Sustaining Revenue Under the Affordable Care Act Alabama Hospital Association January 24, 2014

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Sustaining Revenue Under the Affordable Care Act

Alabama Hospital AssociationJanuary 24, 2014

Dan M. SilverboardJennifer E. Tyler

Presentation Overview

Background: Payment Reform Under the ACA

Readmissions Reduction Program

Hospital Value-Based Purchasing Program

Hospital-Acquired Conditions Reduction Program

Direct Employer Contracting

Opportunities in Telemedicine

Mergers and Acquisitions

Billing and Collections

Health Spending/Percent GDP

Source: CMS

Background: Key Facts

Alabama opt-in to the Medicaid expansion would have covered approximately 240,000 previously uninsured persons—or sixty percent (60%) of its uninsured population.

DSH Reduction (UAB):

$307,827,500 in DSH payments in FY2011. This accounts for nearly 10% of all Medicaid spending in Alabama.

Background: ACA Payment Reform

“Estimates suggest that as much as $700 billion a year in health care costs do not improve health outcomes.”

- Peter Orszag, Former Director of the Congressional Budget Office

Background: ACA Payment Reform

Focus on quality of care when determining provider reimbursement.

Implemented through Prospective Payment System and private commercial contracts.

Affected providers:

Hospitals

Individual clinicians

Managed care organizations (MAOs)

Accountable care organizations (ACOs)

Affordable Care Act Provision with Quality Focus

Value based purchasing• 3001 - Hospital value-based purchasing• 3006 - Value-based purchasing for SNF• 3014 - Quality and efficiency measurement• 10301 - Develop a plan to implement VBP for ambulatory surgical

centers• 10326 - Pilot testing for pay-for-performanceHospital readmissions• 3025 - Hospital readmissions reduction program• 3026 - Community-based care transitions programHealthcare acquired conditions• 2702 - Payment adjustment for health care-acquired conditions• 3008 - Payment adjustment for conditions acquired in hospitalsAccountable care organizations• 2706 - Pediatric accountable care organization demonstration

project• 3022 - Medicare Shared Savings ProgramDual eligibles• 2602 - Providing federal coverage and payment coordination for dual

eligible beneficiariesPreventative services• 4103 - Annual wellness visit providing a personalized plan• 4104 - Removing barriers to preventive services• 4105 - Evidence-based coverage of preventive services

Coordination of care• 2703 - State option to provide health homes for enrollees with chronic

conditions• 2704 - Demonstration project to evaluate integrated care around a

hospitalizationLong term care• 2401 - Community first choice option• 2402 - Removal of barriers to providing home and community based services• 2403 - Money follows the person rebalancing demo• 2404 - Protection for recipients of home and community-based services

against spousal• impoverishment• 10202 - Incentives for states to offer home community based servicedPublic reporting• 10303 - Development of outcome measures• 10327 - Improvements to the physician quality reporting system -- also see

Provision 3002• 10331 - Public reporting of performance informationQuality reporting initiative• 2701 - Adult health quality measures• 3002 - Improvements to the physician quality reporting system.• 3004 - Quality Reporting for Long Term Care Hospitals (LTCH), inpatient

rehabilitation• hospitals, and hospice programs• 3005 - Quality reporting for PPS-exempt cancer hospitals• 10322 - Quality reporting for psychiatric hospitals

7

Financial Impact of CMS Quality Programs

Program FY 2014 FY 2015 FY 2016 FY 2017

Hospital VBP Program ±1.25% ±1.50% ±1.75% ±2.00%


-1.0% -2.0% -3.0% -3.0%

HAC Program -1.0% -1.0% -1.0%

Hospital IQRProgram

-2.0% -2.0% -2.0% -2.0%

Max Penalty: 4.25% 6.5% 7.75% 8.0%


BackgroundRecommended by Medpac in 2007, 2008 Reports to Congress.Public reporting of readmissions began in 2009 on Hospital Compare. Authority:

Adopted as part of PPACA (section 3025) in 2010. Codified in SSA, §1886(q). Initial program policies in FY 2012 IPPS final rule. Regulations at 42 C.F.R. §412.152.

