance and Policy

6. Volume and Payments HSN Total Payment Trends Payments for Health Safety Net fiscal year 2008 (HSN08) are based on actual service volume from October 1, 2007 through March 31, 2008. HSN payments for hospitals and community health centers declined by 38% in HSN08 compared to the prior year of the Uncompensated Care Pool. +1% -38% Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Payment data are reported for the full 12 months of PFY06, PFY07, and HSN08. In order to transition to a claims based payment system, the first six months of HSN08 service volume (October through March) were used as the basis for the full HSN08 payment. Service volume in each payment month for HSN08 included HSN adjudicated claims for services provided and emergency room bad debt claims written off by providers in the same period. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

7. Volume and Payments HSN Total Service Volume Trends Health Safety Net (HSN) volume for hospitals and community health centers declined by 36% in the first six months of HSN08 compared to the same period in the prior year of the Uncompensated Care Pool. -9% -36% Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Hospital volume is the sum of inpatient discharges and outpatient visits to hospital providers. Community health center volume is the sum of visits to community health center providers. Volume data are reported for the first six months (October through March) of PFY06, PFY07, and HSN08. Hospital volume includes Health Safety Net adjudicated claims for services provided and emergency room bad debt claims written off by providers in the same period. It excludes pharmacy claims. Community health center service volume is based on services provided to individuals during the first six months of HSN08 (October through March). Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

8. Volume and Payments HSN Hospital Payment Trends Payments for Health Safety Net fiscal year 2008 (HSN08) are based on actual service volume from October 1, 2007 through March 31, 2008. Hospital payments declined by 40% in HSN08 compared to the prior year of the Uncompensated Care Pool. +2% -40% Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Payment data are reported for the full 12 months of PFY06, PFY07, and HSN08. In order to transition to a claims based payment system, the first six months of HSN08 service volume (October through March) were used as the basis for the full HSN08 payment. Service volume in each payment month for HSN08 included HSN adjudicated claims for services provided and emergency room bad debt claims written off by providers in the same period. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

9. Volume and Payments HSN Hospital Service Volume Trends Hospital volume declined by 37% in the first six months of Health Safety Net fiscal year 2008 (HSN08) compared to the same period in the prior year of the Uncompensated Care Pool. During this same period, the volume of outpatient visits decreased by 38% and the volume of inpatient discharges declined by 33%. -5% -37% Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Volume data are reported for the first six months (October through March) of PFY06, PFY07, and HSN08. Hospital volume includes Health Safety Net adjudicated claims for services provided and emergency room bad debt (ERBD) claims written off by providers in the same period. Inpatient ERBD claims include services for individuals who were admitted as a result of an emergency room visit which was later written off as bad debt by the provider. It excludes pharmacy claims. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

10. Volume and Payments HSN Community Health CenterPayment Trends Community health center (CHC) payments decreased by 10% in Health Safety Net fiscal year 2008 (HSN08) compared to the prior year of the Uncompensated Care Pool. The adoption in HSN08 of MassHealth dental rates and the federally qualified heath center (FQHC) Medicare visit rates increased CHC dental rates by more than 20% and medical visit rates by approximately 9%. -11% -10% Notes: Health Safety Net fiscal year 2008 (HSN08) community health center (CHC) payments are based on the service volume provided to HSN eligible individuals two months prior to the month of payment. CHC service volume is reported on a Payment Reporting Form (PRF), submitted to the Division 45 days after the close of the month in which services were delivered. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

11. Volume and Payments HSN Community Health Center Volume Community health center (CHC) volume decreased by 32% in the first six months of Health Safety Net fiscal year 2008 (HSN08) compared to the same period in the prior year of the Uncompensated Care Pool. -18% -32% Notes: Health Safety Net fiscal year 2008 (HSN08) community health center (CHC) volume is based on the services provided to HSN eligible individuals in the months of October through March. It is the sum of visits to CHC providers. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

12. Volume and Payments HSN Total Users Medical expenses for an estimated 187,000 individuals were billed to the Health Safety Net (HSN) in the first six months of HSN08. The number of users has decreased by 31% in the first six months of HSN08 compared to the same period in the prior year of the Uncompensated Care Pool. -8% -31% Notes: Users who receive a service in more than one setting (hospital, community health center or emergency room bad debt users) are not double counted. Uncompensated Care Pool fiscal year 2006 and 2007 users are reported based on the date charges for services were written off by the provider. Health Safety Net fiscal year 2008 users are reported based on claims in that month. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

