1. OHA UPDATE November 19, 2015

2. Ohio Hospital Association | CELEBRATING 100 YEARS | AGENDA Federal o Medicare 2016 CY Hospital OPPS Proposed Rule o Growing Pains for Medicare Hospital P-for-P Programs o Value-Based Purchasing Rated Poor by GAO o Comprehensive Care Joint Replacement Model Challenged o Medicare Medical Review Programs Expanding o RAC Contract Re-Bid Vacated; What Now? o What About Medicaid RAC? o ICD.10 State o Ohio Medicaid DSH Program & Federal Program Audits o Medicaid EAPG OPPS o Medicaid Episodes-of-Care Expanding into Payments o Other Medicaid Initiatives Nov. 19, 2015 Central Ohio HFMA 2

3. Ohio Hospital Association | CELEBRATING 100 YEARS | Medicare CY 2016 OPPS Final Rule o Final Rule Out Oct. 30; Effective Jan. 1, 2016 (Mostly!) o Usual Mix of Updates to APC Groups & Weights, Inpatient- Only Procedures and Quality Reporting Rule o.2% Cut for Alleged Increased “Two-Midnight Rule” Payments is Still in (for Now) – CMS States it Will Comment Later o Three Big Changes: New Tweaks to “Two-Midnight” Admission Criteria QIO (Ohio’s is KePRO Area 4) to Take Over Pre(?) and Post-Pay Reviews of Short-Stay Medical Necessity CMS: Started Oct. 1, Regardless, but Few Details Available “Significant” Problems to be Referred to Medicare RAC Does Not Affect RAC Reviews of Physician’s Order Reduced Annual Payment Update by 2% to Pay for Unbundled Lab Services Will Cause Negative Update for Most Hospitals in CY 2016 Watch for Advocacy/Legal Action on This Nov. 12, 2015 GDAHA Patient Accounts Managers Committee Big Cut in Annual Update is Controversial 3

4. Ohio Hospital Association | CELEBRATING 100 YEARS | MEDICARE PAY FOR PERFORMANCE PROGRAMS Nov. 19, 2015 Central Ohio HFMA 4 The Medicare Update Factor is Under Siege Medicare Hospital Update Factor minu s Productivity Offset m in u s Supplemental Reduction Factor min us Quality Pay-for- Reporting Reduction for Non-Compliance minus Value-Based Purchasing Pool Carve-Out minu s Meaningful Use Reduction for Non- Compliance minus Healthcare- Acquired Conditions Penalty minus Readmissions Penalty minus Behavioral Offset

5. Ohio Hospital Association | CELEBRATING 100 YEARS | MEDICARE IPPS UPDATE & PAYMENTS AT RISK UNDER PAY FOR PERFORMANCE PROGRAMS Nov. 19, 2015 Central Ohio HFMA 5

6. Ohio Hospital Association | CELEBRATING 100 YEARS | MEDICARE P-FOR-P PROGRAMS Readmissions Reduction Policies Show Promise VBP Shows Little Shift in Hospitals’ Quality Performance that Would Not Have Occurred Without the Program VBP Eligible Hospitals Received <.5% of Applicable Medicare Payments, Compared to 1% to 1.5% Reduction To Annual Inflationary Update Smaller VBP Hospitals Had Larger Negative Effects Nov. 19, 2015 Central Ohio HFMA 6 …But What do They Add?

7. Ohio Hospital Association | CELEBRATING 100 YEARS | Medicare Comprehensive Care Joint Replacement Model o Start Date: Jan. 1, 2016; Duration: Five Years o Applies Only to IPPS Hospitals in Covered CBSAs Not Already in BCPI for Lower-Extremity Joint Replacement o Episodes Triggered by Discharge under MS-DRG 469 & 470 o All Part A and B Services Related to the Major Joint Replacement Included in a 90-Day Episode o Payments Retroactively Reconciled to a Target Price for the Episode. o No Change to Current Billing or Initial Payment Practices o Target Price set at Blend of Historical Hospital-Specific Cost and Regional Cost; Regional Component Increases Over Time o Expected Spending Discounted by 2% to Reach Performance Period Target Price o Hospital's Financial/Quality Outcomes Could Result in Incentives (Year One) or Penalties (Year Two and Beyond) Nov. 19, 2015 Central Ohio HFMA Demo in 75 CBSAs – Three in Ohio 7

