FFY 2018 IPPS PROPOSED RULE CHA MEMBER FORUM

FFY 2018 IPPS PROPOSED RULE CHA MEMBER FORUM June 1, 2:00 3:30 p.m. (PT) Dial-in: 1-888-317-6003 Passcode: 7542838 Adobe Connect: http://connect1.calhospital.org/ipps/

Objectives Review proposed changes to several key payment and quality provisions in the FFY 2018 IPPS Proposed Rule The full text of the proposed rule and the CHA summary are available at www.calhospital.org/regulatory-tracker Solicit CHA member feedback on proposed changes for CHA comments All comments due on June 13 at 2 pm PT. Comments submitted online at www.regulations.gov Draft comments will be available approximately 1 week in advance via CHA news 2

Rule Overview Rate updates Wage Index DSH Quality Programs Other RFI AO provisions 3

Adopted Rate Update Final FFY 2017 Proposed FFY 2018 Percent Change Federal Operating Rate $5,516.14 $5,596.00 +1.45% Federal Capital Rate $446.79 $451.27 +1.03% 4

Marketbasket Rebasing IPPS marketbasket revised every 4 years Current revision updates baseline cost report data from 2010 to 2014 Combined with 2007 Census data tables from Bureau of Economic Analysis FFY 2018 proposed marketbasket update remains the same under either dataset Results in wage index labor share reduced from 69.6% to 68.3% (for wage index > 1) 5

Rate Update Operating Marketbasket Base Marketbasket: 2.9% (+$2.9 B) Reduced by: ACA Multifactor Productivity Adjustment of 0.4 percentage points (-$399 M) Predetermined ACA offset for FFY 2018 of 0.75 percentage points (-$748 M) Proposed FFY 2018 Marketbasket Update: 1.75% 6

FFY 2018 Market Basket Update with Meaningful Use and IQR No Penalty IQR Penalty Meaningful Use Penalty Both Meaningful Use and IQR Penalties Proposed Baseline Market Basket Rate-of-Increase 2.9% Proposed Market Basket Update With ACA Reductions 1.75% Proposed Penalty for Failure to Submit IQR Quality Data - -0.725 PPT - -0.725 PPT Proposed Penalty for Failure to be a Meaningful EHR User - - -2.175 PPT -2.175 PPT Proposed Market Basket Update, less EHR/IQR 1.75% 1.025% -0.425% -1.15% CAHs = cost-based payment reduced by up to -1.0% due to MU PPT= Percentage Point 7

2018 Compliance Update* Meaningful Use (EHR) 107 hospitals projected to receive a penalty Estimated impact of $25.1 M IQR 91 hospitals penalized Estimated $3.7 M impact Both 25 hospitals Est. $0.9 M impact * Meaningful Use and IQR Penalty list from FFY 2018 IPPS Proposed Rule Impact File 8

ATRA IPPS 3.9% Retrospective Coding Adjustment 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024-0.80% -0.80% -0.80% 3.441% 2.941% 2.441% 1.941% +0.50% 1.441% +0.50% 0.9412% +0.50% +0.50% -1.50% +0.50% +.4588% IPPS Federal Rate Legislative Action FFY 2018 Update FFY 2018 Impact Overall Impact (FFY 2014-2023) ATRA +3.9% +$3.7 B -$8.1 B MACRA ( 17 FR) +0.5% +$469.6 M -$20.9 B 21 st Century Cures ( 18 PR) +0.4588% +$433.0 M -$21.2 B 9

2-Midnight Policy Adjustment Shands Jacksonville Medical Center, Inc. v. Burwell CMS responded with two adjustments: FFY 2017: Permanent +0.2% adjustment to eliminate the reduction going forward FFY 2017: Temporary adjustment of +0.6%, for one year, to account for reduction to FFYs 2014, 2015 and 2016 rates FFY 2018: -0.6% adjustment proposed to be applied for FFY 2018 to remove effect of temporary adjustment (-$656 M, including capital) 10

Proposed Rate Update Final FFY 2017 Proposed FFY 2018 Percent Change Federal Operating Rate $5,516.14 $5,596.00 +1.45% Federal Operating Rate ACA-Adjusted Update (2.90% MB minus 0.4% productivity adj. minus 0.75% pre-determined adj.) 21 st Century Cures Act-Mandated Retrospective Coding Adjustment Reduction +1.75% +0.4588% 2-Midnight Rule Temporary Retrospective Adjustment Removal -0.6% Net Rate Change (EXCLUDING BUDGET NEUTRALITY) Net Rate Change (INCLUDING BUDGET NEUTRALITY) +1.61% +1.45% Note: Values assume no penalties for IQR or EHR 11

CHA Comments Supportive of MB Rebasing methodology Continue to raise concerns regarding last years 1.5% coding offset and seek clarity on its return to the baseline Other comments or concerns? 12

Wage Index Calculation CY 2016 Occupational Mix Survey Used in wage index calculation starting FFY 2019 Due to MACs by July 3, 2017 Other Wage-Related Costs Cost Report Worksheet S-3 Part II, Line 18 CMS clarifying that included values must match IRS s description of a fringe benefit and be reported on forms W-2 or 1099 as taxable income Seeking comment on possible removal of Line 18 from wage index calculation 13

Rural Wage Index FFY 2018 Expiration of Imputed Rural Floor Applies only to Delaware, New Jersey, and Rhode Island No longer factors into national rural floor budget neutrality Rural Hospital Deadlines Deadline for submission to MGCRB of documentation for SCH/RRC approval proposed as 1 st business day following January 1 st New deadline not applicable to RRCs seeking reclassification to rural areas 14

