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Real Examples of the Real Costs of Reimbursement Reform

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Title: Real Examples of the Real Costs of Reimbursement Reform


1
  • Real Examples of the Real Costs of Reimbursement
    Reform

2
Introductions
  • 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

3
Acute Care Reimbursement Changes
4
Hospital 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)

5
Hospital 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
6
MS-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
7
Sequestration 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

8
Medicare 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
9
DSH 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)

10
DSH 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

11
Medicare 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

12
Medicare 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

13
Medicare 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

14
Medicare DSH ProposalsRedistributions
The below is an excerpt from the final rule
Medicare DSH Supplemental Data File
15
Medicare 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)

16
Medicare DSH - Michigan Summary
  • Below is a listing of some of the larger shifts
    in DSH reimbursement

All information compiled from publically
available data
17
Medicaid 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
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20
Drivers Behind Mergers and Acquisitions
21
Drivers Behind Mergers and Acquisitions
22
Drivers Behind Mergers and Acquisitions
23
Drivers Behind Mergers and Acquisitions
24
Drivers Behind Mergers and Acquisitions
25
Drivers Behind Mergers and Acquisitions
26
Drivers Behind Mergers and Acquisitions
27
Drivers Behind Mergers and Acquisitions
28
Long-term Care Reimbursement Changes
29
Topics for Discussion
  • Healthcare Reform Initiatives on
  • Private Pay
  • Medicare
  • Medicaid
  • Impact on Skilled Nursing Facilities and other
    LTC Providers
  • Strategies for Success

2
30
Impact of Healthcare Reform on SNFs
Case Management Care Coordination Cost Efficiency
31
Opportunity
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
32
Threat
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
33
Who is Paying for SNF Services
34
Trends 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
35
Healthcare ReformThe Triple Aim
Manage Population Health Coordinate Care and
Reduce Redundancy
36
Moving 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
37
On 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
38
Post-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
39
Managing 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
40
Medicaid 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
41
MichiganFacility 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

42
Base 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  
43
Medicaid 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
44
Provider 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

45
Summary of Current Rates 10/1/12Source VCL
Info and Rate Letters
46
Moving to Managed Care for Dual Eligibles
47
ICO - 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)

48
ICO - 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?

49
Macomb County Pilot AreaWhere are you on this
chart?
50
Average 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

51
Thank you!
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