Effective October 1, 2012. $8.2 billion in cost savings.


Why are Readmissions a Target? Hospitals are the most expensive setting for health

care delivery, costing between $1,600 and $2,000 a day per patient and consuming $850 billion of the $2.7 trillion spent annually on health care in the U.S.

MedPac (2008): “Within 30 days of discharge, 17.6 percent of admissions are readmitted, accounting for $15 billion in Medicare spending in 2005…12 percent were avoidable.”

NEJM (2009): 1 in 5 Medicare patients are readmitted; avoidable readmissions cost $17 billion annually.


Program Measurements

Acute-care hospital readmissions within 30-days for discharged Medicare FFS patients.

Effective for discharges on or after Oct. 1, 2012.

Applicable Conditions:

Acute myocardial infarction

Heart failure

Pneumonia

Chronic obstructive pulmonary disease (2015)

Elective hip/knee arthroplasty (2015)


Key Points“Readmission” occurs when a Medicare patient is discharged from an acute care hospital and then is admitted to the same or another acute care hospital within 30 days. Can be for any cause (i.e., it does not have to be for the same cause as the initial admission).

Exclusions: For FY 2014, unplanned readmissions following a planned

readmission so long as within 30 days of the initial admission. Same-day hospital inpatient readmissions for the same

condition to the same hospital. Excludes transfers to another IPPS hospital, discharges

against medical advice.


Penalty Assessment: “Excess readmission ratio” (ERR) is calculated based

on the hospital’s readmission performance as compared to the national average for the condition.

ERR is then risk-adjusted for clinically relevant factors (limited patient demographics, comorbidity, patient frailty).

CMS utilizes administrative claims data. Penalty Amount:

FY 2013: Up to 1% FY 2014: Up to 2% FY 2015: Up to 3%


Reporting Requirements Readmission data is reported on Hospital

Compare website. Hospitals are able to review data prior to

publication and may make corrections, though not to claims data.

Limited appeal rights.


Hospital Compare Data


FY 2013 Program Results: 2,225 hospitals penalized. $227 million in penalties. 77% of safety net hospitals were penalized. 81% of Alabama hospitals penalized.

CMS considering incorporating socioeconomic factors into risk-adjustment (race, ethnicity, income, lifestyle, patient access to primary care).

Value-Based Purchasing Program

Authority:

Section 3001(a) of PPACA.

Codified in SSA, §1886(o).

Final Rule, 76 FR 26490 (May 6, 2011).

Regulations at 42 C.F.R., §412.160 et seq.

Additional guidance in IPPS rules (2012-2014).

Applicability:

All “subsection (d)” hospitals – all hospitals paid under IPPS. Critical access hospitals and small hospitals are excluded.


Program Metrics:How well hospital follows “best clinical practices” in certain areas (“Clinical Process of Care Domain”).How well hospital enhances patient experience (“Patient Experience of Care Domain”).Mortality outcomes for certain conditions (added for FY 2014) (“Outcome Domain”).Areas are evaluated based on specific quality measures.

Exposed Funds: 1% of DRG payment upwards or downwards for FY 2013, increased annually by ¼%. 1.25% for FY 2014 DRG payments/1.5% for FY 2015. Caps out at 2% in 2017.


Program Funding: All hospitals participating will have their base operating

DRG payment for each patient discharge reduced The money will be used to fund the incentive payments. CMS estimates $1.1 billion available in FY 2014.

Data Collection: Patient Experience Domain: HCAHPs survey data is used. Clinical Process of Care Domain: Chart abstracts are used. Outcome Domain: Medicare claims data. Surveys and abstracts are collected through the Hospital

Inpatient Quality Reporting Program.


Hospital Inpatient Quality Reporting Program (HIQRP)

Requires acute care hospitals to submit data regarding specific quality measures for common health conditions among Medicare patients which typically result in hospitalization.

Hospitals that successfully report are paid a higher annual update to their payment rates by CMS.

Eligible hospitals that do not participate receive an annual market basket update with a 2% reduction.

95% of hospitals participate.