Other Provisions Outliers Threshold proposed at $26,713 Expiration of MDH and LVA on October 1, 2017 absent legislative action CHA continues its advocacy for all extenders Minor changes to the Postacute Care Transfer DRGs CMS has directed contractors to make the 96 hour rule a low priority for medical reviews conducted on or after October 1, 2017 15

Discussion/Questions? 16

Medicare DSH DSH Payment Projections Under Traditional Formula ($16.003 B) 25% Paid Under Traditional Method 75% [FACTOR 1] Dedicated to New Pool Step 1: Reduce Pool [FACTOR 2: relative to national rates of insurance] Step 2: Distribute Pool [FACTOR 3: based on hospitals uncompensated care ] 17

Medicare DSH Current Policy (FFY 2017) Proposed Policy (FFY 2018) Factor 1 (program funding) $10.797B Factor 2 (program reductions) 44.64% cut $5.977 B pool for uncompensated care payment Factor 3 (uncompensated care payment) Low income patient days as proxy Medicaid Days from FFY 2011, 2012, and 2013 Medicare Cost Reports FFY 2012, 2013, and 2014 SSI Ratios Average of Factor 3s calculated for the three data years Factor 1 (program funding) $12.002 B Factor 2 (program reductions) 41.99% cut $6.962 B pool for uncompensated care payment Factor 3 (uncompensated care payment) Low Income Patient Days: Medicaid Days from FFY 2012 and 2013 Medicare Cost Reports; FFY 2014 and 2015 SSI Ratios Uncompensated Care Costs: Trimmed FFY 2014 S-10 Line 30 Average of Factor 3s calculated for the three data years 18

Medicare DSH 2,418 Hospitals projected to be DSH eligible in FFY 2018: 83 projected to gain UCC distributions (YES) 70 projected to lose UCC distributions (SCH/NO) Proposal to change source of insured pool estimates from CBO to CMS Office of the Actuary (National Health Expenditures Accounts) for calculation of pool reduction amount Results in a decreased cut in FFY 2018 compared to FFY 2017 (41.99% vs 44.64%) (Or an increase of $1billion) 19

FFY 2018 Proposed S-10 Transition Phase in of Worksheet S-10, Line 30 (Charity Care and Non- Medicare Bad Debt Expense), again proposed for FFY 2018 with FFY 2014 data Would utilize three-year Factor 3 averaging currently in place FFY 2018 FFY 2019 FFY 2020 Proxy Data FFY 2012 Medicaid Days + FFY 2014 Medicare SSI Days FFY 2013 Medicaid Days + FFY 2015 Medicare SSI Days FFY 2013 Medicaid Days + FFY 2015 Medicare SSI Days Phased-out S-10 Data FFY 2014 S-10, Line 30 FFY 2014 S-10, Line 30 FFY 2015 S-10, Line 30 FFY 2014 S-10, Line 30 FFY 2015 S-10, Line 30 FFY 2016 S-10, Line 30 20

Proposed S-10 Transition: Data Cleaning Cost to Charge Ratio (CCR) Trim Meant to account for hospitals that consistently report high uncompensated care amounts For hospitals with either no CCR reported on S-10, or those with a CCR value more than 3 standard deviations from the national geometric mean (0.937 for FFY 2014), CCR is replaced with the statewide average. Data Annualization for Short- and Long-Period filers to reduces disparity S-10 subject to desk review beginning with FFY 2017 cost reports 21

2014 S-10 Data: Uncompensated Care Cost (L30) Trimmed UCC Data from IPPS Proposed Rule 22

California DSH Impact Analysis that considered Medicare Advantage days in their model estimates over $700 million in losses for CA (FFS and MA) in FY 2020. Hospital specific data is not available at this time for MA impact. 23

Percent Change in 2020 Hospital's Uncompensated Care Using S-10 Compared to SSI Days to Allocate Dollars 24

In millions Estimated Change in 2020 Uncompensated Care Using S-10 Compared to SSI Days, By States with Largest Dollar Gains and Losses $800.0 $600.0 $604.3 $400.0 $200.0 $74.5 $119.6 $137.6 $153.3 $0.0 ($200.0) ($102.0) ($94.1) ($77.0) ($400.0) ($600.0) ($449.4) ($351.0) 25

S-10 Data Integrity Issues Cost report consultants across the country agree that the S-10 data related to charity care is inconsistently reported and doesn t allow for reasonable comparisons between hospitals CHA whitepaper articulates these issues and has been shared broadly with interested stakeholders including CMS Report highlights incorporated into draft comments. Whitepaper available at http://www.calhospital.org/sites/main/files/file-attachments/s- 10_white_paper_final_for_distribution_february_2017.pdf 26

Examples of bad data A hospital in Houston reports more than $600 million in uncompensated care costs in both 2014 and 2015. This is almost twice its total net patient revenue and almost $1 million per patient bed. A hospital in New Orleans is a 174-bed for-profit hospital. It reported an increase of $40 million in uncompensated care between 2014 and 2015, giving it more than $150 million in uncompensated care costs almost 40 percent of its net patient revenue. A hospital is in a state that reports almost universal health insurance coverage and has a Medicaid waiver that provides for an uncompensated care pool. Despite this, the hospital reported almost $138 million in uncompensated care costs on line 30 of its S-10, an increase of $30 million from 2014. Significant errors also remain in the 2014 data base. A hospital in Mt. Pleasant, Texas, reported providing less than $10 million in uncompensated care in 2015 but the database still shows the hospital providing $534 million in uncompensated care in 2014 an amount that is nearly ten times the hospital s total net patient revenue for the year. A hospital in Ohio reported providing $600,000 in uncompensated care in 2015 but more than ten times that amount in 2014. The 2014 amount is more than 30 percent of the hospital s net patient revenue for the year. 27