8. Ohio Hospital Association | CELEBRATING 100 YEARS | Medicare Comprehensive Care Joint Replacement Model o Should Ease Process for Beneficiaries, Lessen Cost-Sharing Over Time, but… o Disconnect Between Cost of Care and Target Price for Care Delivered in Bundle o No Price Negotiation – Medicare Sets the Target Price o Over-Emphasis on Hospital Role in Bundled Episode Focus is on Medicare Spending; Hospitals Have Limited Control Over Non-Hospital Care Delivered in Episode All Covered Providers’ Services Included in Bundle, but Only Hospital’s Payments Affected o Focus is on Penalizing “Over-Spending” Hospitals; No Bonus for Low-Cost - High Quality Performers o Limited Ability for Hospitals to Control Medicare Covered & Payable Services; Little Room to Innovate o Could Impact Patient Access to Covered Care Nov. 19, 2015 Central Ohio HFMA Industry Reaction is Mixed 8

9. Ohio Hospital Association | CELEBRATING 100 YEARS | HOSPITAL UTILIZATION REVIEW PROGRAMS Nov. 19, 2015 Central Ohio HFMA 9 Decreasing Bang for Increasing Buck o Multiple Contractors & Auditors with Differing Rules, Targets, Procedures, Experience & Authority o Duplication of Effort; Little Coordination Between Payers o Increasing Cost of Compliance Personnel IT Claims Management o Conflicting and Proprietary Criteria & Guidelines o Misaligned Incentives

10. Ohio Hospital Association | CELEBRATING 100 YEARS | MEDICARE HOSPITAL MEDICAL REVIEW PROGRAMS Nov. 19, 2015 Central Ohio HFMA 10

11. Ohio Hospital Association | CELEBRATING 100 YEARS | MEDICARE RAC CONTRACT RE-BID o New Regions Drawn to Re-Weigh Claims Volume o Existing Region B Subdivided At Least Some Region B States Must Switch Contractors o Limited “Old” Contract Activity Expanding (Mostly) Automated Reviews & DRG Validations Effective Through Dec. 31, 2015 (Expect Extension) o Details and Review Issues Listed on CGI Webpage DRG Payment Complex Reviews (Over/Underpayments) Code and Unit Overpayments Automated Reviews Drug Unit Overpayments o CGI Also Cleaning Up Old ADRs for Records Never Submitted Nov. 19, 2015 Central Ohio HFMA RAC Contract Re-bid Vacated – Expect Another Soon 11

12. Ohio Hospital Association | CELEBRATING 100 YEARS | MEDICARE RAC MAPS – OLD VS. NEW Nov. 19, 2015 Central Ohio HFMA Current (Old Contracts) New Contracts 12

13. Ohio Hospital Association | CELEBRATING 100 YEARS | CMS RAC PROCESS IMPROVEMENTS o Expanded Discussion Periods o Delayed Award of Contingency Fees o Additional Program Education and Outreach & (QIO or MAC; Who’s on 1 st ?) o New Standards for RAC Accuracy & Overturned Denials o Faster Review Turnaround o Limits on Look-back for Patient Status Reviews o ADRs Must be Diversified o ADR Limits Adjusted to Provider Compliance Rates (Benchmarks Still Under Discussion) o Provider Satisfaction Surveys (New Contractor will Perform) o Short-Stay IPPS Policy Still Under Consideration! o … and Effects of ALJ Appeals “Buy-out” Still Unclear Nov. 19, 2015 Central Ohio HFMA Now Being Phased in Over Contract Extensions (Indicates New SOW) 13

14. Ohio Hospital Association | CELEBRATING 100 YEARS | WHAT ABOUT THE MEDICAID RAC?! o CGI Contract Ended in July, 2014 o ODM Assumed Responsibility for Outstanding Reviews, Recoveries and Appeals ODM Will Internally Correct Claims Recovered in Error ODM will Complete any Reviews of ADRs/Medical Records Sent to CGI Before Contract Ended ODM Will Manage Any Requested Appeal CGI did not Complete Interest on New Recoveries Will Only Accrue to Original Overpayment Notification or Appeal Request o No News on Next Steps Nov. 19, 2015 Central Ohio HFMA RFP Out for New Contractor, but no Takers 14