13. Volume and Payments HSN Hospital, Community Health Center and Emergency Room Bad Debt Users The number of hospital users have decreased by 36%, community health center (CHC) users by 32% and emergency room bad debt (ERBD) users by 28% in the first six months of Health Safety Net fiscal year 2008 (HSN08) compared to the same period in the prior year of the Uncompensated Care Pool. Notes: Uncompensated Care Pool fiscal year 2006 and 2007 users are reported based on the date charges for services were written off by the provider. Health Safety Net fiscal year 2008 users are reported based on claims for services provided in that month.Hospital, community health center (CHC), and emergency room bad debt users as shown do not add to total users due to double counting. Users are not duplicated within each setting; however, users may receive services at more than one facility type (for example, a person may seek care at both a hospital and a CHC), and therefore be counted once in each category. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

14. Service Patterns HSN Hospital Utilizationby Claim Type and Age Nearly three-quarters of inpatient payments were for services provided to adults ages 27 to 64. Inpatient volume for this same population accounted for 57% of discharges. Adults ages 65 and older accounted for 20% of inpatient discharges but only 4% of inpatient payments. Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Payment data are reported for the full 12 months of PFY06, PFY07 and HSN08. In order to transition to a claims based payment system, the first six months of HSN08 service volume (October through March) were used as the basis for the full HSN08 payment. Service volume in each payment month for HSN08 included HSN adjudicated claims for services provided and emergency room bad debt claims written off by providers in the same period. It excludes pharmacy claims.Hospital volume is the sum of inpatient discharges and outpatient visits to hospital providers. Volume data are reported for the first six months (October through March) of PFY06, PFY07, and HSN08. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

15. Service Patterns HSN Hospital Utilizationby Eligibility Group 100% 100% Approximately half of both hospital volume and payments were for individuals who were only eligible for the Health Safety Net (HSN) and had no other coverage. More than a third of utilization and associated payments were for those who had HSN temporary or secondary eligibility. Emergency Room Bad Debt HSN Secondary: CommCare Dental Temporary Coverage HSN Secondary: Other HSN Secondary: MassHealth HSN Partial (200.1-400% FPL) HSN Primary (0-200% FPL) Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Payment data are reported for the full 12 months of PFY06, PFY07, and HSN08. In order to transition to a claims based payment system, the first six months of HSN08 service volume (October through March) were used as the basis for the full HSN08 payment. Service volume in each payment month for HSN08 included HSN adjudicated claims for services provided and emergency room bad debt claims (ERBD) written off by providers in the same period. It excludes pharmacy claims. Hospital volume is the sum of inpatient discharges and outpatient visits to hospital providers. Volume data are reported for the first six months (October through March) of PFY06, PFY07, and HSN08. Individuals for whom claims are submitted for ERBD do not have an eligibility determination. HSN Secondary: MassHealth includes individuals who have MassHealth as their primary payer. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

16. Service Patterns HSN Hospital Inpatient Utilizationby Admission Type Nearly 90% of inpatient discharges and payments were for emergency or urgent care. Nine percent of both inpatient discharges and payments were for scheduled, or elective, procedures. 100% 100% Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Payment data are reported for the full 12 months of PFY06, PFY07, and HSN08. In order to transition to a claims based payment system, the first six months of HSN08 service volume (October through March) were used as the basis for the full HSN08 payment. Service volume in each payment month for HSN08 included HSN adjudicated claims for services provided and emergency room bad debt claims written off by providers in the same period. It excludes pharmacy claims.Hospital volume is the sum of inpatient discharges and outpatient visits to hospital providers. Volume data are reported for the first six months (October through March) of PFY06, PFY07, and HSN08. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

