1. HCAP UPDATE June 14, 2016 2016 OHA Annual Meeting

2. Ohio Hospital Association | ohiohospitals.org | AGENDA I.Welcome/Introductions II.HCAP 2015 Refresher III.HCAP 2016 Introduction IV.Data Trends/Analysis V.SFY 2016 Medicaid Cost Report Update VI.DSH Audit Possible Log Changes VII.HCAP FAQ Changes VIII.Quick Update – Franchise Fee/UPL IX.Q/A X.Adjourn June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 2 HCAP UPDATE – OHA ANNUAL MEETING

3. Ohio Hospital Association | ohiohospitals.org | HCAP 2015 REFRESHER 2016 OHA Annual Meeting – HCAP Update June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 3

4. Ohio Hospital Association | ohiohospitals.org | HCAP 2015 – A REFRESHER June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 4 Pot 1Pot 2Pot 3APot 4APot 4BPot 6 Total Distribution High DSH PotOBRA Cap Pot“HCAP” PotCAH PotRural Pot Children’s Hospital Pot Distributed Based On: Medicaid Costs (inc. MCP) For hospitals with Medicaid utilization ratio greater than 25.35% “Room” left under OBRA caps. Each hospital’s: Total UC Below FPL Costs. “Room” left under OBRA caps. “Room” left under Children’s hospital OBRA caps. --- SFY 2014 Data Inputs for Each Pot: High DSH Medicaid f-f-s Costs + Medicaid MCP Costs = Total Medicaid Costs $2,168.5M OBRA Cap total: UCC<100% FPL w/o ins.: $467.0 M + Medicaid Shortfall: $377.1 M. + UCC>100% FPL w/o ins: $542.6 M. = OBRA Cap Total $1,386.7M UC Below 100% Costs = $455.7M OBRA Room for Critical Access hospitals = $39.9M OBRA Room for hospitals in rural counties = $118.2M OBRA Room for Children’s hospitals = $106.3M --- Distributed To: High DSH hospitals if within OBRA caps (13 qualify to receive $ in Pot 1) All hospitals (if within OBRA cap) All hospitals (if within OBRA cap) Designated Critical Access Hospitals (32 eligible) Rural hospitals (if within OBRA cap) Children’s hospitals (5 eligible) --- Total Funds Distributed (in millions): $73.1$406.5$64.3$20.7$32.7$12.1$609.3

5. Ohio Hospital Association | ohiohospitals.org | HCAP 2016 INTRODUCTION 2016 OHA Annual Meeting – HCAP Update June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 5

6. Ohio Hospital Association | ohiohospitals.org | HOSPITAL CARE ASSURANCE PROGRAM - 2016 Continue to build on 2014 and 2015 reforms – complete transition to OBRA-based model GOALCHALLENGES Expedite 2016/17 rulemaking/CMS review Complete program reforms in advance of DSH cuts STRATEGY Ohio Medicaid OHA Board, advised by OHA Finance Committee DECISION-MAKERS Policy Update June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 6 Impact of expansion Desire to accelerate recommendation process

7. Ohio Hospital Association | ohiohospitals.org | HCAP DATA - REFRESHER FFY 2016 HCAP: Uses SFY 2015 Medicaid Cost Reports Hospital FYEs between July, 2014 and June, 2015 Majority CY 2014 Data June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 7

