1. OHA 2014 Forecast Charles Cataline Vice President, Health Economics and Policy Ohio Hospital Association charlesc@ohanet.org March 14, 2014

2. Agenda Federal Update o 10 Hot Topics for 2014 o Medicare CY 2014 OPPS Enhanced Bundling and Packaging o Medicare RAC Contract Re-bid State Update o Medicaid Expansion Kicks in in 2014 o … as does “Medicaid Modernization II” o Medicaid APR-DRG Conversion – What’s Left? o Medicaid Family Planning Benefit Answers Provided o What’s Up With the Ohio Health Care Marketplace o BWC 2014 Hospital Payment Targets Other Finance / PFS Issues o FFY 2011 Medicaid DSH Uninsured Care Audit o How’s it going?! o Is this the Last of the Big Changes to Policies & Procedures? March 14, 2014SW Ohio HFMA 2

3. Federal Update: 2014 Ten Hot Topics (& Two You Can Ignore ) March 14, 2014SW Ohio HFMA 3

4. #10 Federal Sequester 2% Cut in Medicare Payments to Providers –Net of deductible and coinsurance –Not cumulative, year-to-year –CMS says it has no discretion to exempt Items –Began on 4/1/13 New “Bipartisan Budget Act” Signed 12/26/13 –Extends Medicare cuts Through March of 2024 –Medicaid still exempt Government Stays Open –Through 9/30/15 –…but there is still the “debt limit” issue this February March 14, 2014SW Ohio HFMA 4

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6. #9 “Rural Floor” Wage Index Worth $169M to Massachusetts Hospitals in 2014 No Change to Current Policy in 2014 IPPS Final Rule Adjustment Still Applied Nationwide (per ACA) Bills Pending in Congress to Repeal ACA Provision –Senate bill got 68 votes in a test vote, but will those votes be there when it matters? –So far, nothing in either the new law or SGR repeal bills Is Fundamental Wage Index Reform Coming? –Immediate relief not likely –CMS continues to ignore efforts to reform March 14, 2014SW Ohio HFMA 6

7. #8 ICD-10 CMA Says Oct. 1, 2014 is Hard Deadline –Ohio Medicaid & BWC on board, too! –Commercial payers and trading partners ????? –Congress would have to intervene to change date No Provider Bill-to-Payment Testing Scheduled!! –MACs converting LCDs & opening web-based test site Instructions on split bills out (DOS 10/1/14); See CR 7492 Medicaid, Medicare, BWC testing underway –No formal word from commercials What Effect on 2015 DRGs, IPPS Update & Budget Neutrality? – Stay Tuned! –Initial Medicaid results are troubling!! –Clinical documentation more important than ever! March 14, 2014SW Ohio HFMA 7

8. #7 Hospital Tax-Exempt Status IRS issued NPRM on 4/3/13 –Implements ACA mandate & imposes CHNA standards –Still no final rule –IRS says hospitals can rely on the provisions in the proposed rule for now Other ACA mandates –Written financial assistance policy –Written emergency care policy –Limit amounts charged to “qualified” provision –Make “reasonable” efforts to determine FA eligibility –Possible $50K penalty for not meeting CHNA mandate Expect Increased Media & Government Scrutiny of Rate Setting & Billing/Collection Practices !!! March 14, 2014SW Ohio HFMA 8

9. #6 Outpatient Observation “Two Midnights” Rule –Effective with admissions Oct. 1, 2013 –CMS states rule clarifies existing policy & will increase inpatient payments, but it remains highly controversial’ –CMS conducting a series of calls & seminars –RAC reviews still under moratorium Meanwhile… –Beneficiary lawsuit against CMS still pending –DOJ still suing hospitals for “short stays” –RACs upset with review limits and delays –Several group appeals on.2% IPPS budget neutrality cut forming Congress did not Invalidate Rule but AHA and Others Still Advocating Hard; This Could Still be Addressed Later This Year March 14, 2014SW Ohio HFMA 9