DRAFT CHA Comments FFY 2017 CHA Comments Supportive of CMS Proxy of Medicare SSI and Medicaid Days S-10 needs improvement prior to use Update and revise instructions CMS should audit S-10 data (similar to area wage index data) prior to use Include Medicaid shortfall in calculation of uncompensated care Include GME costs in CCR CMS Status (FFY 2018 IPPS Proposed Rule) MedPAC and CMS have long believed the S-10 is a better source for uncompensated care Increasing correlation between Schedule 990 and S-10 CMS has agreed in previous years, however believes by FY 2018 hospitals will have had sufficient time to have revised and improved data CMS believes transmittal 10 issued in October was sufficient to address concerns CMS has articulated it plans to do limited desk audits in the future. CMS does not agree that Line 19 of the cost report should be included and proposes Line 30 only CMS does not believe that it is appropriate to modify the calculation of the CCR Line 1 of Worksheet S-10 to include GME costs 28

DRAFT CHA Comments Gather stakeholders to inform updates to the instructions Audit data following release of revised instructions Implement S-10 no sooner than FFY 2021 Should CMS proceed Longer transition (5 years) Limit weight of S-10 data with proxy data Stop loss/stop gain policy 29

CHA Advocacy Priority Medicare DSH cuts continues to be TOP CHA advocacy priority Letter to Adminstrator Verma sent May 31, available in CHA News Seeking meeting with the Administrator and HHS officials this month Continued advocacy with Republican Members of CA delegation to weigh in on top priority issues 30

Discussion/Questions? 31

Summary of Proposed Updates to Inpatient Quality Reporting (IQR) Program Refinements to two existing measures for FFY 2020 HCAHPS Pain Management Questions 30-Day Stroke Mortality Measure Risk Adjustment to include NIH Stroke Scale Proposed new voluntary measure for FFY 2020 Hybrid Hospital-Wide Readmission (HWR) Measure with Claims and Electronic Health Record Data Reduction of previously finalized ecqm reporting Requirements 32

Proposed Refinements to HCAPHS Pain Management Questions for FFY 2020 CMS proposes to modify the HCAHPS Pain Management Questions to focus on hospitals communication with the patient about pain during the inpatient stay Current Pain Management 12. During this hospital stay, did you need medicine for pain? o Yes o No If No, Go to Question 15 13. During this hospital stay, how often was your pain well controlled? o Never o Sometimes o Usually o Always 14. During this hospital stay, how often did the hospital staff do everything they could to help you with your pain? o Never o Sometimes o Usually o Always Proposed Communication about Pain HP1: During this hospital stay, did you have any pain? o Yes o No If No, Go to Question During this hospital stay, how often did hospital staff talk with you about how much pain you had? o Never o Sometimes o Usually o Always During this hospital stay, how often did hospital staff talk with you about how to treat your pain? o Never o Sometimes o Usually o Always 33

Proposed Voluntary Measure for FFY 2020 Hybrid Hospital-Wide Readmission (HWR) Measure with Claims and Electronic Health Record Data (NQF #2879) Measure would combine claims data with patient data extracted from hospital EHRs Measure includes 13 core clinical data elements Hospitals the participate would receive confidential feedback reports and the measure would not be publicly reported CMS notes it is considering proposing the measure as required for the IQR program as early as FFY 2023 34

Proposed Updates to IQR ecqm Reporting Requirements Retains list of 15 available ecqms as finalized in the FFY 2017 IPPS Final Rule 2017 Reporting Period/FFY 2019 Payment Determination Report 6 of 15 available ecqms, for two self-selected quarters of CY 2017 2018 Reporting Period/FFY 2020 Payment Determination Report 6 of available 15 ecqms, for the first three quarters of CY 2018 Requires EHR technology to be certified to all 15 ecqms available 35

DRAFT CHA Comments Continue to narrow and refine list of measures those that are important and drive quality improvement Pain Mgt Questions: Step in the right direction, more testing needed, NQF review should be priority Stroke Mortality: NQF review should be a priority Hybrid Readmissions: Is the agency ready?? Are hospitals ready? ecqm: Significant concerns regarding certification requirements 36

Hospital Value Based Purchasing (VBP) Program Snapshot FFY 2017+ capped @ 2% contributions FFY 2017 Program = $1.8 Billion, FFY 2018 Program = approx. $1.9 Billion FFY 2016-2017 change in impacts 437 Hospitals went from winning under the program to losing 315 Hospitals went from losing under the program to winning FFY 2017 winners and losers 2955 eligible hospitals 1612 hospitals broke even or won 1343 hospitals lost 37

VBP FFY 2015-2017 Performance 38

Hospital VBP Timeframes FFY 2018 VBP Program Timeframes FFY 2019 VBP Program Timeframes 39

Summary of Proposed Updates to Hospital VBP Program Proposed Removal of PSI-90 in FFY 2019 Proposed Addition of Modified PSI-90, or AHRQ Patient Safety and Adverse Events composite measure (NQF#0531) for FFY 2023 Proposed Addition of New Episode of Care Payment Measure for FFY 2022 Refinements to Scoring of the Efficiency Domain Modifications to Performance and Baseline Periods 40