15. Ohio Hospital Association | CELEBRATING 100 YEARS | ICD.10 No Major Breakdowns Some Hospitals are Reporting Payment Slowdown and an Increasing Number of Glitches Watch out for BWC Self- Insured Employers / TPAs; They are Not Required to be HIPAA Compliant! OHA is Surveying Finance & ABC Committees Nov. 19, 2015 Central Ohio HFMA 15

16. Ohio Hospital Association | CELEBRATING 100 YEARS | HCAP 2016 o Ohio 1 st State to Reform Medicaid DSH Formula in Response to Medicaid Expansion & Federal DSH Audits o 2014 Program Emphasis Shifted From Uncompensated & Charity Care to Medicaid Shortfall & Uncompensated Care o OHA Recommended Transition Period Over 2 – 4 Years Why: Usable Medicaid Cost Report Data is Generally Two Years Old (Pre-Medicaid Expansion) Response: Keep $100M in Pot 3A in 2014 as Cushion Transfer $36M of Pot 3A to Pot 2 in 2015 Transfer Half of Remaining Funds in Pot 3A in 2016 Transfer All Remaining Funds to Pot 2 in 2017. Request ODM File Multi-Year Medicaid State Plan Amendment to Avoid Duplicate CMS Reviews. Nov. 19, 2015 Central Ohio HFMA 16

17. Ohio Hospital Association | CELEBRATING 100 YEARS | HOSPITAL PAYER MIX FY13-15 Nov. 19, 2015 Central Ohio HFMA 17

18. Ohio Hospital Association | CELEBRATING 100 YEARS | OHIO HOSPITAL CARE ASSURANCE PROGRAM HCAP TIMELINE – CY/FFY 2015 Nov. 19, 2015 Central Ohio HFMA 18 CMS APPROVES 2014 CHANGES (JUNE but CMS has until 7/30 – 90 th day) ODM INITIATES 2014 ASSESSMENTS/PAYM ENTS (JULY) ODM FILES 2015 SPA (JUNE/JULY) CMS IGNORES SPA FOR 89 DAYS (OCTOBER) CMS ISSUES RAI (OCTOBER) ODM RESPONDS TO RAI (NOVEMBER) CMS APPROVES 2015 (DECEMBER) ODM INITIATES ASSESSMENTS/PAYM ENTS FOR 2015 (JANUARY/FEBRUARY)

19. Ohio Hospital Association | CELEBRATING 100 YEARS | HCAP 2015 PRELIMINARY MODEL Nov. 19, 2015 Central Ohio HFMA 19

20. Ohio Hospital Association | CELEBRATING 100 YEARS | FEDERAL MEDICAID DSH FUNDING Nov. 19, 2015 Central Ohio HFMA 20 FFY Change in Net Gain ($) Change in Net Gain (%) 2014$00.0% 2015$00.0% 2016$00.0% 2017$00.0% 2018($74,365,059)-17.7% 2019($108,895,256)-25.2% 2020($142,375,927)-32.1% 2021($175,902,095)-38.6% 2022($209,474,896)-44.7% 2023($243,095,496)-50.4% 2024($276,765,091)-55.8% 2025($278,824,088)-54.7%

21. Ohio Hospital Association | CELEBRATING 100 YEARS | MEDICAID DSH AUDITS o ODM Delivered 2011 Final Report to CMS in Dec. 2014. No response Yet 11 Hospitals with Adjusted DSH Limit Below 2011 Payment o FFY 2012 Report Due to CMS in December 2015 183 Hospitals Audited – All Had Adjustments of Varying Size 14 Hospitals with Adjusted Hospital-Specific DSH Limit Below 2012 Payment o Common Issues Cited by Myers & Stauffer Patient Logs Submitted, but no Corresponding Data on Cost Report Reverse of Above: Cost Report Data, but No Log Logs Not in the Required Format Nov. 19, 2015 Central Ohio HFMA 21 FFY 2011 & 2012