Scoring Methodology: Achievement Score Improvement Score Total Performance Score: Higher of Achievement Score

or Improvement Score for each measure. CMS then aggregates the scores for each measure to achieve one score for the category. After the scores are weighted, they are added together to get the total performance score, which is then converted into a payment adjustment percentage (PAP).

VBP Bonus = PAP x hospital’s base DRG operating payment.



Clinical Process of Care Measure Performance Standard (Achievement Threshold)

Benchmark

Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time

0.9663 0.9996

Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose

0.9634 1.0000

Postoperative Urinary Catheter Removal on Postoperative Day 1 or 2

0.9286 0.9989

Surgery Patients with Recommended Venous Thromboembolism Prophylaxis Ordered

0.9462 1.0000

Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery

0.9492 0.9983

Surgery Patients on a Beta Blocker Prior to Arrival That Received a Beta Blocker During the Perioperative Period

0.9565 1.0000


HCAHPS Patient Experience Measure Performance Standard (Achievement Threshold)

Benchmark Floor

Communication With Nurses 75.79% 84.99% 42.84%

Communication With Doctors 79.57% 88.45% 55.49%

Responsiveness of Hospital Staff 62.21% 78.08% 32.15%

Pain Management 68.99% 77.92% 40.79%

Communication About Medicines 59.85% 71.54% 36.01%

Hospital Cleanliness and Quietness 63.54% 78.10% 38.52%

Discharge Information 82.72% 89.24% 54.73%

Overall Hospital Rating 67.33% 82.55% 30.91%


Mortality Outcome Measure Performance Standard (Achievement Threshold)

Benchmark

AMI 30-Day Mortality Rate 0.8477 0.8673

HF 30-Day Mortality Rate 0.8861 0.9042

PN 30-Day Mortality Rate 0.8818 0.9021


Appeals:

Yes. Within 30 days from time CMS payment report is posted, the hospital must submit a “Corrections Request.”

The hospital may submit an appeal within 30-days on the CR if denied.

The appeals process is facilitated through QualityNet.

Reporting: Results for each individual performance measure as well as a hospital's total performance are reported on Hospital Compare.


Early Program Results

FY 2013: 1,557 hospitals received bonuses, 1,427 had reductions.

FY 2014: 1,231 hospitals received bonuses, with reductions to 1,451 hospitals.

Bigger teaching hospitals did the worst, with smaller, community hospitals faring better.

Fifty-seven% of for-profit hospitals received bonuses, while only 21% of government-owned hospitals gained money.

“For nearly two-thirds of the hospitals, the changes are less than a quarter of a percent…[s]till, for hospitals with lots of Medicare patients, hundreds of thousands of dollars are at stake.” (Kaiser Health News)

HAC Reduction Program

Beginning in FY 2015, the Hospital-Acquired Condition (HAC) Reduction Program, mandated by the Affordable Care Act, requires CMS to reduce hospital payments by 1 percent for hospitals that rank among the lowest-performing 25 percent with regard to HACs.


Authority:

2005 Deficit Reduction Act

In 2009, CDC found preventable HACs added $6 billion in health care costs.

Section 3008 of PPACA.

Codified in SSA, § 1886(p)

Regulations at 42 C.F.R., § 412.170 et seq.

FY 2014 IPPS Rule.


Penalties/Reporting

HAC/POA Policy: For discharges on or after October 1, 2008, hospitals do not receive additional payment where a designated HAC is not present on admission. Payment is made as though no secondary diagnosis were present.

HRP: Beginning in FY 2015 hospitals in the lowest 25% for HACs will receive a 1 percent penalty on reimbursement. Penalty adjustment will occur after base DRG payment adjustments have been calculated and made for the VBP and readmission reduction programs.

Data: IQR Program.

Reporting: Hospital Compare.