10. #4 DSH Formulas New Medicare Formula in FFY 2014 IPPS Final Rule –ACA mandate –Final rule not as administratively onerous as proposed, but still redistributes 75% of the Medicare DSH pot –Still uses old proxies, because S-10 data is highly suspect Medicaid DSH Allocation / Reductions –Another ACA mandate, but new budget law delays reductions for two years (to FFY 2015), doubles reduction in FFY 2016 & extends overall policy to FFY 2023 –(Contrary to popular rumors) HCAP does not go away!! Federal audit policy adds to concerns about big pay-backs OHA Finance Committee recommended revised, transitional distribution formula to OHA Board March 14, 2014SW Ohio HFMA 10

11. Medicaid Cost Report Data & DSH Audits FFY 2011 Medicaid DSH Audits Underway – Preliminary Results Expected in May! CMS: 2011 Audits get Serious –Focus Shifts From Uncompensated to Uninsured Audit Guidelines Should Settle Down in 2014 o OHA Working on Medicaid Cost Report Rule, AuPs, Standard Policies & FAQs o Finance Committee Monitoring Effects on HCAP $$$ Standardized Electronic Logs Required Required Electronic Logs are on ODM Cost Report Webpage For Most, Two Years of Logs Requested Requires –Updated and Full Completed Medicaid Cost Report Schedules C, F, I and new J-series March 14, 2014 SW Ohio HFMA 11

12. #3 WHAT ABOUT LTACS? N New Law Dramatically Alters Payment System –Good News: “25% Rule” Delayed Again – Effective date extended to12/29/16 –Bad News: Moratorium on new LTACs & Bed Increases – Begins 1/1/15 - Ends 9/30/17: No exceptions –Really Bad News: Watch for Greatly Increased LTAC Medical Review & Coverage Standards in FFY 2015 PPS Rules Only two Types of patients get full LTAC PPS payment: In acute care hospital ICU for 3 days, or on vent in the LTAC for 96 Hours with stay in acute care immediately preceding No (principal?) diagnoses of psych or rehab All other patients get lesser of PPS-comparable per diem or 100% of estimated cost Two-year transition (FFY’s 2016 & 2017) with 50/50 blend of old/new As of FFY 2020 NO LTAC PPS payment if two patient types equal less than 50% of total admissions March 14, 2014SW Ohio HFMA 12

13. #2 Physician SGR Fix New Law in Effect to 3/31/14 ( The SGR Repeal and Medicare Beneficiary Access Improvement Act of 2013) –0.5% increase (in lieu of 20% cut) & extends the 1.0 GPCI floor Senate & House Permanent Fix Bills Merged –Repeals SGR –0.5% Update to Doc Payments for Five Years –Phased-in Merit-Based Incentive PPS Payment System –Still (for how long) includes several Hospital Payment “Fixes” Problem: Bill Costs $139B to $140 B Over 10 Years –What might be the “pay-fors?” > Cut bad debt? > Cut GME? > Reduce CAHs to 100% of cost?> Cut provider-based clinics? > Cut updates to all Post-Acute Providers?>All of the Above? March 14, 2014SW Ohio HFMA 13

14. #1 ACA Goes “Prime Time!” Implementation SNAFUs Largely Over, but Insurers Still Having Trouble with Accurate Data –2.3 M enrollees & counting; Still 31M uninsured by 2017 (per CBO) –Biggest consumer issue now seems to be coverage confirmation Intense Political Scrutiny will Continue in 2014 Expect Employers to Actively Shop & Walk Away if Details are not Agreeable; Insurers to Play Hardball Impact on Providers Still Unclear – Potential for Unforeseen Consequences High –Flood of new Patients in ED –Insurer premiums & patient co-pays still in flux –Decreased charity; Increased bad debt –Individual mandate is insignificant in early years –Employer mandate may get junked in federal exchange states March 14, 2014SW Ohio HFMA 14

15. …and Two Things to Ignore Independent Provider Advisory Board – No members – Nothing to do anyway Any Fundamental Medicare Restructuring – Especially not in an election year – Trustee’s report Says Part A is okay through 2026 March 14, 2014SW Ohio HFMA 15

