Ohio Hospital Association Finance Committee 2018 Hospital Inpatient Reimbursement Recommendations
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1 Ohio Hospital Association Finance Committee 2018 Hospital Inpatient Reimbursement Recommendations Freddie L. Johnson, JD, MPA Chief Medical Services & Compliance Officer August 10, 2017
2 2018 Inpatient Reimbursement Goals Maintain a simplified reimbursement methodology Maintain injured worker access to quality care Remain current with the Medicare inpatient prospective payment system (IPPS) Appropriately mitigate budget neutrality and ACA impacts Maintain statewide reimbursement to cost benchmark of 114%, not including the effect of quality initiative adjustments 2
3 2018 Recommendations Adopt 2018 Medicare updates 1.6% increase in national standardized amount for hospitals that submit quality data and EHR meaningful use MS-DRG changes, coding updates and relative weight updates Quality related program adjustments Modify BWC payment adjustment factor (PAF) to reflect the statewide reimbursement to cost benchmark of 114% for MS-DRG services for high cost outlier services for direct graduate medical education (DGME) add-on Adopt a per diem reimbursement methodology for inpatient detoxification services 3
4 BWC Inpatient Reimbursement Formula (Medicare Base x PAF) + (DGME x PAF) = Ohio Fee Step 1. Establish a statewide aggregate payment target. BWC goal is to pay hospitals at 114% of statewide costs. Step 2. Utilize Medicare s base rates and apply an inflation factor (PAF) to reach the aggregate payment target. Example Goal is to pay $114 Medicare Rate PAF Target BWC Payment Rate $103 x = $114 $66 x = $114 4
5 Developing the 2018 Recommendations Evaluate the current benefit plan Analyze Medicare related rule updates Model impact of Medicare update on related reimbursement methodology Evaluate Ohio proposals against other states and payers 5
6 Establishing 2018 Payment Adjustment Factors Key considerations Hospital costs = allowed charges x cost to charge ratio Medicare methodology changes BWC established goal of 114% Payment Type Payment to Cost Goal 2017 PAF 2018 Payment to Cost using 2017 PAF Proposed 2018 PAF DRG 114% 112.7% 119% 110.3% Outlier 114% 175.4% 117% 172.8% 6
7 Medicare s Quality Programs BWC has adopted Medicare s quality programs Inpatient quality reporting Electronic health record meaningful use Value based purchasing (adopted by BWC in 2013) Hospital acquired conditions Hospital acquired conditions reduction Hospital readmissions reduction (adopted by BWC in 2015) Payment adjustment factors are established prior to the application of quality adjustments 7
8 Impact of Medicare Pay for Performance Quality Programs $58,500,000 No Performance Adjustments Applied $58,500,000 After Performance Adjustments Applied $58,000,000 $57,500,000 Variance: $544, % increase $58,000,000 $57,500,000 Variance: $82, % increase $461,128 $57,000,000 $57,000,000 $56,500,000 $57,857,532 $56,500,000 $56,000,000 $57,313,532 $56,000,000 $57,313,532 $57,396,405 $55,500,000 $55,500,000 $55,000, $55,000,
9 Impact of Medicare Pay for Performance Quality Programs Urban, 500+ beds, Major or Minor Teaching 2018 Estimated Payments EHR and Quality Reporting Reduction VBP Hospital Readmissions Reduction Hospital Acquired Conditions Hospital A $1.1M $0 $3840 $0 $0 $3840 Total Hospital B $1.9M $0 ($2170) $0 $0 ($2170) Hospital C $6M $0 ($39,759) ($43,506) $0 ($83,265) 9
10 2018 Recommendations for Inpatient Detoxification Adopt an optional per diem payment for inpatient detoxification services OAC allows payment of inpatient and outpatient detoxification services without a claim allowance Up to 30 days of inpatient detox treatment over an 18 month period (not required to be consecutive days) Over 4000 injured workers are eligible for detox, according to the opioid overuse criteria Per diem = all inclusive rate (room and board plus bundled services) Rates Acute services - $786 per day Sub-acute services - $597 per day 10
11 2018 Projected Impacts 2018 reimbursement is $57.4 million Continue to meet 114% reimbursement to cost goal for Ohio hospitals Maintain injured worker access to quality care Ensure injured worker access to inpatient detoxification services 11
12 Next Steps Release for public comment - TBD First read with BWC Board of Directors August 24, 2017 Complete analysis and impacts of Medicare 2018 IPPS Final Rule Data source: Medicare 2018 Final Rule files and tables BWC final payment adjustment factors are calculated Second read with BWC Board of Directors September 27,