Designated HACs (Present on Admission Policy): Foreign Object Retained after Surgery

Air Embolism

Blood Incompatibility

Stage III and IV Pressure Ulcers

Falls and Trauma

Vascular Catheter-Associated infection

Catheter-Associated Urinary Tract Infection

Manifestations of Poor Glycemic Control

Deep Vein Thrombosis and Pulmonary Embolism Following Certain Orthopedic Procedures

SSI Following Bariatric Surgery for Obesity:

SSI Following Cardiac Implantable Electronic Device (CIED)

SSI Following Certain Orthopedic Procedures

SSI, Mediastinitis, following Coronary Artery Bypass Graft (CABG)

Latrogenic Pneumothorax with Venous Catheterization

HAC Reduction Program: Calculation

Domain 1 (8 AHRQ Measures - 35%):

Pressure ulcer rate;

Iatrogenic pneumothorax rate;

Central venous catheter-related blood stream infection rate;

Postoperative hip fracture rate;

Postoperative pulmonary embolism /deep vein thrombosis rate;

Postoperative sepsis rate;

Wound dehiscence rate; and

Accidental puncture and laceration rate.

Domain 2 (2 CDC Measures - 65%):

Central Line-Associated Blood Stream Infection

Catheter-Associated Urinary Tract Infection.

Total HAC Score: D1 + D2 (Risk Adjusted - age, gender, and comorbidities).

Encouraging Enrollment in Exchanges


Enrolling patients in exchanges is high priority

Various methods: Navigators: Ascension Health/Providence Health and

AIDS Alabama, Tombigbee Healthcare Authority

Local meetings, local health fairs

Insurance phone hotlines

Mining patient records to determine potential eligibility

Finding Coverage for Patients

Medicaid enrollment: Presumptive enrollment At least one state requires presumptive enrollment

(Illinois).

Under provisions of the ACA qualified hospitals are allowed to make presumptive eligibility determinations for individuals who show potential eligibility for Alabama Medicaid under the primary ACA groups (children, pregnant women and parent/caretaker relatives).

Alabama Medicaid recently issued new guidance on presumptive enrollment


Alabama Medicaid Presumptive Enrollment Individuals required to submit a simplified hospital PE

application to receive presumptive eligibility benefits.

The hospital PE application must be submitted electronically.

The hospital PE determination based on income, household size, citizenship and state residency.

The qualified hospital will accept self-attestation of information and will not perform any verification checks of information provided.


Alabama Medicaid Presumptive Enrollment (cont.) Presumptive eligibility granted for up to 60 days.

After completing the hospital PE application, the individual will be referred to complete a full Medicaid application.

The individual will be able to complete the Medicaid application online, via paper, over the phone, and in person at their local Medicaid office.

Eligibility worker

• Another option for getting individuals signed up for Medicaid is for hospitals to hire an eligibility worker that could actually enroll patients in Medicaid using the Medicaid system.


Certified Application Counselors Individuals who work at hospitals or other provider

organizations who can assist individuals in applying for coverage through the health care marketplace.

http://www.enrollamerica.org/toolkits/pe/home.html.

National enrollment site: Enroll America has useful tools for enrollment, outreach

For example: How to create an Outreach Work Plan

www.enrollamerica.org


Caution against premium assistance

October 30, 2013 – DHHS guidance: Qualified Health Plans (QHPs) are not “federal health care programs” for purposes of the Anti-Kickback Statute (AKS) Appeared to sanction 3rd party premium subsidies for

patients purchasing insurance through exchanges


November 4, 2013 DHHS FAQ:

“It has been suggested that hospitals, other healthcare providers, and other commercial entities may be considering supporting premium payments and cost-sharing obligations with respect to qualified health plans purchased by patients in the Marketplaces. HHS has significant concerns with this practice because it could skew the insurance risk pool and create an unlevel field in the Marketplaces. HHS discourages this practice and encourages issuers to reject such third party payments. HHS intends to monitor this practice and to take appropriate action, if necessary.”

Addressing Bad Debt

Addressing Bad Debt

Hospitals must address bad debt Payment of copays and deductibles will continue to be a

problem for patients in exchanges

High deductible plans lead to large patient responsibility

High deductible plans lead to patients seeking to pay cash only (not report to insurance)

Many patients will remain uninsured

Hospitals must find ways to turn accounts receivable into cash

Addressing Bad Debt

Caution: ACA implemented new rules regarding collections actions, effective Jan. 1, 2014

New IRC Section 501(r)(6) requires a hospital organization to make reasonable efforts to determine whether an individual is eligible for financial assistance before engaging in extraordinary collection actions (“ECAs”) against the individual.