22. Ohio Hospital Association | CELEBRATING 100 YEARS | MEDICAID DSH AUDITS Report Due to ODM in June 2016; Due to CMS in December 2016 Desk Reviews Underway, with On-site Reviews Expected February – April 2016 –High DSH Payment –Proximity of HCAP Payment to DSH Limit –Subject to On-Site Audit in Previous Year –May Also Include Non-Financial Program Exam New Logs for MyCare Ohio & Medicaid-Eligible, but not ODM-Paid Costs and Payments Nov. 19, 2015 Central Ohio HFMA 22 FFY 2013 Audit

23. Ohio Hospital Association | CELEBRATING 100 YEARS | MEDICAID EAPG OPPS Enhanced Ambulatory Patient Groups –Created by 3M –In Use at 13 State Medicaid or Blue Cross Plans –Designed for Outpatient Encounters and Services –Replaces Ohio Medicaid Outpatient Fee Schedules –Groups Services with Similar Cost & Resource Use –Applicable to All Ambulatory Settings Same-Day Surgery Outpatient Hospital ED & Clinic Visits Freestanding Outpatient Diagnostic & Treatment Facilities Ohio Implementation Scheduled April 1, 2016 Background Nov. 19, 2015 Central Ohio HFMA 23

24. Ohio Hospital Association | CELEBRATING 100 YEARS | MEDICAID EAPG OPPS DRG –Inpatient Admission –Discharge Date Defines Code Sets –Uses ICD-9-CM or ICD- 10-CM Diagnosis & Procedure Codes –Only One DRG per Admission –Employs Some Charge Bundling EAPG –Ambulatory Visit –Claim “FROM” Date Defines Code Sets –Uses ICD-9-CM or ICD-10- CM Diagnosis Codes & HCPCS/CPT, Procedure Codes –Multiple EAPGs May be Assigned per Visit –Employs Significant Charge “Packaging,” Consolidation & Discounting Nov. 19, 2015 Central Ohio HFMA 24 EAPGs vs. DRGs

25. Ohio Hospital Association | CELEBRATING 100 YEARS | MEDICAID EAPG OPPS FEE SCHEDULES –Uses ICD.9.CM or ICD.10.CM Diagnosis Codes & HCPCS/CPT Procedure Codes –11 Fee Schedule Groupings (Facility Fees, Surgical & Other Procedures, and Diagnostic Tests) –Multiple Fee Schedule Payments Likely Per Visit –Employs CCI Edits, but Little Charge Bundling/Packaging –Permits Exception Payments for High Cost Pharmacy, Medical Supply & Device Costs, and for Outpatient Observation EAPG –Uses ICD.9.CM or ICD.10.CM Diagnosis Codes & HCPCS/CPT Procedure Codes –564 EAPGs in Five Major Categories (Significant, Ancillary & Incidental Procedures, Medical Visit and Drugs) –Multiple EAPGs Possible per Visit –No CCI Edits in 3M Model, but Employs Significant Charge Packaging, Consolidation & Discounting –No Exception Payments Nov. 19, 2015 Central Ohio HFMA 25 EAPGs vs. ODM Fee Schedules

26. Ohio Hospital Association | CELEBRATING 100 YEARS | MEDICAID EAPG OPPS Applies to ALL Hospitals Most of 3M OPPS Architecture Adopted Ohio-Specific EAPG Weights Determined Full Packaging, Consolidation & Discounting Applied –Six Month Transition to Full Packaging for “Paragraph L” Fee Schedule Exceptions, and to Payments for Outpatient Observation and Dental Services Transition Period from Fee Schedules to OPPS for up to Three Years Included –Stop Loss/Stop Gain Transitional Corridor Likely Nov. 19, 2015 Central Ohio HFMA 26 ODM OPPS Policy Decisions Completed