17. Service Patterns Top Ten InpatientMajor Diagnostic Categories The top ten diagnostic categories account for 82% of inpatient discharges. Inpatient discharges for mental diseases and disorders, and alcohol/drug use and induced organic mental disorders were the top two diagnostic categories among inpatient claims. These two diagnostic categories comprised nearly a third of inpatient volume and 13% of inpatient payments. Notes: Major diagnostic category (MDC) groupings are based on ICD-9 classifications. Totals may not add to 100% due to rounding. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

18. Service Patterns Top Ten OutpatientAmbulatory Patient Groups There was little variation in distribution of cases among the top ten outpatient ambulatory patient groups. Pulmonary tests were the costliest ambulatory patient group, representing both the largest share of outpatient volume (4%) and outpatient payments (6%). Notes: Ambulatory patient groups (APGs) are based on 3M version 12 grouper. Totals may not add to 100% due to rounding. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

19. Service Patterns Case Mix of theInpatient HSN Population The case mix index represents the relative complexity, severity of illness, and amount of resources required to treat a given patient population. The case mix index remained comparatively stable from Uncompensated Care Pool fiscal year 2006 (PFY06) through Health Safety Net fiscal year 2008 (HSN08). The average length of stay for HSN users has decreased since PFY06. Notes: Uncompensated Care Pool (UCP) fiscal year 2006 through UCP fiscal year 2007 is based on October through September data and excludes mental health and substance abuse major diagnostic categories. Health Safety Net fiscal year 2008 is based on claims with dates of service from October through July and excludes mental health and substance abuse major diagnostic categories and 837I claims. Case mix is calculated using the 3M all payer version 12 grouper with New York weights. Source: DHCFP Health Safety Net Data Warehouse as of 11/24/08. Massachusetts Division of Health Care Finance and Policy

20. Service Patterns HSN Hospital Inpatient Utilizationand Payments by Claim Type Inpatient services where the Health Safety Net (HSN) was the primary payer accounted for 50% of service volume and 80% of inpatient payments. Inpatient services where the HSN was the secondary payer accounted for 41% of volume, but only 8% of payments. Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Payment data are reported for the full 12 months of PFY06, PFY07, and HSN08. In order to transition to a claims based payment system, the first six months of HSN08 service volume (October through March) were used as the basis for the full HSN08 payment. Service volume in each payment month for HSN08 included HSN adjudicated claims for services provided and emergency room bad debt (ERBD) claims written off by providers in the same period. Inpatient ERBD claims include services for individuals who were admitted as a result of an emergency room visit which was later written off as bad debt by the provider. It excludes pharmacy claims. Hospital volume is the sum of inpatient discharges from hospital providers. Volume data are reported for the first six months (October through March) of PFY06, PFY07, and HSN08. Totals may not add to 100% due to rounding. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

21. Service Patterns HSN Hospital Outpatient Utilization and Payments by Claim Type Outpatient services where the Health Safety Net (HSN) was the primary payer accounted for 66% of volume and 76% of payments. Outpatient services where HSN was the secondary payer accounted for 20% of volume but only 7% of payments. 100% 100% Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Payment data are reported for the full 12 months of PFY06, PFY07, and HSN08. In order to transition to a claims based payment system, the first six months of HSN08 service volume (October through March) were used as the basis for the full HSN08 payment. Service volume in each payment month for HSN08 included HSN adjudicated claims for services provided and emergency room bad debt claims written off by providers in the same period. It excludes pharmacy claims.Hospital volume is the sum of inpatient discharges from hospital providers. Volume data are reported for the first six months (October through March) of PFY06, PFY07, and HSN08. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

22. Service Patterns Hospital Payment Rates As of Health Safety Net fiscal year 2008 (HSN08), payments are based on Medicare payment principles. Payment rates range according to the variation in case mix among hospitals. Hospitals that treat a greater number of more complex cases are paid higher rates reflective of this complexity. The table shows the mean, median, minimum, and maximum payment rates for each payment category across all hospitals that provide services in each payment category. Note: Payment rates effective 10/1/2007 for Health Safety Net fiscal year 2008. Inpatient emergency room bad debt (ERBD) claims include services for individuals who were admitted as a result of an emergency room visit which was later written off as bad debt by the provider. Massachusetts Division of Health Care Finance and Policy

