Title: Real Examples of the Real Costs of Reimbursement Reform
1- Real Examples of the Real Costs of Reimbursement
Reform
2Introductions
- Chris Walski, CPA
- Consulting Manager
- 231.932.5664
- Christopher.Walski_at_plantemoran.com
- Jon Lanczak, MBA
- Associate
- 248.223.3569
- Jon.Lanczak_at_plantemoran.com
3Acute Care Reimbursement Changes
4Hospital Rate Update
- Medicare IPPS
- Medicare updates rates based primarily on a
standard Market Basket update with other
adjustments, such as adjustments mandated by the
Affordable Care Act and coding related
adjustments - The following illustrates historical and
projected IPPS update percentages. The table
excludes the impact of the 2 sequester and
Hospital Readmission Reductions)
5Hospital Rate Update
Actual 2011 Actual 2012 Actual 2013 Actual 2014 Estimated 2015 Estimated 2016
Market Basket 2.40 3.00 2.60 2.50 2.80 3.00
Affordable Care Act Reductions
Market Basket -0.25 -0.10 -0.10 -0.30 -0.20 -0.20
Productivity - -1.00 -0.70 -0.50 -1.00 -1.10
Subtotal 2.15 1.90 1.80 1.70 1.60 1.70
Other Adjustments
2008 2009 Recoupment -2.90 - 2.90 - - -
Prospective Reduction - -2.00 -1.90 - - -
Cape Cod Decision - 1.10 - - - -
Documentation and Coding - - - (0.80) (0.80) (0.80)
Admission Guidance Offset Budget Neutrality Adjustment - - - (0.20) - -
Net Update -0.75 1.00 2.80 0.70 0.80 0.90
6MS-DRGs
- No Major changes made for FY 2014. CMS proposes
to maintain the current MS-DRGs - See Table 5 in final rule for file containing
weights
MS-DRG Number of Discharges 2013 Weight 2014 Weight Percentage Change
470 Major Joint Replacement W/O MCC 423,963 2.0953 2.1463 2.43
871 Septicemia W/O MV 96 Hrs W MCC 346,173 1.8803 1.8527 -1.47
392 Esophagitis W/O MCC 217,069 0.7375 0.7395 0.27
292 Heart Failure Shock W CC 205,502 1.0034 0.9938 -0.96
690 Kidney and Urinary Infection W/O MCC 196,098 0.7810 0.7693 -1.50
291 Heart Failure Shock W MCC 185,066 1.5174 1.5031 -0.94
194 Pneumonia W CC 180,836 0.9996 0.9771 -2.25
683 Renal Failure W CC 156,229 0.9958 0.9655 -3.04
190 COPD W MCC 142,684 1.1860 1.1708 -1.28
603 Cellulitis W/O MCC 142,285 0.8392 0.8402 0.12
7Sequestration Cut of 2
- 2 cut was applied to Medicare payments beginning
for dates of service on/after April 1, 2013 - Effective 2013 2021
- Mandated by the Budget Control Act of 2011
- The 2 reduction is after coinsurance and
deductibles - May apply to Medicare Advantage payments
depending upon hospital contractual agreement
with plans
8Medicare Dependent Hospital Status
- The MDH program had been extended through
September 30, 2013 - The 2014 final rule does not extend the program
- Current MDH hospitals will have until August 31,
2013 to apply for Sole Community status (if they
meet the SCH criteria) in order to have that be
effective upon termination of the MDH program
Actual 2012 Benefit
Michigan Hospital A 359,930
Michigan Hospital B 1,056,693
9DSH Overview
- CMS is required by the ACA to reduce hospital DSH
payments based on the expectation that there will
be a smaller uninsured population - Based on the 2014 final rule
- Hospitals will receive 25 of the DSH amount
calculated under the original methodology
(empirically justified amount) - The remaining 75 under the original calculation
will be pooled with other hospitals receiving DSH
(Factor 1). The total pool will be reduced by the
estimated reduction of uninsured minus 0.1
percentage point (Factor 2 - .943 for 2014) and
then redistributed back out to the hospitals
based on their relative level of uncompensated
care (Factor 3)
10DSH Payments
- CMS was considering a policy change to make DSH
Payments via interim payments rather than a per
discharge add-on. This was eliminated in the
final rule. - CMS confirmed their policy of counting the days
of patients enrolled in Medicare Advantage plans
in the Medicare fraction of the traditional
disproportionate payment percentage (DPP) - The treatment of the Medicare Advantage days
benefits some hospitals and has a detrimental
effect on others. The Medicare fraction is
Medicare SSI Days / (Medicare Medicare
Advantage Days). - CMS is appealing a recent Allina Court ruling
that disallowed the inclusion of the Medicare
Advantage days
11Medicare SSI Category
- MSA recently announced that data is now available
for hospitals to validate their SSI ratio data
provided by CMS and used for Medicare DSH payment
calculations - Potential to increase Medicare DSH payments.