16. Other Medicare CY 2014 Medicare OPPS Started Jan. 1, Regardless of Delay - Overall 1.7% increase Changed E&M Reimbursement in Clinics  Just One Reimbursable “G” Code Paid at APC Level  Does Not Affect Medicaid in CY 2014  Good News on Medicare ED E&M (for now?) Big Movement Toward Additional APC Packaging & “Comprehensive APCs” Is This the Slow Start of Real Outpatient Encounter- Based Reimbursement? Packaging addl. Diagnostic & Surgical Drugs/Biologicals, Diagnostic Tests, Add-on Codes & Device Removal Comprehensive APCs for “Device-Dependent” APCs Additional Quality Standards Tighter Supervision Standards at CAH’s March 14, 2014SW Ohio HFMA 16

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18. Medicare RAC RAC Contract Rebid on Hold Until June 1 (?) New Regions Drawn to Re-Weigh Claims Volume Existing Region B Subdivided – at the Very Least Some States in Region B Must Switch Contractors CMS will “Pause” Medicare RAC Activity Until New Contracts are in Place Feb. 21 – Last Day a RAC can Issue Post-Payment ADR Feb. 28 – Last Day a MAC can Issue ADR for RAC Pre-Pay Review Demo June 1 – Last Day a RAC Can Send Denied Claims to MAC for Recovery Once New RACs are in Place ADRs will be Released Retro to Start of Program “Pause” In the Interim, CMS will Continue to “Refine” Medicare RAC Program, Starting with…

19. Medicare RAC Maps – Old Vs. New Proposed Current

20. CMS: Five Medicare RAC Program Improvements 20 SW Ohio HFMAMarch 14, 2014

21. State Update: Medicaid Expansion Started Jan 1. 2014 Ohio Supreme Court : Controlling Board-Based Expansion is Constitutional!! Electronic and Expedited Application Software went Live Dec. 9 at “benefits.ohio.gov” Linked to Federal Data Hub No CPJFS Visit Required Utilize MAGI Standards No Documentation Required Presumptive Eligibility Roll- Out Continues - Watch for Quality Standards OHA Advocating for Additional Direction on Overall Process & Preparing “Intake” Tool Kit. Stay Tuned!! March 14, 2014SW Ohio HFMA 21

22. Potential Medicaid Expansion Population by County 22 SW Ohio HFMAMarch 14, 2014

23. Medicaid Online Eligibility System benefits.ohio.gov Live as of Dec. 9, 2013 Designed to Interact with the Federal “Data Hub” to Provide a “No Touch” Application Experience However, Most Cases Currently Still Need to be Completed by Follow-up with a County JFS Case Worker Expansion as of February… –23,156 have enrolled –9% of estimated 275,000 –About 90,000 Medicaid applications are stuck between federal and state systems – county JFSs are working to resolve –State expects to enroll 500,000 in next 18 months – about 231,000 from “woodwork Direct people to benefits.ohio.gov even if they tell you they’ve completed an application through healthcare.gov 23 SW Ohio HFMAMarch 14, 2014

24. Medicaid Presumptive Eligibility “Qualified Entities” can Deem Someone Presumptively Eligible for Medicaid Coverage –All Hospitals and FQHCs Eligible Coverage Starts Immediately Coverage Lasts Until Person Completes Successful Full Medicaid Application or Until the Last Day of the Month Following the Month They Became PE Online Training Required – Takes About 15 Minutes Signed Acknowledgement Sent Back to ODM ODM Will Monitor Provider for how Many PE-Enrolled Individuals Complete a Full Application and how Many of Those are Found to be Fully Eligible 24 SW Ohio HFMAMarch 14, 2014