Proposed Removal of PSI-90 and Replacement with Modified PSI-90 Remove PSI-90 composite safety measure from VBP program beginning with FFY 2019 Adopt Modified-PSI 90, or AHRQ Patient Safety and Adverse Events composite measure (NQF#0531) for FFY 2023 FFY 2023: 21-month baseline period (Oct. 1, 2015 - June 30, 2017) and 24-month performance period (July 1, 2019 June 30, 2021) FFY 2024 and Subsequent Years: 24 month baseline period (July 1, 2016 June 30, 2018) and 24-month performance period (July 1, 2020 June 30, 2022) 41

Proposed Addition of New Episode of Care Payment Measure for FFY 2022 Hospital-level, risk-standardized 30-day pneumonia episode of care payment measure beginning with FFY 2022 FFY 2022: 36 month baseline period (July 1, 2013 - June 30, 2016) and 23-month performance period (August 1, 2018 - June 30, 2020) FFY 2023: 36-month baseline period, performance period extended to 35-months FFY 2024 and subsequent years: 36-month performance and baseline periods 42

Baseline and Performance Periods Domain and Measure Baseline Period Performance Period Person and Community Engagement HCAHPS Survey January 1, 2018 December 31, 2018 January 1, 2020 December 31, 2020 Clinical Care Morality (MORT-30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-CABG) July 1, 2012 June 30, 2015 July 1, 2017 June 30, 2020 MORT-30-PN (updated cohort) July 1, 2012 June 30, 2015 September 1, 2017 June 30, 2020 THA/TKA April 1, 2012 March 31, 2015 April 1, 2017 March 31, 2020 Safety Previously Adopted and Proposed Baseline and Performance Periods for FFY 2022 PC-01 and NHSN Measures (CAUTI, CLABSI, SSI, CDI, MRSA) Efficiency and Cost Reduction January 1, 2018 December 31, 2018 January 1, 2020 December 31, 2020 MSPB January 1, 2018 December 31, 2018 January 1, 2020 December 31, 2020 Payment (AMI and HF) July 1, 2012 June 30, 2015 July 1, 2017 June 30, 2020 PN Payment July 1, 2013 June 30, 2016 August 1, 2018 June 30, 2020 43

Baseline and Performance Periods Domain and Measure Baseline Period Performance Period Person and Community Engagement HCAHPS Survey January 1, 2019 December 31, 2019 January 1, 2021 December 31, 2021 Clinical Care Morality (MORT-30-AMI, MORT-30-HF, MORT-30-COPD, MORT-30-CABG), MORT-30-PN (updated cohort) July 1, 2013 June 30, 2016 July 1, 2018 June 30, 2021 THA/TKA April 1, 2013 March 31, 2016 April 1, 2018 March 31, 2021 Safety Previously Adopted and Proposed Baseline and Performance Periods for FFY 2023 PC-01 and NHSN Measures (CAUTI, CLABSI, SSI, CDI, MRSA) Patient Safety and Adverse Events (Modified PSI-90) Efficiency and Cost Reduction January 1, 2019 December 31, 2019 January 1, 2021 December 31, 2021 October 1, 2015 June 30, 2017 July 1, 2019 June 30, 2021 MSPB January 1, 2019 December 31, 2019 January 1, 2021 December 31, 2021 Payment (AMI and HF) July 1, 2013 June 30, 2016 July 1, 2018 June 30, 2021 PN Payment July 1, 2013 June 30, 2016 August 1, 2018 June 30, 2021 44

VBP Domain Weights for FFY 2019 and Subsequent Years Domain Weights for FFY 2018 and Subsequent Years Domain Weight Safety 25% Clinical Care 25% Efficiency and Cost Reduction 25% Person and Community Engagement 25% 45

Hospital Acquired Condition (HAC) Program Snapshot HAC Reduction Program payment adjustments 1.0% payment penalty applied to hospitals in the worst performance quartile of Total HAC scores Payment Reduction applied to Total Medicare FFS Payments, including: Capital (inclusive of DSH/IME) Operating (inclusive of DSH/IME, VBP and RRP) Uncompensated Care Outlier Payments Due to ties, only 22.9% of eligible hospitals receive a payment penalty for 2017 Estimated $436 million national cut 46

HAC Timeframes 2013 2014 2015 2016 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D FFY 2017: Domain 1 Performance Period FFY 2017: Domain 2 Performance Period FFY 2017 Program Payment Adjustment 2017 2018 2019 FFY 2018: Domain 1 Performance Period FFY 2018: Domain 2 Performance Period FFY 2018 Program Payment Adjustment FFY 2019: Domain 1 Performance Period FFY 2019: Domain 2 Performance Period FFY 2019 Program Payment Adjustment 47

Proposed Updates to Hospital-Acquired Condition Payment Reduction Program Changes to data collection time periods for FFY 2020 measures CMS proposes two-year period for all program measures Domain 1: Patient Safety and Adverse Events July 1, 2016 June 20, 2018 Domain 2: CDC NHSN Measures January 1, 2017 December 31, 2018 No new HAC measures proposed CMS seeks comment on accounting for SDS factors in HAC Reduction Program, and on risk-adjusting CDC NHSN measures for disability or medical complexity 48

Proposed Updates to Extraordinary Circumstance Exceptions (ECEs) Across Programs CMS proposes changes to its extraordinary circumstances exceptions processes across multiple programs (IQR, VBP, HAC, HRRP, PCHQR, IPF QRP) for consistency: Extraordinary Circumstances Exceptions proposed as common nomenclature CMS would not require that requests be signed by the facility s CEO, and would allow them to be signed by another appropriate designated contact. CMS indicates it will strive to complete reviews of ECE requests within 90 days of receipt. CMS can grant ECEs if they determine that a systemic problem with its data collection systems directly affected facilities ability to submit data 49