8. Ohio Hospital Association | ohiohospitals.org | HCAP 2016 – PRELIMINARY MODEL June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 8 Pot 1Pot 2Pot 3APot 4APot 4BPot 5Pot 6Pot 7 Total Distribution High DSH PotOBRA Cap Pot“HCAP” PotCAH PotRural Pot Closed Pot – Cuyahoga County Children’s Hospital Pot State Residual Distributed Based On: Medicaid Costs (inc. MCP) For hospitals with Medicaid utilization ratio greater than 27.88% “Room” left under OBRA caps. Each hospital’s: Total UC Below FPL Costs. “Room” left under OBRA caps. UC Below FPL Costs “Room” left under Children’s hospital OBRA caps. “Room” left under OBRA caps. --- SFY 2015 Data Inputs for Each Pot: High DSH Medicaid f-f-s Costs + Medicaid MCP Costs = Total Medicaid Costs $1,691M OBRA Cap total: UCC<100% FPL w/o ins.: $111.4 M + Medicaid Shortfall: $549.1 M. + UCC>100% FPLw/o: $313.9 M. = OBRA Cap Total $974.4M ($997.9M when negatives “zeroed”) UC Below 100% Costs = $96.2M OBRA Room for Critical Access hospitals = $30.3M OBRA Room for hospitals in rural counties = $102.5M Remaining hospitals in Cuyahoga County: UC Below 100% Costs = $7.5M OBRA Room for Children’s hospitals = $55.4M OBRA Room for All Hospitals = $456.2M --- Distributed To: High DSH hospitals if within OBRA caps (14 qualify to receive $ in Pot 1) All hospitals (if within OBRA cap) All hospitals (if within OBRA cap) Designated Critical Access Hospitals (32 eligible) Rural hospitals (if within OBRA cap) Hospitals in Cuyahoga County (if within OBRA cap) Children’s hospitals (5 eligible) All hospitals (if within OBRA cap) --- Total Funds Distributed (in millions): $73.6$441.5$32.4$20.9$32.9$.636$12.1$.544$613.3

9. Ohio Hospital Association | ohiohospitals.org | HCAP 2016 2016 OHA Annual Meeting │ HCAP Update June 14, 2016 9 POT 1 – “High DSH” Medicaid inpatient utilization rate (MIUR) of at least 27.88% $73.6M (12.00% of total) Medicaid costs ($1.691B) FUNDING ELIGIBILITY DISTRIBUTION METRIC

10. Ohio Hospital Association | ohiohospitals.org | HCAP 2016 2016 OHA Annual Meeting │ HCAP Update June 14, 2016 10 POT 2 – “OBRA” OBRA space (i.e., room under DSH limit) $441.5M (71.99% of total) Remaining “zeroed” OBRA ($997.9M) FUNDING ELIGIBILITY DISTRIBUTION METRIC

11. Ohio Hospital Association | ohiohospitals.org | HCAP 2016 2016 OHA Annual Meeting │ HCAP Update June 14, 2016 11 POT 3A – “HCAP” OBRA space $32.4M (5.28% of total) All Uncompensated Care <100% FPL ($96.2M) FUNDING ELIGIBILITY DISTRIBUTION METRIC

12. Ohio Hospital Association | ohiohospitals.org | HCAP 2016 2016 OHA Annual Meeting │ HCAP Update June 14, 2016 12 POT 4A – “CAH” CAH status & OBRA space $20.9M (3.40% of total) Remaining “zeroed” OBRA for CAHs ($30.3M) FUNDING ELIGIBILITY DISTRIBUTION METRIC

13. Ohio Hospital Association | ohiohospitals.org | HCAP 2016 2016 OHA Annual Meeting │ HCAP Update June 14, 2016 13 POT 4B – “Rural” Rural status & OBRA space $32.9M (5.36% of total) Remaining OBRA for non-CAH rurals ($102.5M) FUNDING ELIGIBILITY DISTRIBUTION METRIC

14. Ohio Hospital Association | ohiohospitals.org | HCAP 2016 2016 OHA Annual Meeting │ HCAP Update June 14, 2016 14 POT 5 – “Cuyahoga Closed Hospital” Open hospital in Cuyahoga county with OBRA space $635.7K (0.10% of total) UC<100% FPL ($7.5M) FUNDING ELIGIBILITY DISTRIBUTION METRIC

15. Ohio Hospital Association | ohiohospitals.org | HCAP 2016 2016 OHA Annual Meeting │ HCAP Update June 14, 2016 15 POT 6 – “Children’s Hospital” Children’s hospital with OBRA space $12.1M (1.98% of total) Remaining “zeroed” OBRA ($55.4M) FUNDING ELIGIBILITY DISTRIBUTION METRIC

