The Maryland “Experiment” Evolution of Maryland’s Medicare Waiver Brian Sims Maryland Hospital Association November 17, 2017

Objective Pre- and Initial Waiver Environment System Redesign New All-Payer Model Enhanced Total Cost of Care Model

Pre- and Initial Waiver Environment (1970’s-2000)

Maryland Pre-Waiver Healthcare Environment Significant amount of inefficiency in delivery system (Late 60’s early 70’s) Over utilization Length of stay for patients exceeded national averages Weak financial performance for Maryland Hospitals Inconsistent access to hospital care for the poor and uninsured By 1971, hospital cost per case in Maryland exceeded the National average by 25%!

The Formation of the Health Services Cost Review Commission (HSCRC) 1971 - Initial legislation enacted by the General Assembly Independent body within the Department of Health and Mental Hygiene HSCRC given the authority to establish hospital rates 1974 – HSCRC began setting unit rates for hospitals after 3 year phase-in Authority extended only to non-federal insurers (commercial payers) 1977 – Maryland granted temporary “waiver” by federal government to test alternative payment approaches Exempted the state from national Medicare and Medicaid reimbursement requirements Base rates created 1980 – Medicare exemption became “permanent” in Maryland Continue to be the only state with this “waiver” But, there’s a “catch”!

The “Waiver Test” On-going demonstration that the cumulative rate of growth in Medicare inpatient payments per admission to Maryland hospitals is no greater than the cumulative rate of growth in Medicare inpatient payments per admission to hospitals nationally over the same time period Maryland inpatient costs per case had improved dramatically from 25% higher than nation to 12% below in 1992 Growth in Medicare spending per inpatient hospital stay less than nation

HSCRC Regulatory Jurisdiction Hospital Rates: Includes: Inpatient services Hospital-based outpatient services Excludes: Physician / Professional Fee / Part B Activity Other operating revenue Non-operating revenue

All-Payer Hospital Rate Setting System HSCRC Establish and approve rates for each unit of service (Room and Board, imaging, lab, etc.) Hospital specific Unit rates are to be reasonably related to underlying costs Hospitals Required to charge ALL payers at HSCRC approved unit rates Payers (All) Required to pay hospitals based on each hospitals approved unit rates Payers given the ability to deny payment of care for lack of medical necessity

System Redesign (2000-2013)

Initial System Redesign (2000) After more than 25 years of sustained success, widespread support for redesign gained momentum Goals of the redesign included: Provide predictability and stability Be prospective in nature Recognize input cost inflation Streamlined approach Reflective of the national experience Frustration in lack of consistency and constant modifications to methodologies. Key Component was the inclusion of an annual update factor

Modern System Redesign Around 2010 we began to experience further and rapid deterioration of our waiver cushion Projections of the future rate of deterioration demonstrated a likely failure of the waiver test by 2013

Overarching Concern for Maryland Hospitals Changes to the healthcare delivery system that challenged the waiver test: Less expensive care shifted to outpatient settings or outside of the hospital Shift of cases to observation increases the average charge per admission in Maryland Medicaid budget issues New payment initiatives designed to control volume

Initiatives Designed to Control Spending Quality Related Programs Maryland Hospital Acquired Condition (MHAC) program Designed to incentivize hospitals to reduce Potentially Preventable Complications Hospitals are rewarded or penalized based on performance relative to their peers Quality-Based Reimbursement (QBR) program Pay-for-performance system of rewards/penalties using evidence-based process of care measures Similar to MHAC, hospital scores are scaled based on relative performance Expansion of Total Patient Revenue (“TPR”) Methodology

New All-Payer Model (2014-2018)

Birth of a New Model On October 10, 2013, the State of Maryland applied to the Center for Medicare and Medicaid Innovation (CMMI) for a demonstration project focusing on The “Triple Aim”: To improve outcomes / quality To enhance patient experience To reduce the cost of care The application was approved on January 10, 2014 The Beginning of the “New” All-Payer Model Better Care Lower Costs Better Health On October 10, 2013, the State of Maryland applied to the Center for Medicare and Medicaid Innovation (CMMI) for a demonstration project to improve outcomes, to enhance patient experience and to control costs. The application was approved effective January 1, 2014 The resulting All-Payer Model (“the Model”) shifts the focus from historic price per encounter controls to a focus on overall revenue growth, including price and use.

