HFMA NATIONAL POLICY UPDATE: REGULATORY …...HFMA NATIONAL POLICY UPDATE: REGULATORY AND MARKET OUTLOOK Chad Mulvany, FHFMA Director, Healthcare Finance Policy, Strategy and Development

HFMA NATIONAL POLICY UPDATE:REGULATORY AND MARKET OUTLOOK

Chad Mulvany, FHFMADirector, Healthcare Finance Policy, Strategy and DevelopmentHFMA

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Agenda

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• The Political Process• Fiscal Reality• Transformation and Disruption• Closing Comments

Extenders

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While the Continuing Resolution Funded CHIP and Delayed ACA Taxes, It Did Not Include Other Key Healthcare Policy Items

Political Process

Legislative Status of Key Health Policy Items

Passed Likely to Pass Questionable

• ”PAYGO” Suspension• 6 Year CHIP Extension• Med Device Tax Delay

(2018 – 2019)• Health Insurance Tax Delay

(2019)• Caddie Tax Delay (2022)

• Community Health Center Funding (expires 3/31/18)

• Medicare Dependent Hospital Program*

• Low-Volume Hospital Adjustment Program*

• Part B Therapy Cap Exceptions*

• Ambulance Add-On*

*Expired 9/30/17

• ACA Cost Sharing Reduction Subsidies (Alexander-Murray Bill)

• ACA Reinsurance for High Cost Beneficiaries (Collins-Nelson Bill)

239 193

0

2018 Elections

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Safe R Likely R Leans R Toss-up Likely D Leans D Safe DIND

178 174

0

Current:

Projected:

Source: http://cookpolitical.com, accessed 12/14/17

Republicans Have a Significant Advantage in the House…

51 49

0 50 100

47 35

0 50 100

…However, the Senate Is in Play

U.S. House of Representatives U.S. Senate

Political Process

The Administration’s 2018 Agenda

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CMS Is Providing Increased Flexibility on Medicaid Plan Design

The Trump administration early Thursday initiated a pivotal change in the Medicaid program, announcing that for the first time the federal government will allow states to test work requirements as a condition for coverage.

The announcement came in a 10-page memo with detailed directions about how states can reshape the federal-state health program for low-income people.

Trump Administration Clears Way To Force Some Medicaid Enrollees To Work

Source: https://khn.org/news/medicaid-officials-unveil-guidance-for-states-seeking-to-set-work-requirements/

Political Process

Key Elements of Pending Coverage Waivers

New or Amended Waiver Proposals Undergoing Public Comment or CMS Review

AR AZ IA IN KY MA ME UT WIPremiums/Lockout ü ü ü ü ü ü ü ü

Cost Sharing ü ü ü ü ü ü ü ü üHealthy Behavior Incentives ü ü ü ü ü ü

NEMT Waiver ü ü ü üIMD Exclusion Waiver ü ü ü ü ü ü

Retro Waiver ü ü ü ü ü ü üDelay in Enrollment ü ü

Drug Screening üTime Limits ü ü ü

Partial Expansion (w/ Enhanced Federal Funding) ü ü

Work-Related Provisions ü ü ü ü ü ü üHealth Savings-Like Accounts ü ü ü

Late Renewal Paperwork Penalty/ Lockout ü ü

Closed Formulary ü

ü= For childless adults and

other populations (expansion state)

ü = For childless adults(non-expansion state)

ü = For other populations (non-expansion state)

ü = For childless adults (expansion state)

Source: Cindy Mann, Partner, Manatt Healthcare, Presentation to HFMA Large System CFO Council, October 6, 2017

2018 Governors Races

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36 States Have Governors Races with Up to 14 State Houses Potentially Changing Party

Political Process

Agenda

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Unsustainable Growth

Excess Medicare and Medicaid Cost Growth Threatens Long-Term U.S. Fiscal Stability

Source: 1) https://www.cbo.gov/system/files/115th-congress-2017-2018/presentation/52913-presentation.pdf

Federal Debt Given Different Rates of Excess Cost Growth for Medicare/ Medicaid Spending

Fiscal Reality

Inadequate MD Reimbursement

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Medicare Payment Growth Will Not Keep Up with Practice Expenses