- CMS allows providers to choose either their
fiscal year or the federal fiscal year (10/1 to
9/30) for SSI days purposeswhichever is more
advantageous to the provider
12Medicare DSH Reductions
- Dollars Available
- Estimated total DSH funding for FY 2014 12.8
billion (12.2 billion after uninsured reduction)
compared to 11.8 billion in FY 2013 - Estimated 25 rate-based and paid under
traditional formula 3.2 billion - Estimated 75 for uncompensated care payments
9.6 billion (9 billion after uninsured
reduction) - Proposal for reducing funding dedicated to
uncompensated care payment - Use CBOs March 2010 and February 2013 uninsured
rate estimates which are 18 for FY 2013 and 16
for FY 2014
13Medicare DSH ProposalsRedistributions
- Final Rule for distributing funding dedicated to
uncompensated care payment - Use low-income patient days as proxy
- Medicaid days and Medicare SSI days
- Numerators of current DSH calculation
- CMS may use cost report worksheet S-10 in future
years - CMS cites unreliable data as hospitals still are
not consistent in reporting bad debt and charity
care in terms of hospitals costs ( of charges)
vs. payment from government or other payors.
Therefore, the S-10 will not be used for 2014 - Calculate uncompensated care payment factor
- Hospital's low-income patient days relative to
all DSH hospital low-income patient days
14Medicare DSH ProposalsRedistributions
The below is an excerpt from the final rule
Medicare DSH Supplemental Data File
15Medicare DSH - Michigan SummaryREVISED
- Most Michigan hospitals will gain under the
program for 2014 - Total increase of 8.9 million state wide
- 37 Hospitals are estimated to benefit with total
gains of 34.3 million (highest projected winner
4.9 million) - 29 hospitals are estimated to lose a combined
25.3 million (highest projected loser 5.7
million)
16Medicare DSH - Michigan Summary
- Below is a listing of some of the larger shifts
in DSH reimbursement
All information compiled from publically
available data
17Medicaid Expansion
- Expands Coverage to an estimated 470,000 people
- The Medicaid expansion will have an impact on
several programs - Medicare DSH (likely positive)
- 340B Eligibility (likely positive)
- Medicaid DSH Ceiling Computations (likely
negative) - Medicaid UPL computations (likely positive)
18(No Transcript)
19(No Transcript)
20Drivers Behind Mergers and Acquisitions
21Drivers Behind Mergers and Acquisitions
22Drivers Behind Mergers and Acquisitions
23Drivers Behind Mergers and Acquisitions
24Drivers Behind Mergers and Acquisitions
25Drivers Behind Mergers and Acquisitions
26Drivers Behind Mergers and Acquisitions
27Drivers Behind Mergers and Acquisitions
28Long-term Care Reimbursement Changes
29Topics for Discussion
- Healthcare Reform Initiatives on
- Private Pay
- Medicare
- Medicaid
- Impact on Skilled Nursing Facilities and other
LTC Providers - Strategies for Success
2
30Impact of Healthcare Reform on SNFs
Case Management Care Coordination Cost Efficiency
31Opportunity
Healthcare Reform will create significant
opportunities for aging services providers
Growth in All Senior Service Lines Significant
Growth in HCBS Need for Strong Case Management
Managing Health vs. Treating Illness
30
32Threat
Providers will be at greater financial risk
Payment reductions at most sites of
care Increased pay for performance and
outcomes Increased risk for managing an episode
of care Providers becoming Insurers Insurers
becoming Providers
31
33Who is Paying for SNF Services
34Trends in Private Pay.
- More Discerning Consumers
- Growth of Private Insurance Products
- Enhanced Coverage of HCBS
- Return of Premium to Beneficiary
- Joint Policies
- CCRC At Home Products
- Other Membership/Affinity/Constituency
Average rate is 210 for semi private. Newer
facilities mostly private room and charging 300
per day
35Healthcare ReformThe Triple Aim
Manage Population Health Coordinate Care and
Reduce Redundancy
36Moving to Insurance Models - Medicare
Under Insurance Models of Care, there will be
incentives for community based organizations to
play a greater role in the triple aim
INCLUDING PACE
37On the SNF Medicare Horizon
- Rate Increases for FY 2014
- Offset by Continued Sequestration
- Shift Toward Managed Care/Risk
- Penalties for Readmissions FY 14?
- Bundled Payments for Certain Procedures
- Pressure to decrease rates related to SNF
Operating Margins Medpac 20-24 - Focus on Therapy and Medical Necessity
Average Medicare Rate for 2012 455.62
38Post-Acute Care Delivery
How Do Medicare Patients Use Post-Acute Care?
Healthcare reform will be focused on placing
patients in the least costly venue that provides
the best outcomes and will seek to eliminate
utilization of multiple care sites on the
continuum
Patients use of site during a 90 day episode
Patients first site of discharge after acute
care hospital stay
(1) RTI, 2009 Examining Post Acute
Relationships in an integrated Hospital System
36
39Managing SNF Services
Longer Term Stays Manage Population Health Case
Management Focus Minimize Hospitalizations Manage
End of Life Person Directed Planning
Short Term Stays Manage Episode of Care Case
Management Focus Reduce Re-Hospitalizations
38
40Medicaid Fee For Service Updates
- Regular Re-basing of Cost at 10/1/13
- Cost Reports Ending in Calendar Year 2012
- Continuation of Quality Assurance Assessment
Program - Plant Cost Reimbursement
- Tenure Method Class I
- Cost Method Class III
10/1/13 rates will utilize 2012 cost reports.