23. User Demographics Hospital Utilization and Payments by Primary Payer The largest share of hospital volume and payments were for services for individuals who have the Health Safety Net (HSN) as their primary and only payer. Only 24% of volume and 12% of payments were for individuals who were covered by other public or private insurance, and for whom the HSN paid any uncovered services, co-payments, and deductibles. Payer Not Reported Other Payers Medicare MassHealth HSN Only Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Payment data are reported for the full 12 months of PFY06, PFY07, and HSN08. In order to transition to a claims based payment system, the first six months of HSN08 service volume (October through March) were used as the basis for the full HSN08 payment. Service volume in each payment month for HSN08 included HSN adjudicated claims for services provided and emergency room bad debt claims written off by providers in the same period. It excludes pharmacy claims. Hospital volume is the sum of inpatient discharges and outpatient visits to hospital providers. Volume data are reported for the first six months (October through March) of PFY06, PFY07, and HSN08. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

24. User Demographics Hospital Utilization and Payments by Gender In the first six months of Health Safety Net fiscal year 2008 (HSN08), men used fewer services than women, but payments for their care were higher, accounting for 43% of volume and 52% of payments. 100% 100% Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net (HSN) fiscal year run from October 1 through September 30 of the following year. Payment data are reported for the full 12 months of PFY06, PFY07, and HSN08. In order to transition to a claims based payment system, the first six months of HSN08 service volume (October through March) were used as the basis for the full HSN08 payment. Service volume in each payment month for HSN08 included HSN adjudicated claims for services provided and emergency room bad debt claims written off by providers in the same period. It excludes pharmacy claims. Hospital volume is the sum of inpatient discharges and outpatient visits to hospital providers. Volume data are reported for the first six months (October through March) of PFY06, PFY07, and HSN08. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

25. User Demographics Hospital Utilization and Paymentsby Age The non-elderly adult population (ages 19 to 64) accounted for 82% of hospital volume and 89% of hospital payments. 100% 100% Age Not Reported Ages 65 and Older Ages 45-64 Ages 27-44 Ages 19-26 Ages 0-18 Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Payment data are reported for the full 12 months of PFY06, PFY07, and HSN08. In order to transition to a claims based payment system, the first six months of HSN08 service volume (October through March) were used as the basis for the full HSN08 payment. Service volume in each payment month for HSN08 included HSN adjudicated claims for services provided and emergency room bad debt claims written off by providers in the same period. It excludes pharmacy claims. Hospital volume is the sum of inpatient discharges and outpatient visits to hospital providers. Volume data are reported for the first six months (October through March) of PFY06, PFY07, and HSN08. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

26. User Demographics Hospital Utilization and Paymentsby Family Income Individuals eligible for Health Safety Net primary, those with income less than 200% of the federal poverty level (FPL), received services accounting for 79% of volume and 78% of payments. Users with no income received the most costly services, comprising 32% of service volume that generated 42% of payments. Users with income between 100% to 200% of FPL used a less costly service mix, accounting for 36% of volume and 26% of payments. 100% 100% Income Not Reported Emergency Room Bad Debt Claim 200% to 400% FPL 100 to 200% FPL Up to 100% FPL No Income Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Payment data are reported for the full 12 months of PFY06, PFY07, and HSN08. In order to transition to a claims based payment system, the first six months of HSN08 service volume (October through March) were used as the basis for the full HSN08 payment. Service volume in each payment month for HSN08 included HSN adjudicated claims for services provided and emergency room bad debt claims written off by providers in the same period. It excludes pharmacy claims. Hospital volume is the sum of inpatient discharges and outpatient visits to hospital providers. Volume data are reported for the first six months (October through March) of PFY06, PFY07, and HSN08. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

27. User Demographics Hospital Utilization and Paymentsby Family Size Single adults account for 70% of hospital volume and 76% of hospital payments. 100% 100% Notes: The Uncompensated Care Pool fiscal year (PFY) and the Health Safety Net fiscal year (HSN) run from October 1 through September 30 of the following year. Payment data are reported for the full 12 months of PFY06, PFY07, and HSN08. In order to transition to a claims based payment system, the first six months of HSN08 service volume (October through March) were used as the basis for the full HSN08 payment. Service volume in each payment month for HSN08 included HSN adjudicated claims for services provided and emergency room bad debt claims written off by providers in the same period. It excludes pharmacy claims. Hospital volume is the sum of inpatient discharges and outpatient visits to hospital providers. Volume data are reported for the first six months (October through March) of PFY06, PFY07, and HSN08. Source: DHCFP Health Safety Net Data Warehouse as of 10/29/08 Massachusetts Division of Health Care Finance and Policy