Addressing Bad Debt

ECAs include: Reporting to credit agencies

Placing a lien on individual’s property

Attaching or seizing individual’s bank account

Commencing a civil action against an individual

Garnishing individual’s wages

Sales of patient’s debt to third party collection company

IRS is authorized to strip tax-exempt status for “willful and flagrant” violations

AHA & HFMA issued “best practices” for hospitals


ACA requires hospitals to revise financial assistance policies to capture more patients (IRC § 501(r)(4)).

FAP should establish: Eligibility for financial assistance (free & discounted care)

Basis for calculating amounts charged to patients

Method for applying financial assistance

Billing and collections policy (if not separate)

Measures to widely publicize the FAP within the community

Direct Contracting with Employers


Traditional model Employers contract with payors (HMO, MCO, PPO) to

access providers

Providers contract with payors (HMO, MCO, PPO) to access patients

Problems Inflexible

Costly

Administratively difficult to manage


Employers becoming receptive to innovative options

Employers are facing: Increasing pressure to trim healthcare costs

Drive to keep employees healthy

Employee benefit plans in flux

Drop coverage and push employees to exchanges?

Optimize current coverage?


Examples of Direct Contracts between Employer and Providers

Lowe’s

225,000 employees and dependents enrolled in Lowes self-funded plan can travel to Cleveland Clinic for heart procedures.

Lowe’s covers all medical deductibles, coinsurance payments, travel costs and lodging for patient and companion.


Examples of Direct Contracts between Employer and Providers Perdue Farms

Contracts directly with physicians and hospitals

Healthcare costs for the company are less than half of the national average

Wal-Mart

1.1 million employees and their dependents covered by Wal-Mart’s plan can travel to Cleveland Clinic for cardiac surgery with employer covering deductibles and travel


Benefits of Direct Contracting Lower costs—No “middleman” cut (network access fees)

More flexibility—Providers can negotiate better deals for important procedures/services

Hospitals can obtain access to patients with reliable source of payment

Less “nit-picking” of medical judgment

Less administrative hassle

Reduced physician burnout, since focus is less on volume and more on quality of care


What makes a hospital attractive to employers? Outcomes

Transparency

Aligned incentives (e.g., employed physicians)

Geography and access

What will save employees time?

For high risk procedures—employers may be willing to send employees out-of-state

For OB or occupational medicine—employers looking for local providers

Infrastructure (e.g., experience, staff)


Considerations before approaching direct contracting Start small and capitalize on current services

Occupational health department—can serve as natural extension

Community based services (e.g., education, health screenings, flu shots)

Review current managed care contracts

Which are most disadvantageous

Review contract terms—some may prohibit direct contracting


Considerations before approaching direct contracting (cont.) Who are employer decision-makers?

Corporate benefit department may be located out-of-state

May not have experience or knowledge of direct-contracting concept

Employer contracts with payors may not permit direct contracting

Set realistic goals



What is Telehealth/Telemedicine? Transfer of clinical information through interactive

audiovisual media

Set to experience explosive growth Predictions of 18.5% annual growth in telehealth

worldwide through 2018


Benefits Monitoring of chronic disease in less expensive settings

Approximately 125 million Americans living with 1 or more chronic diseases and number expected to grow to 157 million by 2020 (CDC).