Medical Group Management AssociationCumulative % Change Since 2001 for Physician-Owned Multispecialty with Primary Care-Only

Groups for Operating Cost, the Consumer Price Index, and Medicare Physician Payments

Fiscal Reality

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Hospital Bottom Lines

The CBO Projects Input Price Growth Will Continue Outstripping Medicare Payment Increases

-19.0%

-14.0%

-9.0%

-4.0%

1.0%

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Illustrative Hospital Medicare Margin Impact:CBO Projections of Growth in Medicare Payment and Input Prices

Sources:1) 2014 Margin: MedPAC; Assessing Payment Adequacy and Updating Payments: Hospital Inpatient and Outpatient Services; December 10, 20152) Growth in Medicare Revenue and Input Prices: The Congressional Budget Office Economic Outlook: 2016 – 2026, pg 673) HFMA Analysis

CBO Projection

Modest Cost Control

Significant Cost Control

Fiscal Reality

“Paper” Cuts

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• Medicaid DSH• 340B Reductions for Medicare• Sequestration• Site-Neutral Payments

Fiscal Reality

Federal Medicaid Reform

“Capping” or “Block Granting” Medicaid Has Been Proposed to Reform the Program and Reduce Expenditures

Comparison of Traditional Medicaid to Caps or Block GrantsProgram Feature Traditional

MedicaidPer Capita Allotment Block Grant

Federal Funding

The federal government

“matches” state spending for

qualifying services/

populations.

A per capita allotment is the product of the state’s per capita allotment for

the four major beneficiary categories. Allotment is determined

by a state’s average medical assistance and non-benefit

expenditures per full-year-equivalent enrollee.

Funding is determined using a base year, assuming states transition expansion individuals into other

coverage.

Spending and benefit decisions for able-bodied adults and children rest

solely with states.

ACA Expansion Population Yes Phased Out Starting in 2019. No

Inflation Adjustment Yes No No

Population Adjustment Yes Yes No

Fiscal Reality

Block Granting’s Impact

“Capping” or “Blocking” Will Reduce Federal Funding for Medicaid…

($196)

($732)($800)($700)($600)($500)($400)($300)($200)($100)

$0

ACA Medicare Cuts Medicaid Block Grant

Comparison of 10-Year Savings from ACA Medicare Market Basket Reductions to a Medicaid Block Grant Proposal

Billions of Dollars

Sources:1) https://fas.org/sgp/crs/misc/R40486.pdf2) https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/costestimate/amendreconprop.pdf

Fiscal Reality

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Public Options

A Number of States Have Recently Advanced Public Option-Related Legislation

“Single Payer” LegislationMedicaid “Buy-In” Legislation

Examples of Recent Public Option Legislative Activity

Fiscal Reality

Agenda

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New Voluntary Bundles

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Transformation and Disruption

CMMI Recently Announced 32 New Inpatient and Outpatient Episodes of Care as Part of CMMI Advanced

Source: https://www.hfma.org/Content.aspx?id=58872

Bundled Payment for Care Improvement Results - General

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Results from the Year Three BPCI Report Are Based on Limited Data and Therefore Largely Inconclusive

One of the 23 episodes evaluated

reduced costs.

Systematic improvements in quality have not

occurred.

Participants in prospective episodes withdrew due to the

administrative burden.

Savings Quality Administrative Burden


Bundles – LEJR Results

Hospital-Initiated Lower Joint Replacement Episodes Show Promise

Reductions in Total and SNF Episode Spending for Fracture and Non-Fracture Cases

BPCI Hospital Compared to Control Hospital

Sources:1) https://downloads.cms.gov/files/cmmi/bpci-models2-4yr3evalrpt.pdf

•Episodes at BPCI hospitals cost $1,273 less

•BPCI Participants reduced SNF LOS by 1.0 and 2.4 days for non-fracture and fracture cases.