New All-Payer Model OLD NEW Healthcare Delivery Volume Revenue Fragmentation Care Coordination Volume Episodic Care Population Health Revenue Fee-for-service Global budget

New All-Payer Model: Financial Tests Annual All-Payer hospital SPENDING CAP − 3.58% all payer per capita growth Medicare dynamic hospital SAVINGS TARGET − $330 million over 5 years Medicare Total Cost of Care (TCOC) spending GROWTH per beneficiary not to exceed the Nation All-payer per capita growth rate of 3.58% is the ten year average annual growth rate in Maryland Gross State Product (GSP) per capita (2002 – 2012) The all-payer per capita growth rate is expected to be calculated using: Regulated, inpatient and outpatient hospital charges, from Maryland hospitals for Maryland residents receiving services. Population growth from the Maryland Department of Planning Rather than defined savings, Maryland’s Medicare per beneficiary total cost growth rate cannot exceed the national average by more than 1 percentage point in year 1, and must be “break even” with the national average by year 3. CMS concerned with shifts to unregulated or other services

New All-Payer Model: Quality Targets Reduction of 30-day Medicare READMISSION rate to the national average in 5 years. 30% Reduction of Potentially Preventable Complications (PPC) over 5 years. All-payer per capita growth rate of 3.58% is the ten year average annual growth rate in Maryland Gross State Product (GSP) per capita (2002 – 2012) The all-payer per capita growth rate is expected to be calculated using: Regulated, inpatient and outpatient hospital charges, from Maryland hospitals for Maryland residents receiving services. Population growth from the Maryland Department of Planning Rather than defined savings, Maryland’s Medicare per beneficiary total cost growth rate cannot exceed the national average by more than 1 percentage point in year 1, and must be “break even” with the national average by year 3. CMS concerned with shifts to unregulated or other services

Maryland Waiver Performance Dashboard Cumulative Performance – Jan 2014 to Most Recent Data Available

HSCRC Policy Impacts Under Global Budget Revenue (GBR), hospitals receive annual adjustments for: Inflation Change in markup (payer mix and UCC via the UCC pool) Population/Demographics Market Shift Infrastructure There are no explicit adjustments for changes in: Volume (I/P or O/P) Case Mix/Severity How do you recognize changes in volume due to changes in population demographics? How do you adjust budgets for changes in market share and movement to unregulated services? How do you measure efficiency on a per capita basis? What limits, if any, do you place on unit rate increases within global budgets? How do you fund capital within a global budget environment? How do you address unforeseen adjustments, such as extraordinary inflation, a flu epidemic, or ACA-related volume growth (or today, potential loss of coverage), within the global budgets? How do you align global budgets with other payment models (ACOs, PCMH)? How do you align global budgets with providers still under volume-driven incentives?

Future Initiatives: Enhancement of the All-Payer Model Align Measures and Incentives Align updated measures across providers and programs Increased physician engagement Payment and Delivery System Transformation Promote innovation Development of additional initiatives focused on Behavioral Health and Post-Acute Care Foster Accountability Enhance provider accountability for population health through value-based incentives Increased Consumer Engagement

Enhanced Total Cost of Care Model (2019-)

Enhanced Total Cost of Care Model Term sheet in clearance process; when approved, next step would be developing contract for state/federal signature Policy Development: Current Model Policy Development: Enhanced Model Changes/Challenges: Enhanced Model

Policy Development: Current Model Full rate review application regulations and update to HSCRC’s Inter-hospital Cost Comparison (ICC) methodology Capital funding approach Update to market shift methodology Unit rate compliance Data availability and access

Care Redesign Care Redesign Amendment to the All-Payer Model Agreement Addresses need for greater provider alignment and transformation tools under the All-Payer Model The Amendment aims to modify the All-Payer Model by supporting: Effective care management and population health activities Improvement in care for high and rising risk populations Efforts to provide high quality, efficient, well-coordinated episodes of care Hospitals and their Care Partners in monitoring and controlling Medicare beneficiaries' Total Cost of Care (TCOC) growth  The Amendment proposes two voluntary, hospital-led programs, which align hospitals and their Care Partners through common goals and incentives.  The Hospital Care Improvement Program (HCIP) and Complex and Chronic Care Improvement Program (CCIP) Care redesign amendment proposed by the state

Care Redesign Programs: HCIP Hospital Care Improvement Program (HCIP) to be implemented by participant hospitals and hospital-based providers  Aims to: Improve inpatient medical and surgical care delivery Provide effective transitions of care Ensure an effective delivery of care during acute care events, beyond hospital walls Encourage the effective management of inpatient resources Reduced potentially avoidable utilization with a byproduct of reduced cost per acute care event Care Partners who choose to participate may receive incentive payments based on reducing internal costs through a reduction in unnecessary utilization and resources, efficient practice patterns, and improved quality.