16. Ohio Hospital Association | ohiohospitals.org | HCAP 2016 2016 OHA Annual Meeting │ HCAP Update June 14, 2016 16 POT 7 – “Statewide Residual” All hospitals with OBRA space $543.8K (0.09% of total) Remaining “zeroed” OBRA ($456.2M) FUNDING ELIGIBILITY DISTRIBUTION METRIC

17. Ohio Hospital Association | ohiohospitals.org | HCAP TENTATIVE TIMELINE – FFY 2015/’16/’17 June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 17 CMS APPROVES 2015 MODEL (DECEMBER, 2015) ODM ADMINISTERS 2015 ASSESSMENTS/PAYMENTS (JUNE) ODM FILES 2016/17 SPA (JULY/AUGUST) CMS IGNORES SPA FOR 80+ DAYS (NOVEMBER) CMS ISSUES RAI (NOVEMBER) ODM RESPONDS TO RAI (DECEMBER) CMS APPROVES 2015 (JANUARY) ODM INITIATES ASSESSMENTS/PAYMENTS FOR 2016 (FEBRUARY/MARCH, 2017) ODM ADMINISTERS 2017 HCAP (FALL, 2017)

18. Ohio Hospital Association | ohiohospitals.org | HCAP 2016 DATA TRENDS & ANALYSIS 2016 OHA Annual Meeting – HCAP Update June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 18

19. Ohio Hospital Association | ohiohospitals.org | HCAP 2016 June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 19 Data Trends: DSH OBRA caps are down 29.7% statewide from the 2015 data, about $419 million. The statewide “misery index” is down to 2.03%, meaning that uncompensated care and Medicaid losses, when offset by HCAP net gains, represent approximately 2% of total hospital operating expenses, on average. For comparison: In 2012 model, the statewide misery index was 5.5%. Medicaid expansion—along with the delays in the Medicaid DSH cuts at the federal level—means, on average, an additional 3.5 percentage points to Ohio hospitals’ operating margins. We have also seen some of the largest safety net hospitals in the state see the biggest impacts from expansion: The hospitals with the ten largest OBRA caps for non-children’s hospitals in 2012 had a collective $500 million loss due to Medicaid and uncompensated care. In 2016, those same 10 hospitals have a combined OBRA cap of $192, over 61% lower than the figure from four years ago. One of those hospitals had a 100% reduction in OBRA, appearing in the 2016 model with a $0 DSH limit.

20. Ohio Hospital Association | ohiohospitals.org | HCAP 2016 – PEER GROUP SNAPSHOT June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 20 Peer Group Net HCAP Index - Preliminary 2016 Preliminary OBRA Cap - Preliminary OBRA Cap Change from 2015 2016 Preliminary Net Gain Net Gain Change from 2015 Rural3.12%$189,133,590$11,153,679$94,892,818$26,736,527 Other3.07%$261,656,252($58,311,555)$72,168,078$10,509,986 Statewide2.03%$990,479,971($418,772,035)$382,788,782$1,479,396 Teaching1.98%$295,332,606($161,975,182)$50,376,178($21,994,084) Critical Access1.94%$57,126,615($2,517,025)$40,545,589$7,173,418 Adult DSH1.73%$127,984,596($101,145,777)$57,494,830($18,280,624) Children's-0.21%$66,178,059($102,937,981)$72,221,546($2,837,328) LTACH-0.29%($4,871,159)($1,737,987)($3,600,191)$269,515 Rehab-0.48%($2,060,587)($1,300,208)($1,310,065)($98,015)

21. Ohio Hospital Association | ohiohospitals.org | HCAP 2016 – PEER GROUP SNAPSHOT June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 21 OBRA Cap Profiles by Peer Group (% of total OBRA) Peer GroupMedicaid Shortfall Uncompensated Care >100% FPL Uncompensated Care <100% FPL Adult DSH34%47%19% Children's62%19% Critical Access71%24%4% Other62%29%9% Rural78%18%4% Teaching43%42%15% Statewide56%32%11%

22. Ohio Hospital Association | ohiohospitals.org | HCAP 2016 June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 22