Key Findings


Muddled Medicare Shared Savings Program Results

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Compared to the Benchmark, the MSSP Costs CMS $400M…

(400) (200)

- 200 400 600 800

FY 2013 FY 2014 FY 2015 FY 2016

MSSP Benchmark vs. Actual Spending$, Millions

MSSP Net Savings

Shared Savings Paid Net of Repayments

Net Loss to Medicare

…More Sophisticated Analysis Suggests Savings Are Occurring

FY 2014 “Difference in Difference” AnalysisMSSP Change in Per-Beneficiary-Per-Year

Spending Relative to Comparison

-264

-94-49

(300)

(200)

(100)

-

2012Cohort

2013Cohort

2014Cohort

% Target Price -2.6% -.9% -.5%

Sources:1) https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/SSPACO/2) HFMA Analysis3) https://jamanetwork.com/journals/jama/fullarticle/2552452


MSSP Observations

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Several Trends Emerge When Comparing ACOs That Generate Savings to Those That Don’t

It takes time. The longer an ACO is in the program, the more likely it will generate “sharable” savings.

More to cut. ACOs that share savings typically have higher benchmarks ($11,614) than those that don’t ($10,563).

Risk changes behavior. Risk-bearing ACOs account for 10% of participants but are responsible for 30% of savings.

Physicians Save More: In 2016, 42% of MD-led ACOs received savings, compared to 23% of ACOs with hospitals.

1. http://www.ajmc.com/printer?url=/contributor/travis-broome/2017/10/cms-releases-medicare-shared-savings-program-2016-results2. https://www.healthaffairs.org/do/10.1377/hblog20171212.585293/full/3. https://jamanetwork.com/journals/jama/fullarticle/25524524. https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2017.0814

Sources:


Rethinking Referrals

Early Results Suggest MD-Led ACOs Generate More Savings…

… Referral Management Has Been a Key Strategy

0%

10%

20%

30%

40%

50%

60%

70%

2013 2014 2016

Physician ACO Hospital ACO

% MSSP Participants with

Expenditures Below the Benchmark

Example: Palm Beach ACO

2013 Gross Savings: $39M2014 Gross Savings: $32M

Key Strategies:- Provided feedback to MDs on use

patterns

- Partnered with post-acute providers

- Improved care transitions

- Invested in patient outreach

Sources:

1. http://jama.jamanetwork.com/article.aspx?articleid=1861359#jvp140051r5

2. Email communication with David Muhlestein, Leavitt Partners, 1/4/15

3. HFMA Analysis of CMS MSSP Financial Data PUF Files


Medicaid Payment Reforms

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Episode/Bundled PaymentsAR, NY, TN, CT, OK, SC

Shared SavingsNJ, MD, ME, MN, VT, RI

Global Budget/ Capitated ModelMD, CA, OR, MA

CPC+ ProgramsAR, CO, HI, KS, KY, MI, MO, MT, NJ, NY, OH, OK, OR, PA, RI, TN, LA*, NE*, ND*

Changes to Supplemental PaymentsNM, CO, OH, TX

Payment Reform

Source: Cindy Mann, Partner, Manatt Healthcare, Presentation to HFMA Large System CFO Council, October 6, 2017

Many States Are Taking the Lead in Payment Reform Efforts


Social Supports Matter

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Evidence Suggests Social, Economic, and Environmental Factors Are Better Predictors of Health than Access to Care.

Contribution of Various Factors to Health Outcomes


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MIPS Bonuses

MACRA’s “Increased Flexibility” Reduces the MIPS Upside Available to Larger Practices

Practice Size

Number of Eligible NPIs

(000s)

Net Impact of MIPS

($, millions)1 - 9 Clinicians 226 -17910 - 24 Clinicians 81 6125 - 99 Clinicians 148 136100 or More Clinicians 306 482Total 761 500

Practice Size

Number of Eligible NPIs

(000s)

Net Impact of MIPS

($, millions)1 - 15 Clinicians 114 17316 - 24 Clinicians 22 1525 - 99 Clinicians 99 64100 or More Clinicians 319 248Total 554 500

Proposed Rule - 2019 Payment Impact Proposed Rule - 2020 Payment Impact

Sources:1) Medicare Proposed QPP Rule, June 30, 20172) Medicare Proposed QPP Rule, May 9, 20163) HFMA Analysis


