Health Care Reform – The
View from Maryland
AAHAM Monthly Meeting
October 21, 2011
Valerie Shearer Overton
Health Reform – Driving Change
• Exponential growth in health care costs
• Better access to insurance coverage
• Connecting spending and quality
• Improving the health of the community
Key Components – PPACA
• Medicaid Expansion--U.S. citizens up to
133% of FPL (Maryland currently at 116%)
• Health Insurance Exchange--individuals and
small businesses
• Federal Subsidies--individuals between
100-400% FPL
• Individual Insurance Mandate
Key Components – PPACA
• Insurance Market Reforms--guaranteed
issue, no pre-ex, no annual/lifetime caps
• Medicare pilots (Readmissions, Value Based
Purchasing, ACOs, HAI)
• Community Benefits:
– Community health needs assessments
Reform in Maryland
• Estimated to cut the uninsured rate by half
(14% to 6.7%); estimated $829 million in
state savings between FY 2011 - FY 2020
• Set against existing State budget
challenges
– Initial $1.6 billion FY 12 structural deficit
– In FY 12, Medicaid must identify an
additional $40 million savings
– $1.2 billion FY 13 structural deficit
Reform in Maryland
• Over $650 million in hospital assessments
annually:
– Medicaid expansion to 116% FPG (2008)
– Medicaid budget assessment
– Maryland Health Insurance Program
(MHIP) State’s high risk pool
HCRCC Established
• Health Care Reform Coordinating Council
• Created by Executive Order--March 2010
• Charged with coordinating state agency
activity and identifying/developing
recommendations on issues critical to
successful reform implementation
• Reported to General Assembly January 1,
2011
Established Six Work Groups
• Exchange and Insurance Markets
• Entry into Coverage
• Education and Outreach
• Public Health, Safety Net and Special
Populations
• Health Care Workforce
• Health Care Delivery System
Exchange/Insurance Markets
First items to be addressed by states under
PPACA
• Exchange (SB 182/HB 166):
– How exchange should be developed to
advance goal of expanding access and
affordability and to function in concert
with the state’s existing insurance
markets, including Medicaid
Exchange/Insurance Markets
• Established governance structure, functions
mandated by PPACA, and areas of study (by
12/2011):
– Market rules inside and outside Exchange
– Navigator and consumer assistance program
– SHOP Exchange
– Financial model (self sustaining by 2015)
– Communications and Marketing
– Transformation to nonprofit (2015)
Exchange/Insurance Markets
• Insurance Market Reforms:
– Benefit Expansion (lifetime max, children
to 26, elimination of pre-exs under 18)
– Disclosure of insurance information to
enrollees
– MLR (80% SGM and IND in 2011, 85%
LGM)
– Premium rate review
Premium Rate Review
• Carriers must publicly disclose any proposed rate
increase of 10% or more in the individual or small
group market
• Reviewed by state or federal regulators (state
regulators in MD)
• Grant monies to “enhance and increase transparency”
of Maryland’s rate review process
• FY 2012 State budget language directs MIA to develop
a mechanism to identify hospital assessments and rate
increases in insurer premiums (Report due to General
Assembly 12/2011)
Workforce
• Charge is to strengthen Maryland
workforce capacity
• Recommended solutions on:
– Recruitment/retention
– Education/training (LARP)
– Improved medical liability climate
– GWIB September interim report
Public Health, Safety Net and
Special Populations
• Focus is on role of public health in a
reformed health care system
• Emerging themes:
– Health care reform will leave
approximately 400,000 uninsured
Marylanders - safety net will still have a
role
Public Health, Safety Net and
Special Populations
• Emerging themes Cont.:
– Health IT will play an important role to
enable seamless, integrated care for those
who fall in and out of coverage
– Medicaid reimbursement will need to
reflect the true cost of providing care
– Need for the state to invest in communitybased mental health resources
Delivery System Changes - Focus
• Electronic medical records (CRISP, state
payor incentives for PCPs)
• Payment system:
– HSCRC bundled payments:

Phase I – Total Patient Revenue
(TPR)
 Phase II – Voluntary
Admissions/Readmissions
 Phase III – Statewide TPR
Delivery System Changes - Focus
• Patient Centered Medical Homes
(CareFirst and MHCC pilots)
• ACOs?
HSCRC Payment Reforms
Phase I: Global Budgets for 10-13 Rural
Hospitals (2010)
Phase II: Admission-Readmission Episode
Payment for 25 Urban/Suburban Hospitals
(2011)
Phase III: Extend Global Budget Incentives
to other Suburban Hospitals (Population
Based Rate Setting) (2012)
Phase I - TPR
TPR =
Regulated Total Gross Patient Revenue
Excludes: Unregulated Services
Overview - TPR
• TPR is a fixed revenue base, regardless of:
– Increase or Decrease in Volumes
– Change in patient acuity
– Inpatient / Outpatient Mix
• Adjustments are made for the following:
– Annual Payment Update Factor
– Changes in Uncompensated Care
– Population Change
Overview - TPR
• Effective and efficient use of health care
services in the market is required to reduce
hospital costs under the fixed cap
• Wholesale shifting of services to an
unregulated setting is prohibited:
– Volume increases in existing unregulated
services, and, expanded use of alternative
care settings is encouraged
• Physician relationships are critical to the
success of TPR
Total Patient Revenue Hospitals & Possible Candidates for TPR
W. Maryland HS $291m
Carroll Co.$202m
Union of Cecil $128m
Wash. Co. $248m
Garret Co. $42m
$783 Mill.