28. Financing Sources and Uses The Health Safety Net is primarily funded from three sources: an assessment on acute hospitals’ private sector charges; a surcharge on payments made to hospitals and ambulatory surgical centers by HMOs, insurers, and individuals; and an annual appropriation from the Commonwealth’s General Fund. Hospital Assessments The total amount paid by hospitals into the HSN is established by the legislature. The FY08 state budget established a total hospital assessment of $160.0 million. Each hospital’s assessment is calculated by multiplying its private sector charges by the uniform percentage, which is calculated by dividing the total assessment ($160.0 million) by the total private sector charges from all hospitals statewide. Since each hospital’s liability is based on its private sector charges, hospitals that treat more private patients make larger payments to the HSN. Please refer to the table on page 30 for each hospital’s assessment liability to the HSN. Surcharge Collections The total amount collected via the surcharge is also established by the Massachusetts legislature. The Division sets the surcharge percentage at a level to produce the total amount specified by the legislature. For HSN08, that amount equaled $160.0 million. If more than $160.0 million is collected in one year, the Division reduces the surcharge percentage in the subsequent year. The surcharge percentage was 2.30% in PFY06, 2.10% in PFY07 and 2.10% in HSN08. Over 820 registered surcharge payers are currently making monthly payments to the HSN. The table on page 29 lists the top surcharge payers and their contributions. Both providers and payers file reports with the Division that are analyzed to ensure payment of appropriate surcharge amounts. General Fund The Commonwealth also makes a General Fund contribution to the HSN. In HSN08 the total General Fund contribution was $33.9 million. Additional Funding for Uncompensated Care In HSN08, offset payments totaling $60 million were paid from the Medical Assistance Trust Fund to Boston Medical Center ($20 million) and Cambridge Health Alliance ($40 million). These payments offset allowable HSN services. Further HSN funding was received from Chapter 120, the supplemental budget provision, which provided an extra $15.7 million to the Health Safety Net Trust Fund. Additionally, $24 million in HSN08 funding came from UCP residual balances transferred to HSN08 funding. Massachusetts Division of Health Care Finance and Policy

29. Financing Health Safety Net 2008Sources and Uses* *These amounts are NOT FINAL; claims data is still being received and is subject to review. **Ch 118G s36(b) requires any amounts remaining after payments shall be transferred to the Commonwealth Care Trust Fund. Notes: Dollars are expressed in millions. Projected hospital payments include an allowance of approximately $22.0 million for denied claims that may remediate. The Division anticipates resolution of these issues in January 2009. Hospital payments have been reduced by $11.5 million to reflect recoveries providers make from emergency room bad debt claims and income earned by providers on free care endowments. The estimates are based on adjudicated hospital claims from October through March, which represent the claims basis for twelve months of payments. Massachusetts Division of Health Care Finance and Policy

30. Financing Surcharge Collections The total surcharge amount for Health Safety Net fiscal year 2008 (HSN08) was set by the Massachusetts legislature at $160 million. In order to produce the total amount specified by the legislature, DHCFP set the surcharge percentage at 2.1% for HSN08. Over 820 registered surcharge payers made payments in HSN08. The table lists the top ten surcharge payers and their contributions. Note: Payment rates effective 10/1/07 for Health Safety Net fiscal year 2008. Totals may not add to 100% due to rounding. Massachusetts Division of Health Care Finance and Policy

31. Financing Hospital Assessments and Payments *Payment amount does not include offset payments from the Medical Assistance Trust Fund, or reserves for remediated claims of approximately $22 million. Notes: The annual hospital assessment is calculated by multiplying each hospital’s private sector charges (PSC) by the uniform assessment rate of 1.07%. Private sector charges are derived from the fiscal year 2006 RSC 403 Cost Reports filed by hospitals for the period from October 2005 through September 2006. All hospital reported data are unaudited and subject to change with future updates and calculations. Based on data as of 12/2/08. Massachusetts Division of Health Care Finance and Policy