Care Redesign Programs: HCIP Examples of categories of care redesign interventions in the HCIP include:   care coordination discharge planning clinical care patient safety patient and caregiver experience population health efficiency and cost reduction 

Care Redesign Programs: CCIP Complex and Chronic Care Improvement Program (CCIP), to be implemented by participant hospitals and community providers and practitioners Aims to: Strengthen primary care supports for complex and chronic patients in order to reduce avoidable hospital utilization Enhance care management through tools such as effective risk stratification, health risk assessments, and patient-driven care profiles and plans Facilitate overall practice transformation towards person-centered care that produced improved outcomes and meets or exceed quality standards. In the CCIP, Participant Hospitals deploy care management resources and technology that align and support community-providers who work with the Participant Hospital. Care Partners who choose to participate will have access to care management tools and resources targeted to high utilizer and rising risk patients that will support implementation of care plans, provide care coordination, and help manage care transitions. Participation in the CCIP is also tailored to leverage the Medicare Chronic Care Management (CCM) fee. Care Partners who choose to participate may receive incentive payments from hospitals based on defined activities that improve quality of care and reduce potentially avoidable utilization of hospitals.​

Care Redesign Programs: CCIP Examples of categories of Care Redesign Interventions in the CCIP include: care management, workforce capacity development health information technologies.

Policy Development: Enhanced Model Medicare Performance Adjustment (MPA) Management of TCOC savings Medicare discount / differential Health care services supply alignment with the Model Policies to implement the Maryland Primary Care Program Policies regarding hospital accountability for population health metrics Updates to quality programs with “aggressive and progressive” targets State/CMS policy on access to patient-identifiable data needed to manage TCOC

Enhanced Model Operational Changes/Challenges Building/strengthening provider alignment Workforce shortages and workforce development Developing capability to utilize data to strategically manage population health, including behavioral health Continued cultural change (internal and in the community) of movement from volume to value Cost management strategies, particularly regarding capital structure Adequacy of revenues within a capped system

Enhanced Model at a Glance Hospital Focused Hospital Savings Hospital Quality Metrics Acceleration of Prevention/Chronic Care Managment Hospital Alignment All-Provider/Person-Centered Focused Total Cost of Care Savings Population Health Metrics Maryland Comprehensive Primary Care Program (MDPCP) Physician Alignment Through MACRA Bonus – eligible Programs & Post Acute Alignment To achieve a patient-centered system, the Total Cost of Care Model includes the following key elements: Care will be coordinated across both hospital and non-hospital settings, including mental health and long term care. The Model will invest resources in patient-centered care teams and primary care enhancements. ​ Maryland will set a range of quality and care improvement goals.  Providers will be paid more when patient outcomes are better. Maryland will set a range of population health goals addressing opioid use and deaths, diabetes, and other chronic conditions. State flexibility will facilitate programs centered on the unique needs of Marylanders, the provider community, geographic settings, and other key demographics.   As part of the federal agreement to put the new Total Cost of Care Model in place, all-payer hospital cost growth will continue to be limited to 3.58% per capita, a limit that was set in 2014 based on long term growth in Maryland’s economy.  As part of this Model, Maryland commits to saving $300 million in annual, total Medicare spending by the end of 2023. The Medicare savings required in the TCOC All-Payer Model will build off of the ongoing work of Maryland stakeholders, which began in 2014. 

Enhanced Model at a Glance Current Model Current Model Enhanced Model All-payer hospital revenue annual growth cap of 3.58 percent per capita Same Medicare hospital savings-cumulative savings of $330 million over five years Medicare Total Cost of Care (TCOC) savings of at least $300 million by end of 2023, relative to 2013 base year Targeted reduction in hospital-acquired infections (MHAC) & hospital readmissions Expanded focus on populations health metrics; opportunity to revise MHAC program Physician alignment through participation in care redesign programs Enhanced physician alignment through Maryland Comprehensive Primary Care Program (MDPCP) & use of Medicare performance adjustment (MPA) to have all-payer model qualify as an Advanced Alternative Payment Model (AAPM) for MACRA bonus purposes

Enhanced Model at a Glance Current Model Enhanced Model Medicare TCOC guardrail managed through adjustment to all-payer rates Medicare TCOC savings requirement managed through MPA, with amount of adjustment dependent on size of Medicare TCOC savings variance. Savings shortfall may also be managed through adjustment to all-payer rate updates Ends 12/31/2018 Runs at least through 12/31/28, as long as savings are on target, with an opportunity to make the model permanent after that Use of global budgets Use of global budgets & other population-based models, such as ACOs Care redesign waivers for physician gain-sharing Application for additional waivers, including three-day SNF rule, telehealth, and beneficiary inducements Triggering events Waiver transition to national system over two-year period Same Current Model

National Policy and Trend Implications Medicare IPPS/OPPS rate updates Growth in total Medicare beneficiaries: MD vs. Nation Growth in Medicare Advantage participants: MD vs. Nation Population growth: MD vs. Nation Growth in non-hospital spending: MD vs. Nation Medicaid expansion Affordable Care Act repeal / replacement

Questions? Contact: Brian Sims bsims@mhaonline.org 35