25. Medicaid Presumptive Eligibility PE Today Pregnant women and children only Entered through MITS ODM is phasing in batches of up to 12 hospitals Currently about 20 hospitals are Qualified Entities Coverage is for outpatient pregnancy related services and all services for children PE in the Near Future All Medicaid populations PE portal through the integrated eligibility system All hospitals can become qualified entities We are waiting for the state to finish the PE portal The Hospital is Responsible for Following Through with Patient to get Full Medicaid Application Completed 25 SW Ohio HFMAMarch 14, 2014

26. Ohio Health Insurance Marketplace healthcare.gov 60,122 have purchased plans in Ohio –Bronze = 21% –Silver = 58% –Gold = 18% –Platinum = 3% –Catastrophic = 1% 82% with financial assistance 26 SW Ohio HFMAMarch 14, 2014

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28. State Update: Medicaid Budget 2014/2015 “Medicaid Modernization II” Additional $67M Cut Over SFY 2014/2015 Biennium 2009 5% Payment Increase Reversed for Non-Childrens Hosp’s. Inpatient Now, Outpatient Still Unclear Cost-Based Hospitals’ Payments Reduced to 90% (7/1/14?) Capital Expenditures Reduced to 85% Cost (No Settlement!) Cuts to Outpatient Hospital Payments – Effective 1/1/14 Unknown (99-Level) CPT Codes Moved to Fee Schedule o Small Exception for Dental That will not Benefit Many “Paragraph L” Services Reduced to 60% of Cost Secondary Procedure Payment Reduction to 50% Lab Fee Schedule Reworked to Match Medicare Add’l Attention to Medicaid Re-Admissions off the Table for Now Will ODM Recoup APR-DRG “Excess Payments?” Medicaid Interest on Overpayments Reduced (Eff. 1/1/14) March 14, 2014SW Ohio HFMA 28

29. Medicaid APR-DRG Conversion Overview Year-Long Process to Determine Relative Weights, Base Rates & Payment Policies OHA Goal: Fairness and Equity Across Membership; Added Approx. $84 M / Year in Inpatient Payments for In-state Hospitals Addressed rural hospital Inadequacies by Repurposing dollars From Out-of-state Hospitals ($24 M / Year) Has Risk Corridors For Urban Hospitals to Ensure Stability & Predictability and Minimize Winners & Losers –SL/SG % for Non-Childrens, Non-Teaching Expands in July Preserves Most Reimbursement Policies and Payment Logic Within the Current System (For Now?!). March 14, 2014 SW Ohio HFMA 29

30. Medicaid APR-DRG Conversion OHA Peer Group Analysis: Current vs. APR-DRG @ Pay/Cost March 14, 2014 SW Ohio HFMA 30

31. Medicaid APR-DRG Conversion SFY 2014 Policy Shifts CMS Grouper 15 to 3M APR-DRG Outliers Policy Changed to Mirror Medicare New Peer Group Base Rates Newly Calibrated Relative Weights Stop Loss/Stop Gain Applications Within Peer Groups Med-ed Payments Held Harmless What’s Next? New APR-DRG Starts Each Year with Discharges 10/1 and After Stop Loss Transitions in Out Years of Three-Year Transition? Accuracy of Payments & Projections – Rebalance to Come? Additional Discussion Expected About: –Peer Groups, Next Scheduled DRG Re-base & Re- Calibration, Medical Education Payments, HAC, Other? March 14, 2014 SW Ohio HFMA 31

32. Other Medicaid SW Ohio HFMA March 14, 2014 o State Innovation Models – Episodic Payments  State Seeking CMS Grant  Governor’s Advisory Council on Health Care Innovation 5-Year Plan o Develop Comprehensive Primary Care Initiative o Create Payment System for Selected Clinical Episodes  Episodic Payments Involve the Assignment of a “Primary Accountable Provider” to be Responsible for Managing “Costs” in the Treatment of Selected Episodes Using a Retrospective Risk/Gain Sharing Program. o Telehealth Coverage Progressing  Proposed Rule Out (OAC 5160-1-18) o Family Planning Benefit Questions Resolved (?) o Medicaid RAC Roll-out Still Underway  Automated MITS Recovery System Operational  Interest Payments Reduced Jan 1. o Still no Grace Period o Some Concern About Batch Recoveries that are Partially Appealed 32