Chester River $56m
Total Patient Revenue Model
HOSPITAL
Carroll County Hospital
Garrrett Memorial
Washington County Hospital
Western Md. Health Hospital
Mem. Easton $160m
Permanent
Permanent
Total Permanent
I/P Revenue
O/P Revenue
Revenue
$146,741,631 $55,504,189
$202,245,819
$20,932,418 $21,413,706
$42,346,124
$164,548,244 $83,356,668
$247,904,912
$175,657,849 $115,140,741
$290,798,590
$783,295,445
Dorchester General
Easton Memorial
Union of Cecil
Chester River
McCready
Atlantic General
$30,254,946
$95,070,026
$67,713,507
$30,080,490
$6,627,281
$40,472,843
$22,165,665
$65,340,852
$60,261,085
$25,872,486
$12,054,183
$44,859,105
$52,420,611
$160,410,878
$127,974,592
$55,952,976
$18,681,464
$85,331,948
$500,772,469
St. Mary's
Civista
Calvert Memorial Hospital
$65,060,302
$74,346,774
$60,854,007
$60,818,160
$36,922,960
$56,971,854
$125,878,462
$111,269,734
$117,825,861
$354,974,057
Current Revenue under TPR
$1,316,561,827
Potential Revenue under TPR
$1,639,041,971
Dochester $52m
$500 Mill.
Civista $111m
Calvert $118m
$355 Mill.
Atlantic Gen. $85m
St. Mary’s $126m
McCready $19m
HSCRC has established a fixed payment now for all Hospital services in 3 large
regions of the State
Phase II - ARR
• Currently negotiating with 25 hospitals to
establish a 30-day admission/readmission
constraint
• Constitutes a large expansion of the payment
bundle (beyond single admission) for a
substantial portion of the industry ($7.2 billion
in inpatient revenue)
• Actual revenue at risk = 8-9% of total
revenue
Phase II - ARR
• HSCRC believes 30-50% reductions are
possible = savings of between $200 and
$325 million per year for candidate hospitals
(hospitals indicate more in the 20-30%
range)
• HSCRC then has ability to “bend overall cost
curve” (annual payment updates)
Challenges - ARR
• Transitional care (labor intensive) requires
funding
• Fragmented care, inadequate chronic care
• Patient compliance
• Payors do not pay for care coordination and
transitional care (including Medicare)
Quality of Care Initiatives
Phase I: Value-Based Purchasing linked to
payment 2008
• 19 core measures--4 clinical domains &
patient experience of care
• Relative performance linked to
rewards/penalties in annual inflation update
• Includes hospital scores on Patient
Satisfaction measures as well
Quality of Care Initiatives
Phase II: Maryland Hospital Acquired Conditions
2009
• 49 Potentially Preventable Complication Categories
• Payment Incentives linked to relative hospital
performance on risk-adjusted rates of complications
(not present on admission)
• HSCRC reports a 12% reduction in complication
rates from 2009 to 2010
• Estimated savings of $62.5 million in cost out of total
complication related costs of $552 million
Quality of Care Initiatives
Phase III: Maryland Hospital All-Cause
Readmissions
Phase IV: Working toward establishing a
Balanced Portfolio of Quality-Related Measures
HSCRC Value Index – Cost per Case &
Complications
Cost and Quality Rankings – Maryland Hospitals
8.00%
High cost
6.00%
Lower Quality
4.00%
High Quality
2.00%
-2.00%
ROC Position
-4.00%
0.00%
0.00%
2.00%
-2.00%
-4.00%
-6.00%
Low cost - higher
quality hospitals
-8.00%
-10.00%
-12.00%
Low cost
4.00%
6.00%
8.00%
10.00%
Maryland Medical Home Pilot Program
• CareFirst pilot underway January 2010
• MHCC pilot launched July 2010
• Fifty practices, 200 providers, and 200,000
patients
• NCQA Level I recognition within 6 months
and Level II within 18 months
• Practices receive fixed payment + incentive
payment
• MHCC attempting to enroll self-funded
employers
Health Care Delivery System - Focus
Remains
• Creation of new Payment Delivery System
Reform Subcommittee under the HCRCC
• MHA submitted potential nominees
• Will examine projects that improve the
patient experience, reduce costs, or improve
health outcomes:
– Secretary has already suggested TPR,
ARR and PCMH as areas of immediate
interest
What Does Reform Mean for Maryland?
• Additional pressure on our waiver
– Modernization efforts underway
– Higher quality and efficiency expectations
than the nation
• Lower overall HSCRC rate updates
• Newly insured patients--sustained and
increased state budget pressures (Medicaid,
small group and individual)
Questions?