HAC FFY 2017 vs Est. FFY 2018 50

Hospital Readmissions Reduction Program (HRRP) Punitive only program with annual penalty caps FFY 2015+: 3.0% max penalty Three year performance period brought forward each year 51

Proposed Updates to HRRP 21 st Century Cures Act requires changes to HRRP payment methodology to account for sociodemographic (SDS) factors beginning in FFY 2019 Proposes program specifications for FFY 2018 FFY 2018 Applicable Time Period: July 1, 2013 June 30, 2016 No changes proposed to existing methodology No new measures proposed for HRRP 52

RRP Snapshot 53

Proposed HRRP Payment Adjustment Methodology for FFY 2019 21 st Century Cures Act requires CMS to assign hospitals to peer groups based on the proportion of dual eligible beneficiaries and to develop a methodology that allows for separate comparisons for hospitals within these groups No new reporting requirements may be imposed to establish peer groups Change must be made in budget neutral fashion 54

FFY 2019 HRRP SDS Adjustment: Proposed Numerator Groups based on full-benefit dual eligible as: # Full benefit Dual Status # Medicare Patients CMS is proposing to identify full-benefit beneficiaries using data from the Medicare Modernization Act file of dual eligibility States submit this data to CMS monthly An individual would be counted as a full-benefit dual patient if the patient was identified as fullbenefit dual status in the State MMA files for the month he/she was discharged from the hospital 55

FFY 2019 HRRP SDS Adjustment: Proposed Denominator CMS is considering two alternative definitions of total number of Medicare patients: All Medicare FFS and Medicare Advantage stays Just Medicare FFS stays Readmission measures cover only Medicare FFS patients Both approaches would use MedPAR files Also considered using the CMS integrated data repository (IDR) which incorporates managed care claims more consistently to calculate hospital stays 56

FFY 2019 HRRP SDS Adjustment: Proposed Timeframe Data period for identifying full-benefit dual eligible patients is proposed to be same 3-year period as the program performance period i.e. July 1, 2014 June 30, 2017 for FFY 2019 Alternate approach considers1 year period of most recent data available 57

FFY2019 HRRP SDS Adjustment: Proposed Groupings CMS proposes to group hospitals into five peer groups Hard thresholds hospitals who are very close in full-dual eligible % may be assigned to different groups and benchmarks Alternate approaches considered groups of 2 and 10 58

FFY2019 HRRP SDS Adjustment: Proposed Methodology Current payment adjustment: CMS proposes to replace the comparative 1 in the excess payment formula with median excess ratio for hospital s peer group w/ BN adjustment Alternate approaches would instead use mean excess ratio, a budget neutralizing excess ratio, or a standardized excess ratio within the peer group. 59

FFY2019 HRRP SDS Adjustment: Proposed Methodology Impact Median excess readmission ratio method reduces the penalty as a share of total payments from 0.64% to 0.55% within quintiles and penalty per discharge from $157 to $135 for safety-net hospitals Increases payment reduction for non-safety-net hospitals from 0.61% to 0.63% 60

FFY2019 HRRP SDS Adjustment: Proposed Methodology Step 2: Calculate total excess payments for each condition Current program methodology: Total Payment for AMI Procedures (1 AMI Excess Ratio) = AMI Excess Dollars Proposed Comparative median methodology: Total Payment for AMI Procedures Median Peer Group Excess Ratio AMI Excess Ratio = AMI Excess Dollars Hospitals payment reduction amount would be multiplied by a budget neutrality factor Current benchmark = 1 Lower SDS quintile = More stringent benchmark (median) Higher SDS quintile = Less stringent benchmark (median) 61

FFY2019 HRRP SDS Adjustment: Proposed Methodology Step 4: Calculate Readmissions Adjustment factor (capped at.97, or 3%, for FFY 2015+) Current program methodology: ቈ 1 Total Excess Revenue Total Medicare IPPS Operating Revenue = Readmissions Adjustment Factor ቈ 1 BN Adjuster Stratified program methodology: Total Excess Revenue Total Medicare IPPS Operating Revenue Estimate total Medicare savings across all hospitals under the current method and under the proposed stratified method, in the absence of the BN adjustment Calculate a multiplicative factor, that when applied to each hospital s adjustment, overall stratified method penalty equals the current method penalty 62 = Readmissions Adjustment Factor

Estimated Net Change in Penalties with SDS Adjustment Source: DataGen 63

FFY 2019 HRRP SDS Adjustment: Excess Ratio & Public Reporting Excess Ratio used to determine RRP penalties: Publically reported on Hospital Compare in the HQI Readmission Reduction table (4th Quarter) Risk-Standardized Readmission Rate (RSRR): Publically reported on Hospital Compare in the HQI Readmission/Death tables (2nd Quarter) Combines Excess Ratio with National Readmission Rate Estimated Readmission Rate assuming the Average Hospitals Patient Mix 64

DRAFT CHA Comments FFY 2018 performance period mixes ICD-9 and ICD- 10 measure refinements; lack of transparency in what adjustments were made to measures to address the issue Request additional transparency to understand complexities of new methodology Make all data for replicating the model publicly available CMS should do a dry run on FFY 2018 data and make available to hospitals, host national provider calls 65