Employer benefits—ensuring health of employees without having employees take off work

Patients receive medical interventions in a more timely manner

Specialists expand their reach


Regulatory landscape

Medicare Coverage of Telemedicine

Traditionally, Medicare was seen as a roadblock to expansion of telemedicine services Only paid for limited number of Part B services furnished

by a physician or practitioner to an eligible beneficiary via a telecommunications system

Beneficiaries must be presented from originating site in a rural HPSA or in a county outside of a MSA



Former regulations required hospital’s governing body to appoint all practitioners to medical staff

In 2011, CMS issued final rule in (CoPs) for credentialing of physicians/practitioners for telemedicine to: (1) Make current Federal requirements more flexible for

rural and/or small hospitals and CAHs and

(2) Encourage innovative approaches to patient-service delivery



New requirements: hospital’s governing body must ensure through a written agreement with the distant-site hospital that certain criteria are met, Distant-site hospital is Medicare participating hospital;

The physician or practitioner is privileged;

The physician or practitioner holds a license issued or recognized by the state where patient is located;

Hospital must have internal review of distant-site physician’s or practitioner’s


Alabama regulation of telehealth

Alabama Medicaid covers telemedicine for physicians licensed in Alabama to patients in Alabama No mandatory coverage by commercial payors, but many

already cover telehealth

New telehealth regulations issued by Alabama Board of Medical Examiners Effective January 16, 2014



540-X-15-.09 Telehealth medical services provided at an established medical site. Telehealth can be provided at an established medical site

(e.g., hospital) may be used for all patient visits, including initial evaluations to establish a proper provider-patient relationship between distant site provider and a patient.

A distant site provider may delegate tasks and activities to a patient site presenter during a patient encounter.



540-X-15-.10 Distant site provider who provides telehealth at a site other than an established medical site for a patients’ previously diagnosed condition must either: See the patient one time face to face visit before

telehealth OR

See the patient without face to face visit provided the patient has received in person evaluation by another provider who has referred the patient for additional care

Restrictions on Rx of scheduled drugs



540-X-15-.06 Protocols. A provider who uses telehealth medical services in his or

her medical practice shall adopt protocols to prevent fraud and abuse through the use of telehealth services.

540-X-15-.08 Notice to Patients A provider who uses telehealth medical services must,

prior to providing services, give patients notice (except in certain circumstances) including the risks and benefits of telehealth, who to receive follow-up care, signed and dated notice.


Telemedicine/Telehealth Liability Considerations Overall payor skepticism

Patients safety

Protocols in place for physicians and other practitioners (nurses, PAs)

Follow-up

Prescribing practices (e.g., controlled substances)

Privacy & Security safeguards

Mergers, Acquisitions & Consolidation

Hospital Mergers, Acquisitions & Consolidation

Hospital industry consolidation CHS/HMA

$7.6 billion dollar deal

CHS will obtain stronger presence in Florida, Mississippi and Oklahoma

Tenet and Vanguard

Dallas-based Tenet acquired Nashville-based Vanguard. $4.3 billion dollar deal.

Tenet gains market share in areas it previously had no footprint: Chicago, Detroit, San Antonio, etc.


Acquisition of physician practice groups Gain increased access points

Greater critical mass

Stronger presence in geographic areas or regions

Non-ownership collaborative agreements Realize benefits of merging without giving up governance


Hospital Authorities Public hospitals in states that have yet to expand

Medicaid face significant cut-backs

Hospital authority-owned hospitals are not likely to go away—despite bleak outlook

Benefits of Hospital Authority Status Immunity from antitrust liability (Ala. § 22-21-312)

Sovereign Immunity (Ala. § 22-21-312 and case law)

Property tax exemption (Ala. § 22-21-333)

Support from local governments and community

Summary

Summary of Methods for 2014 and Beyond for Sustaining Revenue Focus on quality and outcomes

Focus on enrolling patients in insurance if possible, and managing bad debt

Consider new options for partnerships—with employers, with practice groups, hospitals or local governments

Consider new and innovative uses of technology, including telehealth

QUESTIONS?

THANK YOU!

Dan Silverboard, Esq.30 Ivan Allen Jr. Boulevard,

N.W. Suite 700

Atlanta, GA 30308-3036t: (404) 962-3586

f: (888) 897-8549

[email protected]

Jennifer Tyler, Esq. 30 Ivan Allen Jr. Boulevard,

N.W. Suite 700

Atlanta, GA 30308-3036t: (404) 962-3558

f: (866) 270-1277

[email protected]

Documents

Sustaining Revenue Under the Affordable Care Act Alabama Hospital Association January 24, 2014