13 Next Steps BWC Implementation February 1, 2018 Data source: Medicare 2018 Final Rule files and tables effective October 1, 2017 for Medicare BWC purchases grouper/pricer software containing all data effective for Medicare on October 1, 2017 (final Version 35 MDC and MS-DRG assignments) No updates made throughout BWC rate year 13
14 Thank You 14
15 Appendix 15
16 Source of Data Elements Used in 2018 Proposed Rule Analysis Data Element Source Patient information Ohio BWC Claims file Medicare Provider Number Ohio BWC Inpatient Cost-to-Charge File, previous KNG Health work for Ohio BWC, and manual search based on hospital name Medicare Standardized Tables 1A through 1E from Proposed FY 2018 CMS Rule Amounts HAC Adjustment Provider Specific File (2017) not published with 2018 proposed rule Geographic adjustments Impact File from Proposed FY 2018 CMS Rule Policy adjustments (except Impact File from Proposed FY 2018 CMS Rule HAC) MS-DRG Weights Table 5 from Proposed FY 2018 CMS Rules Uncompensated Care Impact File from Proposed FY 2018 CMS Rule Payment Hospital-Specific Cost-to- Impact File from Proposed FY 2018 CMS Rule Charge Ratios (CCRs) Statewide Cost-to-Charge Tables 8A and 8B from Proposed FY 2018 CMS Rule Ratios Fixed-Loss Outlier Threshold IPPS Proposed FY 2018 Rule Direct Medical Education Payment Ohio BWC Inpatient Cost-to-Charge File from 2017 rate year as published on BWC.ohio.gov Hospital teaching status Impact File from Proposed FY 2018 CMS Rule Hospital state Based on first two digits of Medicare provider number Inflation Adjustment IPPS Proposed FY 2018 Rule 16
17 Ohio Hospitals Operating Cost to Charge Trends CMS Operating CCR Average Operating CCR % Change Count of Ohio Hospitals RY NA 138 RY % 139 RY % 137 RY % 135 RY % 132 RY % 130 RY % data obtained from cms.gov rate year final rule impact files 2018 data obtained from cms.gov rate year proposed rule impact file 17
18 Non-reimbursable Cost Centers Gift, Flower, Coffee Shop, & Canteen Research Physicians' Private Offices Nonpaid Workers Other Nonreimbursable (specify) 18
19 BWC Reimbursement Formula Visualization $120 $115 $110 $114 - Target BWC Payment Rate $105 - Hospital Cost $75 - Medicare Base Rate 19
20 PAF = 1.63 BWC Reimbursement Formula Visualization $120 $115 $110 $114 - Target BWC Payment Rate $105 - Hospital Cost $75 - Medicare Base Rate 20
21 PAF = 1.63 BWC Reimbursement Formula Visualization $120 $115 $110 $105 $114 - Target BWC Payment Rate - Hospital Cost 114% $75 - Medicare Base Rate 21
22 BWC Reimbursement Formula Visualization $120 $115 $110 $105 $75 - Medicare Base Rate Year 1 Year 2 Year 3 Year 4 Year 5 Hospital Cost Medicare Rate 22
23 BWC Reimbursement Formula Visualization $120 $115 $110 $105 $75 - Medicare Base Rate Year 1 Year 2 Year 3 Year 4 Year 5 Target BWC Payment Rate Hospital Cost Medicare Rate 23
24 BWC Reimbursement Formula Visualization $120 $115 $114 $110 $108 $105 $75 $103 $97 $91 - Medicare Base Rate Year 1 Year 2 Year 3 Year 4 Year 5 Target BWC Payment Rate Hospital Cost Medicare Rate 24
25 BWC Reimbursement Formula Visualization $120 $115 $114 $110 $108 $105 $103 $97 $91 $75 - Medicare Base Rate Year 1 Year 2 Year 3 Year 4 Year 5 Target BWC Payment Rate Hospital Cost Medicare Rate 25
26 BWC Reimbursement Formula Visualization $120 $115 $114 $110 $108 $105 $103 $97 $91 $75 $78 $76 $74 $72 Year 1 Year 2 Year 3 Year 4 Year 5 Target BWC Payment Rate Hospital Cost Medicare Rate 26
27 PAF = 1.63 BWC Reimbursement Formula Visualization $120 $115 $114 $110 $108 $105 $103 $97 $91 $75 $78 $76 $74 $72 Year 1 Year 2 Year 3 Year 4 Year 5 Target BWC Payment Rate Hospital Cost Medicare Rate 27
28 PAF = 1.63 BWC Reimbursement Formula Visualization $120 $115 $114 $110 $108 $105 $103 $97 $91 $75 $78 $76 $74 $72 Year 1 Year 2 Year 3 Year 4 Year 5 Target BWC Payment Rate Hospital Cost Medicare Rate 28
29 PAF = 1.63 PAF = 1.50 PAF = 1.39 PAF = 1.28 PAF = 1.17 BWC Reimbursement Formula Visualization $120 BWC Goal is to pay hospital at 114% of cost $115 $114 $110 $108 $105 $103 $97 $91 $75 $78 $76 $74 $72 Year 1 Year 2 Year 3 Year 4 Year 5 Target BWC Payment Rate Hospital Cost Medicare Rate 29
30 PAF = 1.63 PAF = 1.50 PAF = 1.39 PAF = 1.28 PAF = 1.17 BWC Reimbursement Formula Visualization $120 BWC goal is to pay hospitals at 114% of their cost $115 $114 $110 $108 $105 $103 $97 $91 $75 $78 $76 $74 $72 Year 1 Year 2 Year 3 Year 4 Year 5 Target BWC Payment Rate Hospital Cost Medicare Rate 30
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