33. State Innovation Models – Episodic Payments 33 SW Ohio HFMAMarch 14, 2014

34. Ohio Medicaid/Medicare Dually Eligible Integrated Delivery System Demonstration (AKA “MyCare Ohio”) Target Population o Full-Benefit Dual Eligible Enrollees Excluding: Those Eligible for the Medicare Savings Program Dual Eligibles with Intellectual and Developmental Disabilities Served Through an IDD 1915(c) HCBS Waiver or an ICF- IDD. –Those Not Under Waiver can Opt In Dual Eligibles Enrolled in PACE Dual Eligibles under 18 o Duals With “Severe or Persistent Mental Illness” will be Included, Assuming the State Creates Medicaid Behavioral Health Homes Individuals with SPMI in the Demonstration do not Have to Change Providers for Behavioral Health Services. March 14, 2014 SW Ohio HFMA 34

35. MyCare Ohio Dually Eligible Integrated Delivery Demo Model Design o At Least Two Competing Health Plans in each of Seven Regions Chosen for the Demonstration (Most Rural Areas Exempt) o Enrollees can Choose Between the Two Health Plans in Their Region All Regions Have at Least 3 Medicare Advantage Plans Currently Serving Medicare Beneficiaries o The Demonstration will Auto-Enroll the Eligible Population With an Option to Opt in for Medicare-Covered Benefits If They Don’t Opt in for Medicare They Will Still be Enrolled in Medicaid Managed Care Enrollees Will Have the Option of Switching Plans Twice a Year and can Opt into/ out of Medicare at any Time o Utilizes a “Payment Structure That Blends Medicare and Medicaid Funding” March 14, 2014 SW Ohio HFMA 35

36. MyCare Ohio Dually Eligible Integrated Delivery Demo Approx. 196,000 Medicare-Medicaid Enrollees in Ohio Are Currently Receiving Benefits Primarily Through FFS o Approx. 115,000 Included in the Demonstration Program Medicaid Enrollment Starts May1 and is Phased in Through June & July Individuals have up to Eight Months to Decide Medicare Status Starting Jan. 2015, Individual who Have not Chosen a Medicare Plan will be Enrolled in a MyCare Ohio Plan, but they still have the Option to Return to Medicare FFS or Medicare Advantage if they Choose 36 SW Ohio HFMAMarch 14, 2014

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38. MyCare Ohio Dually Eligible Integrated Delivery Demo Draft Payment System o Medicare and Medicaid will Contribute to the Blended Payments in a Manner that Expected Aggregate Savings are Proportionately Shared Between the two Programs o The Blended Capitation Payment Structure is Expected to Provide Plans the Flexibility to Utilize the Most Appropriate Cost Effective Service for the Enrollee, Eliminating Incentives to Shift Costs Between Medicare and Medicaid o Reimbursement will Include Pay-for-Performance Incentives OHA’s Concerns o Can MCPs Really Integrate and Manage this Array of Providers, Agencies and Services? o How Would This Affect Existing UPL Programs o Is it Right to Limit Enrollees Freedom of Choice? March 14, 2014 SW Ohio HFMA 38

39. Other Finance/PFS Current Issues BWC CY 2014 PPS’ o OPPS Rule in Process o Effective Date is now May 5 o Biggest Concern with IPPS was With Medicare DSH Formula o Will PPS’ Stay as Standard for BWC? o IRS Proposed Rule on Charitable Hospitals o Public Hearing Held in December 2012 o Hospitals: Proposed Rule Needs to be More Flexible and Will Force Them to Leave Accounts Open for Months o Consumer Groups: Leave Proposed Rule as is! o IRS: Hospitals Within Systems Can Employ the Same Policy (What is a System?); Hospitals May Pursue Bill Collection During the Second 120-Day Period o STILL WAITING ON FINAL RULE SW Ohio HFMA March 14, 201439

40. Questions / Comments? March 14, 2014SW Ohio HFMA 40