32. Financing Community Health Center Payments Notes: Uncompensated Care Pool fiscal year 2007 does not include a withhold of $16,450 for non-compliance. Health Safety Net fiscal year 2008 does not include a withhold of $208,100 for non-compliance and payments to two community health centers that did not file. Based on data from 12/2/08. Massachusetts Division of Health Care Finance and Policy

33. Financing Demonstration Projects In July 1997, the Massachusetts legislature enacted legislation (M.G.L. c.118G s.18) authorizing DHCFP to allocate up to $10 million in Uncompensated Care Pool funds per fiscal year for demonstration projects designed to demonstrate alternative approaches to improve health care and reduce costs for the uninsured and underinsured on a cost-neutral basis. Chapter 47 also designated specific funds for the Massachusetts Fishermen’s Partnership, which continued to receive funding through Health Safety Net fiscal year 2008 (HSN08). Please refer to the table on page 33 for the HSN08 allocations to demonstration projects. Community Health Center Urgent Care Grant Program In Uncompensated Care Pool fiscal year 2007, Neighborhood Health Plan (NHP) was awarded $4 million in funding to manage a grant program that focuses on expanding urgent care services available at community health centers (CHCs) in order to reduce unnecessary emergency department use. CHCs that received these grants implemented strategies to expand both regular and urgent care hours of operation, increase capacity, and create multi-provider triage procedures. Over 21,000 additional medical visits have been provided as a direct result of this grant program, providing seed money for many of these services to continue in a self-sustaining manner. The funding also provided the opportunity to support increased communication and collaboration between participating centers and the emergency department located in their community. In November 2007, NHP sponsored a Best Practices forum, which brought together the participating CHCs to share experiences and lessons learned. In HSN08, NHP was awarded $2 million to continue the grant program. The health plan is currently in the process of selecting the sites that will receive grant funding. The Massachusetts Fishermen’s Partnership The Fishing Partnership Health Plan (FPHP) offers fishermen and their families the opportunity to purchase health insurance at a reduced rate, made possible through subsidized premiums provided by the HSN. The FPHP is a freestanding trust fund that operates separately from its primary sponsoring organization, the Massachusetts Fishermen’s Partnership. In state fiscal year 2002 (FY02), the legislature allocated increased funding from $2 million to $3 million a year effective state FY03 through state FY07. In state FY08, funding was increased to $4 million. The FPHP contracts with Harvard Pilgrim Health Care to offer fishermen and their families a comprehensive benefit package that includes access to Harvard Pilgrim’s network of providers, mental health services, and pharmacy coverage. All fishermen, regardless of health status or current insurance coverage, may enroll in the plan. FPHP offers four tiers of membership depending on the income of the fishermen; as of September 2008, 1,895 fishermen and their family members were enrolled. Massachusetts Division of Health Care Finance and Policy

34. Financing Demonstration Projects M.G.L. c.118G s.18 authorizes DHCFP to allocate up to $10 million per fiscal year for projects designed to demonstrate alternative approaches to improve health care and reduce costs for the uninsured and underinsured. Each project should demonstrate the potential to save the Health Safety Net at least $1 for every dollar received in funding. • * In Uncompensated Care Pool fiscal year 2007, five community health center (CHC) and community mental health center (CMHC) partnerships were each awarded $20,000 through the CMC/CMHC demonstration project. The goal of the demonstration was to improve the diagnosis and treatment of behavioral health disorders through enhanced coordination of care among providers. These projects were not funded in Health Safety Net fiscal year 2008. • Notes: Ecu-Health Care, Hampshire Health Access, and Fishing Partnership Health Plan demonstrations were statutorily required per Chapter 47 of the Acts of 1997. Funding for other demonstrations was awarded based on criteria determined by the Division. Based on data from 11/7/08. Massachusetts Division of Health Care Finance and Policy

35. Division of Health Care Finance and Policy Two Boylston Street Boston, MA 02116 Phone: (627) 988-3100 Fax: (617) 727-7662 Website: www.mass.gov/dhcfp Publication Number: 09-219-05 HCF