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Potential Advanced APM Upside

In 2015 If Track 1 MSSPs Participated in Track 2, It Would Lead to a Revenue Increase of $886M, Net of Losses

Source: http://avalere.com/expertise/providers/insights/acos-could-see-higher-medicare-payments-by-assuming-more-financial-riskv

Simulated Impact of Shifting from Track 1 to Track 2 for MSSP ACOs (2015)


Outpatient Joints

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Half of Hip and Knee Replacements Will Occur in the Outpatient Setting within 10 Years, According to Projections

Sources:1) http://newsroom.vizientinc.com/newsletter/research-and-insights-news/outpatient-joint-replacement-unnecessary-concern-or-market-rea


Home Is Where the Hospital Is

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Many Common Medical Admits Can Be Managed at Home…

Dehydration

UTI

DVT

Cellulitis

CHF

COPD

Pneumonia

% Hospital at Home Cases1

Presbyterian Healthcare Services

…At A Lower Cost and with Better Outcomes

1Numbers in graph represent the MS-DRGs 2015 discharge volume frequency

6th

14th

17th

35th

39th

42th

59th

Source: http://www.commonwealthfund.org/publications/case-studies/2016/aug/~/media/files/publications/case-study/2016/aug/1895_klein_hospital_at_home_case_study_v2b.pdf

Hospital at Home vs. Acute I/POutcomes Comparison


New Competitors

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M&A Activity Could Increase Health Plans’ Ability to Manage Care

Sources:• https://www.wsj.com/articles/unitedhealth-to-buy-major-doctor-group-for-4-9-billion-from-davita-

1512560700?mg=prod/accounts-wsj• https://www.nytimes.com/2017/12/06/health/unitedhealth-doctors-insurance.html?_r=0• https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2017.0858

• https://www.manatt.com/uploadedFiles/Content/5_Insights/White_Papers/Retail_Clinic_RWJF.pdf• https://www.pressreader.com/usa/los-angeles-times/20171107/281981787862549• https://www.wsj.com/articles/SB10001424052970203347104578100774135846646• https://www.humana.com/about/careers/what-we-do/physicians• https://www.forbes.com/sites/brucejapsen/2017/12/19/humana-wants-to-modernize-home-care-with-

stake-in-4b-kindred-deal/#13fbb3952710


Agenda

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Key Takeaways

Despite the Uncertainty, Several Themes Emerge

• Uncertainty at the federal level will continue.

• More authority for healthcare programs shifted to states.

• Federal debt load is on an unsustainable trajectory.

• Future significant cuts to federal healthcare spending are likely.

• “Paper cuts” will continue to stress provider margins.

• The transition to value will likely be led by states.

• Health systems need to offer a strong AAPM platform to grow market

share.

• Changes in technology, payment models and care delivery will shift

volume to lower-cost sites of service.

Common Themes in Current Environment

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Key Actions

Understand Consumer

Preferences3,4,5

Develop APM Platform2

Rationalize Cost Structure1

In Order to Navigate the Uncertain Environment, Health Systems Should Take the Following Steps:

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Resources

HFMA Resources1) Strategies for Reconfiguring Cost Structure

(https://www.hfma.org/valuereconfiguration/)2) Strategies for Physician Alignment and Engagement

(http://www.hfma.org/valuephysicians/) 3) Health Care 2020: Consumerism

(https://www.hfma.org/healthcare2020/) 4) Preparing to Succeed in a Retail Health Environment

(https://www.hfma.org/Content.aspx?id=25734) 5) Giving a Consumer Focus to Strategic Planning in Health Care

(https://www.hfma.org/Content.aspx?id=56575)

Questions?

Chad MulvanyDirector, Healthcare Finance Policy, Strategy

and DevelopmentHFMA

1100 Vermont Avenue NWSuite 500

Washington, DC 20005Office: 202.238.3453

Email: [email protected]

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Documents

HFMA NATIONAL POLICY UPDATE: REGULATORY …...HFMA NATIONAL POLICY UPDATE: REGULATORY AND MARKET OUTLOOK Chad Mulvany, FHFMA Director, Healthcare Finance Policy, Strategy and Development