23. Ohio Hospital Association | ohiohospitals.org | HCAP 2016 June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 23 Hospital gainers/net contributors: 56 hospitals lose a combined $43.6M in the preliminary model; 50 have $0 OBRA Caps/DSH Limits—36 of those fail to meet OB requirement; 145 hospitals gain a combined $426.4M; 124 hospitals see a higher net gain in 2016 vs. 2015; 77 see a lower net gain. Closed hospital implications: Lakewood Hospital closed mid-year, eligible for partial payment (and partial assessment); Remaining open hospitals in Cuyahoga county split net gain that would have gone to Lakewood for closed portion of year; 13 hospitals with OBRA room by Pot 5 split $635,713; Creates need for statewide residual pot. 2017 HCAP—what to expect: Final year before Medicaid DSH cuts; Small inflationary increase to program; Elimination of Pot 3A—remaining funds shifted to Pot 2.

24. Ohio Hospital Association | ohiohospitals.org | MEDICAID UPDATES: COST REPORTS & DSH AUDITS 2016 OHA Annual Meeting – HCAP Update June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 24

25. Ohio Hospital Association | ohiohospitals.org | MEDICAID UPDATES: COST REPORTS & DSH AUDITS June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 25 SFY 2016 Cost Reports HCAP 2015 Payments Hospital Section Staff Introductions

26. Ohio Hospital Association | ohiohospitals.org | HCAP FAQ CHANGES 2016 OHA Annual Meeting – HCAP Update June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 26

27. Ohio Hospital Association | ohiohospitals.org | FRANCHISE FEE & UPL UPDATE 2016 OHA Annual Meeting – HCAP Update June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 27

28. Ohio Hospital Association | ohiohospitals.org | HOSPITAL FRANCHISE FEE 2016 June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 28 Ohio received CMS approval for two state plan amendments on May 11. –$649 million in UPL payments to hospitals based on their fee for service Medicaid patient volumes. –Of the $649 million, $88 million relates to the expansion population. –Since 2015 UPLs came in at $581 million statewide, without the expansion- related UPLs, we would have seen our first ever annual decrease in UPL room. One significant change to the model since its submission is the source year for the data used to determine outpatient UPL “gaps.” –At the end of the review period, CMS insisted the state update its source data to include more recent cost reports. –Thus, for outpatient, UPL gaps are calculated using mostly 2014 data, whereas for inpatient, those gaps are calculated using 2013 data. –However, hospitals will see their 2016 UPL payments based on their 2013 cost reports across the board.

29. Ohio Hospital Association | ohiohospitals.org | HOSPITAL FRANCHISE FEE 2016 June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 29 Franchise fees were due to ODM on May 26. The fees are based on the 2.66% rate agreed to in last year’s state budget. –Single installment collection with flexibility afforded to hospitals with cash flow difficulties. The overall 2016 net gain attributable to the franchise fee, the UPL payments, the managed care incentive payments and what remains of the original 5% Medicaid rate increase, equals approximately $309 million. –The same figure in 2015 was approximately $273 million. 2017 UPLs are not yet known due to required annual update of cost report source information. –Inpatient estimates by fall –Outpatient estimates could be delayed until next spring (2017)

30. Ohio Hospital Association | ohiohospitals.org | HOSPITAL FRANCHISE FEE 2016 June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 30

31. Ohio Hospital Association | ohiohospitals.org | QUESTIONS? 2016 OHA Annual Meeting – HCAP Update June 14, 2016 2016 OHA Annual Meeting │ HCAP Update 31

32. OHA collaborates with member hospitals and health systems to ensure a healthy Ohio — Ohio Hospital Association 155 E. Broad St., Suite 301 Columbus, OH 43215-3640 T 614-221-7614 ohiohospitals.org — HelpingOhioHospitals @OhioHospitals www.youtube.com/user/OHA1915 Ryan Biles, Sr. Vice President, Health Economics & Policy Charles Cataline, Vice President, Health Economics & Policy Daniel Vielhaber, Manager, Health Economics & Policy Ryan.Biles@ohiohospitals.org Charles.Cataline@ohiohospitals.org Daniel.Vielhaber@ohiohospitals.org