Anticipate Full rebasing
41MichiganFacility Specific Medicaid Rates
- Operating Reimbursement (Variable Cost)
- Costs defined as Base or Support
- Support cost limited in relation to base cost
- Limits on owner/administrator compensation
- Total limit set at 80th percentile of Medicaid
days - No acuity adjustments
- No adjustment for differences in wages by
geography - No incentive to keep cost under the limit
- Capital Reimbursement (Plant Cost)
- Asset measurement based on depreciated
reproduction cost drives reimbursement - Significant restrictions related to whether debt
is allowable - Equity not recognized in reimbursement rate
- Property taxes reimbursed as pass through
- Quality Assurance Add-on
- Payment based only on variable cost
42Base vs. Support Costs
Expense Base Support Base/Support Split
Wages, Fringe Benefits and Payroll Taxes Nursing, Nursing Admin, Dietary, Laundry, Activities, Social Services Administrative, Housekeeping, Maintenance, Medical Records, Medical Director, Central Supplies
Supplies (Includes food and linen) Nursing, Dietary, Laundry, Activities, Social Services Administrative, Housekeeping, Maintenance, Medical Records, Medical Director, Central Supplies
Contracted Services Nursing Staff for Direct Patient Care Administrative, Housekeeping, Maintenance, Medical Records, Medical Director, Central Supplies Laundry, Dietary, Nursing Admin, Activities, Social Services
Workers Compensation All Departments
Utility Costs All Departments
Home Office Costs Can directly allocate on cost report to dietary and nursing All Departments
Minor Equipment and Repairs Maintenance All Departments
Education, Travel, Phone, Taxes, Insurance, Advertising and Misc Expenses All Departments
43Medicaid Reimbursement Limits
Variable Cost Limits Variable Cost Limits Variable Cost Limits Variable Cost Limits Variable Cost Limits Variable Cost Limits
FY 2012 FY 2013 FY 2013 Average VCL Inc VCL Inc
Class I 179.23 186.76 168.39 7.53 4.20
Class III 241.77 248.23 226.94 6.46 2.67
Support to Base Ratio Limits Support to Base Ratio Limits Support to Base Ratio Limits Support to Base Ratio Limits
FY 2012 FY 2013 Change
Bed Group 1 (1-50) 0.3660 0.3697 0.0037
Bed Group 2 (51-100) 0.3611 0.3696 0.0085
Bed Group 3 (101-150) 0.3395 0.3422 0.0027
Bed Group 4 (151) 0.3353 0.3259 -0.0094
44Provider Tax Portion of Rate is Significant
Under Managed Care for Duals, it is believed that
CMS will NOT permit the pass through of Provider
Tax Funds with this methodology but will require
that the funds be rolled into provider rates
- Approximately 18 of the Total Rate
- Significantly Influences Profitability
- Provider Tax Payments
- 2, 23, 11
- Provider Monthly Receipts
- 22 of Variable Cost Component - 35 to 41 for
Average or Higher Provider
45Summary of Current Rates 10/1/12Source VCL
Info and Rate Letters
46Moving to Managed Care for Dual Eligibles
47ICO - RFQ
- Issued previous to the date intended
- Many questions that providers might have,
however, providers cannot submit questions. - When is someone considered a dual eligible?
- 4 Demonstration Areas 3 year pilot program
- NO provision to contract with everyone
- Uncertainty Over what the Medicaid rate
includes with or without QAS (Make sure your
private pay rate is more than Medicaid rate plus
QAS)
48ICO - RFQ
- Nursing Facility Payments page 51
- In addition to the Medicare payment for skilled
care, the Contractor must pay the per diem
coinsurance for days 21 up to 100 of a skilled
nursing facility stay. Once Medicare
reimbursement days are exhausted, the Contractor
must reimburse Class 1 nursing facilities at not
less than the established Medicaid daily rate
Class 3 nursing facilities must be reimbursed at
not less than the Class 1 nursing facility
average Medicaid daily rate in the region. - What type of average Medicaid weighted or
straight average Medicaid rate? What does this
do to the Class 3 providers? Are they able to
recoup lost reimbursement as lost cost under the
certified public expenditure rules? What about
MOE?
49Macomb County Pilot AreaWhere are you on this
chart?
50Average Rates in Pilot Areas
- Upper Peninsula - 154.09 without QAS
- 185.18 with QAS
- Southwest Michigan 165.53 without QAS
- 198.95 with QAS
- Macomb 179.30 without QAS
- 215.98 with QAS
- Wayne 185.73 without QAS
- 222.63 with QAS
51Thank you!