27. Ohio Hospital Association | CELEBRATING 100 YEARS | MEDICAID EAPG OPPS Hospital Peer Groups –Will be Used in Both OPPS and Rebased IPPS –OHA Recommending Five In-State Peer Groups (Childrens, Teaching, Urban Non-Childrens Non- Teaching, CAH, and Non-CAH Rural) –ODM Still Testing Other Options, Mainly Involved with how to Categorize Teaching & Children’s Groups Base Rates to be Determined Once Peer Groups are Identified Application of Fiscal Impact Targets Comes Next Final Piece Involves Length of Transition & Gain/Loss Corridors Nov. 19, 2015 Central Ohio HFMA 27 OPPS Policy Decisions Yet to be Made

28. Ohio Hospital Association | CELEBRATING 100 YEARS | EPISODES OF CARE o Part of State Improvement Model (Also Includes Patient- Centered Medical Homes) o State’s Goal: 80-90% of Ohio’s Population in Some Value- Based Payment Model Within Five Years o EoC Payment Methodology Phase-in 2016 Pegged as Performance Year; Risk/Gain-Sharing to Start in 2017. Commercials Will Adopt ODM Methodology with Separate Metrics Principal Accountable Providers (PaPs) Must Meet Quality Metrics to Receive Gain-Sharing Medicaid Managed Care Plans Will use ODM Metrics Nov. 19, 2015 Central Ohio HFMA 28 Demonstration Model Basics

29. Ohio Hospital Association | CELEBRATING 100 YEARS | EPISODE-BASED PAYMENTS Nov. 19, 2015 Central Ohio HFMA 29

30. Ohio Hospital Association | CELEBRATING 100 YEARS | EPISODE-BASED PAYMENTS Nov. 19, 2015 Central Ohio HFMA 30

31. Ohio Hospital Association | CELEBRATING 100 YEARS | EPISODE-BASED PAYMENTS WAVE ONE Nov. 19, 2015 Central Ohio HFMA 31

32. Ohio Hospital Association | CELEBRATING 100 YEARS | EPISODE-BASED PAYMENTS WAVE TWO Nov. 19, 2015 Central Ohio HFMA 32

33. Ohio Hospital Association | CELEBRATING 100 YEARS | EPISODES OF CARE Medicaid Gain/Risk Sharing Performance Period Starts 1/1/16, but Payments Will not be Affected Until 1/1/17 Commercial Payers will Independently Determine Metrics 2017 Payments will be Budget Neutral, Assuming No Change to PAP “Curve” ODM will set Cost & Quality Thresholds for FFS and all Medicaid Managed Care Plans Wave One Performance Metrics will Limit Risk Sharing to 10%, Again, Assumning no Change to Behavior Gain-Sharing PAP’s Must Meet Quality Metrics Metrics will be Identified Quality Metrics will be Set at Top Quartile, but 2017 Thresholds will be set to Allow 75 Percent of Providers to Potentailly Share Gain. Metric Thresholds will “Ramp up” to Top Quartile by 2021 kigvg Nov. 19, 2015 Central Ohio HFMA 33 OHT/ODM Outline Encouraging Program Specifics

34. Ohio Hospital Association | CELEBRATING 100 YEARS | POTENTIALLY PREVENTABLE MEDICAID READMISSIONS o 3M Product Used to Calculate PPR Rates o Includes All Hospitals Within 30-Day Period o Compares Actual PPR Rate to Expected Rate o State Average at 9.2%: State’s goal: 1% Annual; Decrease o 2015 - Reporting Only; Released in Feb. & July o Includes Hospital Data 2010 – 2014; MCP Data 2013 - 2014 o Payments Tied to Results in 2016 (?) Nov. 19, 2015 Central Ohio HFMA 34

35. Ohio Hospital Association | CELEBRATING 100 YEARS | OTHER MEDICAID HHTLs to End o ODM will Simply Release Draft and Final Rules Expect Year-end Announcements –Medicare Part B Cost Sharing –General Provisions and Outpatient Services o Five Percent Reduction to Non-Childrens Hospitals for Outpatient Services o New “DRG Window” o Changes to Paragraph L Exceptions o Part B Crossover Limits o All of the Above (Except Part B) Will be Impacted by the New OPPS, Scheduled for April 1 –Updated Hospital Billing Guidelines Nov. 19, 2015 Central Ohio HFMA 35

36. 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 Charles Cataline Vice President, Health Economics & Policy charles.cataline@ohiohospitals.org