Measure ID Measure Description Member Resource: CHA Quality Matrix and Program Reference Guide Quality Based Payment Reform (QBPR) Reference Guide Value Based Purchasing (VBP) Overview: FFY 2015 Program Measures, Performance Standards, Evaluation Periods, and Other Program Details for the FFY 2015 VBP Program National Threshold 1 National Benchmark 2 Minimum Standards 4 AMI 7a Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival 80.00% 100.00% 100% AMI 8a Primary PCI Received Within 90 Minutes of Hospital Arrival 95.35% 100.00% HF 1 Discharge Instructions 94.12% 100.00% Quality Based Payment Reform (QBPR) Reference Guide PN 3b Blood Cultures Performed in the ED Prior to Initial Antibiotic Received in Hospital 97.78% 100.00% PN 6 Initial Antibiotic Selection for CAP in Immunocompetent Patient 95.92% 100.00% Process of 90% Care SCIP Inf 1 Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision 98.64% 100.00% Measures, Performance Standards, Evaluation Periods, and Other Program 10 Cases Details for the FFY 2016 20% VBP Program SCIP Inf 2 Prophylactic Antibiotic Selection for Surgical Patients 98.64% 100.00% Minimum Total Performance Score: SCIP Inf 3 Prophylactic Antibiotics Measure Discontinued ID Within 24 Hours Measure After Surgery Description End Time 97.49% 100.00% Standards SCIP Inf 4 Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose 95.80% 99.77% 80% 4 Original Domain Weighting 5 SCIP Inf 9 Postoperative Urinary AMI 7a Catheter Removal on Post Operative Fibrinolytic Day Therapy 1 or 2 Received Within 30 Minutes of Hospital 94.89% Arrival 99.99% 91.15% 100.00% 100% Process of SCIP Card 2 Beta Blocker Prior to PN 6 Arrival That Received a Beta Blocker Initial Antibiotic During the Perioperative Selection for Period CAP in Immunocompetent 97.18% Patient 100.00% 96.55% Quality 100.00% Based Payment Reform (QBPR) Care Reference Guide SCIP VTE 2 Appropriate Venous SCIP Inf 2 Thromboembolism Prophylaxis Prophylactic Within 24 Hours Antibiotic of Surgery Selection for Surgical Patients 97.40% 100.00% 99.07% 100.00% Patient 70% 10% SCIP Inf 3 Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time 98.09% 100.00% Removed: SCIP-VTE-1: Surgery Patients with Recommended Venous thromboembolism Prophylaxis Ordered Experience 10 Cases 90% SCIP Inf 9 Postoperative Urinary Catheter Removal on Post Operative Day 1 or 2 Measures, Performance 97.06% Standards, 100.00% of CareEvaluation Periods, and Other Program Details for the FFY 2017 VBP Program SCIP Card 2 Beta Blocker Prior to Arrival That Received a Beta Blocker During the Perioperative Period 97.73% 100.00% 30% National Minimum Total Performance Score: SCIP VTE 2 Appropriate Venous Thromboembolism Prophylaxis Measure Within Threshold ID24 Hours 1 of Surgery Benchmark Measure 2 Description Standards 4 98.23% 100.00% 60% Original Domain Weighting IMM-2 (NEW) Patients Assessed and Given Influenza Vaccination 90.61% 98.88% Patient 5 Communication with Nurses 47.77% 76.56% 85.70% HAI_1* Central Line-Associated Blood Stream Infection (CLABSI) Experience 80% 0.4570 0.0000 100% Communication with Removed Doctors Measures: AMI 8a: Primary PCI Received Within 90 Minutes 55.62% of Hospital Arrival, 79.88% HF-1: Discharge 88.79% Insructions, PN-3b: Blood Cultures Performed in the ED Prior to Initial Antibiotic Received in Hospital, SCIP-Inf-1: Prophylactic Antibiotic received HAI_2* Within One Hour Prior Catheter-Associated to Surgical Incision, Urinary SCIP-Inf-4: Tract Cardiac Infection Surgery (CAUTI) of Care Patients with 0.8450 0.0000 1 Predicted Responsiveness of Hospital Staff 35.10% 63.17% 79.06% Controlled 6AM Postoperative Serum Glucose HAI_5* (NEW) Methicillin-resistant Staphylococcus Aureus (MRSA) Blood Laboratory-identified 25% Events 0.7990 0.0000 Infection Pain Management 43.58% 69.46% 78.17% 50% HAI_6* (NEW) Clostridium 100 difficile Surveys (C.diff.) 0.7500 0.0000 Safety of Communication about Medicines 35.48% 60.89% 71.85% National National National Minimum 70% Hospital Cleanliness Measure & QuietnessID Measure Description PSI-90* Patient Safety Indicator Composite 0.7779 0.5479 3 Cases Care 90% 41.94% 64.07% 78.90% Pooled Surgical Site Infection (SSI) Floor Measure**: 3 Threshold 1 Benchmark 2 Standards 4 20% Discharge Information 57.67% 83.54% 89.72% Communication with Nurses HAI-3 * Surgical 53.99% Site Infection 77.67% - Colon 86.07% 40% 0.7510 0.0000 1 Predicted Overall Rating of Hospital 32.82% 67.96% 83.44% Communication with Doctors HAI-4 * Surgical 57.01% Site Infection 80.40% - Abdominal Hysterectomy 88.56% Outcomes 0.6980 0.0000 Infection of Care 60% Responsiveness of Hospital Staff 38.21% 64.71% 79.76% 80% National National Minimum 30% Measure ID Measure Description Clinical Care: Pain Management Threshold 1 48.96% Benchmark 2 Standards 4 70.18% 78.16% Measure ID Measure Description 100 Surveys Process 5% Communication about Medicines 34.61% 62.33% 72.77% 30% MORT 30 AMI Acute Myocardial Infarction (AMI) 30-Day Mortality Rate (converted to survival rate for VBP) 84.75% 86.24% Hospital Cleanliness & Quietness AMI-7a Fibrinolytic 43.08% Therapy Received 64.95% Within 30 79.10% Minutes of Hospital Arrival MORT 30 HF Heart Failure (HF) 30-Day Mortality Rate (converted to survival rate for VBP) 88.15% 90.03% 25 Cases 50% 95.4545% 100.0000% Discharge Information IMM-2 Patients 61.36% Assessed and 84.70% Given Influenza 90.39% Vaccination Outcomes 95.1607% 99.7739% 10 Cases 70% MORT 30 PN Pneumonia (PN) 30-Day Mortality Rate (converted to survival rate for VBP) 88.27% 90.42% Overall Rating of Hospital PC-01* (NEW) Elective 34.95% Delivery Prior 69.32% to 39 completed 83.97% Weeks Gestation of Care PSI-90* (New) Patient Safety Indicator Composite 0.6162 0.4500 3 Cases 20% 3.1250% 0.0000% 40% Clinical Care: Removed Measures: SCIP-Inf-2: Prophylactic Antibiotic 1 Predicted National Selection National for Surgical Patients, Minimum SCIP-Inf-3: Prophylactic Antibiotics Discontinued within 24 Hours of Surgery, SCIP- Outcomes HAI-1* (New) Central Line-Associated Measure Blood Stream ID Infection (CLABSI) Measure Description Inf-9: Postoperative 0.4370 Urinary 0.0000 Catheter Removal on Post Operative Infection Threshold 1 Day 1 or Benchmark 2 2, SCIP-CARD-2: Standards 4 Beta Bloacker Prior to Arrival That 40% Received a Beta Blocker During the 25% Perioperative Period, SCIP-VTE-2: Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery; PN-6: Initial Antibiotic Selection for CAP in Efficiency 60% MORT 30 AMI Acute Myocardial Infarction (AMI) 30-Day Mortality Immunocompetent Rate (converted to National Patient survival rate for VBP) 84.75% 86.24% National Minimum of Care 10% Measure ID MORT 30 HF Measure Heart Description Failure (HF) 30-Day Mortality Rate (converted to survival rate Threshold 1 for VBP) Benchmark 2 Standards 4 88.15% 90.03% 25 Cases 20% MORT 30 PN Pneumonia (PN) 30-Day Mortality Rate (converted to survival rate for VBP) 88.27% 90.42% National Measure Median ID Ratio Mean Ratio of Measure Description 30% PSI-90 Patient Safety Indicator Composite 61.62% 45.00% 3 Cases Threshold 1 SPP-1* (New) Spending Per Hospital Patient With Medicare Across All Top 10% 25 Cases HAI-1 * Central Line-Associated Blood Stream Infection (CLABSI) 0.4650 0.0000 50% MORT 30 AMI Hospitals** Hospitals** Acute Myocardial Infarction (AMI) 30-Day Mortality Rate 0% (converted to survival rate for VBP) 85.1458% 87.1669% HAI-2 * (NEW) Catheter-Associated Urinary Tract Infection (CAUTI) 0.8010 0.0000 MORT 30 HF Heart Failure (HF) 30-Day Mortality Rate (converted 1 to Predicted survival rate for VBP) 88.1794% 90.3985% 25 Cases Pooled Surgical Site Infection (SSI) Measure**: FFY 2015 VBP Program Timeframes MORT 30 PN Pneumonia (PN) 30-Day Mortality Rate (converted to Infection survival rate for VBP) 20% 88.2986% 90.8124% HAI-3 * (NEW) Surgical Site Infection - Colon 0.6680 0.0000 2010 2011HAI-4 * (NEW) Surgical 2012 Site Infection - Abdominal 2013 Hysterectomy 2014 2014 0.7520 0.0000 2015 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D Efficiency National Patient 40% Measure ID Measure Description Process of Care: Process of Care: National National Minimum of Care Floor 3 Experience of Care Measure ID Measure Description Baseline Period 6 Performance Period 7 Communication with Threshold Nurses 1 Benchmark 2 Standards 4 25% 58.14% 10% 78.19% 86.61% 25% Communication with Doctors 63.58% 80.51% 88.80% Patient Experience Patient Experience Median Ratio Mean Ratio of 30% of Care: SPP-1* Spending Per Hospital Patient of With Care: Responsiveness of Hospital Medicare Across All Staff Top 10% 37.29% 65.05% 80.01% 25 Cases Baseline Period 6 Performance Period 7 Pain Management Hospitals *** Hospitals *** 49.53% 70.28% 78.33% Outcomes of Care Outcomes of Care 0% 100 Surveys Communication about MedicinesFFY 2015 41.42% 62.88% 73.36% (Mortality/PSI-90): (Mortality/PSI-90): Payment Adjustment Baseline Period 6 Performance Period 7 Hospital Cleanliness & Quietness 44.32% 65.30% 79.39% 20% Outcomes of Care Outcomes of Care Quality Based Payment Discharge Reform Information (QBPR) Reference Guide 64.09% 85.91% 91.23% (CLABSI Measure): (CLABSI Measure): Baseline Period 6 2010 2011 2012 Performance Period 7 2013Overall Rating of Hospital 2014 2015 35.99% 2016 70.02% 84.60% Efficiency Value Based Purchasing (VBP) General Program Methodology J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D and Cost Efficiency of Care: Efficiency Process of Hospital of Care: Care: Measure Scoring ID Methods and Other Program Process Details of Care: for Measure the VBP Description Program Reduction Baseline Period 6 Performance Baseline Period 76 Performance Period 7 10% 25% As required by the ACA, VBP eligible hospitals Patient Experience contribute of Care: a set percentage of their Medicare Patient IPPS base Experience operating of Care: payments to a national VBP pool of dollars. All VBP pool Median dollars Ratio Mean Ratio of Notes: are then paid out, in full, based on each Baseline hospitals Period performance 6 under the program. Under the Performance Program, Period hospitals 7 are evaluated on a measure by measure basis and receive a SPP-1* Spending Per Hospital Patient With Medicare Across All 25 Cases The Affordable Care Act (ACA) of 2010 mandated the implementation score of an of inpatient 0-10 on hospital each measure value-based where purchasing they meet Outcomes (VBP) each of Care Program. measure's The VBP minimum Program is requirement. a pay-for-performance Next, similar Outcomes program measures of Care that links Medicare grouped into domains and overall domain scores are Hospitals *** payment to quality performance for acute care hospitals paid under calculated the Inpatient based Prospective on the Payment average System measure (IPPS). (HAI Measures): score Under in the VBP domain. Program, Domain using a scores subset of are the then quality combined data (HAI reported Measures): to find from a Total the Hospital Performance Inpatient Score (TPS). The FFY TPS 2016 serves as the basis for 0% Quality Reporting (IQR) Program grouped into quality domains, hospitals determining can earn points hospitals towards VBP a Total payments Performance Score (TPS). The TPS will serve as the basis for determining hospitals VBP payments gain/loss Baseline gain/loss Period 6 under the program. Using all program-eligible Performance hospitals' Period 7 Total Performance Scores, CMS Payment calculates Adjustment a VBP slope that under the program. In calculating the TPS, the scoring methodology redistributes provides points all to VBP hospitals contributions that achieve and high makes quality the standards program as budget well as points nuetral to hospitals nationally. that improve Each hospitals in the quality TPS multiplied measures evaluated. by the slope As determines payout percentages. The basic required by the ACA, a pool of funds, to be redistributed to hospitals Outcomes based on of their CareTPS, will be funded through an across-the-board reduction to Medicare Outcomes IPPS of Care base operating payments. The reduction for FFY 2015 is set at 1.5%. Critical Access Hospitals (CAHs), hospitals in Maryland (Mortality and Puerto & PSI-90): 2010 Rico, and small hospitals with insufficient numbers of measures (Mortality and/or cases & 2011 PSI-90): 2012 2013 2014 2015 2016 2017 are excluded from the program. Baseline Period 6 J F M A M J J A S O N D J F M A M J J A S Performance Period 7 O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D 1 The National Threshold is the minimum performance standard for each measure Measure and reflects the median Domain performance score (50th percentile) Total for all hospitals in the nation during the baseline period. The threshold Efficiency of Care: Payout Clinical Care Efficiency of Care: Adjustment - Process: Clinical Care - Process: Performance VBP Slope is used in combination with other factors to calculate hospital-specific achievement points. Baseline Period Performance Period Scores ScoresBaseline Period 6 Score Percentage Performance Period 7 Factor 2 The National Benchmark is the top performance standard for each measure reflects the average performance score for the top 10% of all hospitals in the nation during the baseline period. The benchmark Patient is used Experience in of Care: Patient Experience of Care: combination with other factors to calculate Notes: Baseline Period Performance Period hospital-specific achievement and improvement points. 3 The National Floor is for Patient Experience of Care measures only and each measure reflects the lowest measure score in the nation during the baseline Clinical Measure period. Care Score - The Outcomes: floor Calculation is used in combination with other factors to Clinical Care - Outcomes: calculate hospital-specific consistency points. Baseline Period Performance Period 4 Hospitals must meet minimum case and survey counts to be included For in each the VBP measure, Program. hospitals In addition can to receive the case a count score criteria, of 0-10 hospitals depending must on have where a minimum they fall of 4 in measures relation to to obtain national a Process performance of Care Domain standards (acheivement points) and/or how much FFY 2017 score, and 2 measures to obtain an Outcomes Domain score. they have improved from historical rates/ratios (improvement points). After Safety acheivement of Care (PSI-90): and improvement points are calculated, the higher of the two Safety determines of Care (PSI-90): final Payment Adjustment 5 Baseline Period Performance Period The Domain Weight is a weight applied to each domain to calculate a hospital-specific TPS. A hospital's weighted TPS is compared to TPSs for all hospitals to determine the hospital-specific gain or loss under the program. Beginning with FFY 2015, if hospitals do not meet the minimum requirements on one or more domain, the other domains are proportionately reweighted to determine a TPS. For the FFY 2015 program, hospitals are required to be scored on 2 of the 4 domains to be eligible for the program. Safety of Care (All other): 6 Baseline Period The Baseline Period is a specified period for which quality data collected under the IQR Program will be evaluated. The baseline period data is used for determining the national floors, thresholds, and benchmarks (excluding the efficiency measure) and is also used in combination with other factors to calculate hospital-specific improvement points. Efficiency and Cost Reduction: 7 The Performance Period is a specified period for which quality data collected under the IQR Program will be evaluated. The performance period data is used in combination with other factors to calculate hospitalspecific achievement and improvement points. Baseline Period *For these measures, lower scores are better. **Performance standards for the SPP-1 measure are based on the performance period and are not released in advance of the program. Patient Experience of Care - Consistency Points Calculation Total Performance Score: Original Domain Weighting 5 In addition to individual measure scores, the Patient Experience of Care domain scores hospitals based on how consistently they perform across all measures within the domain. Each hospital can receive between 0-20 consistency points based on the measure with the lowest Consistency Multiplier calculated as shown below: Domain Score and Total Performance Score (TPS) Calculation Individual measure scores for similar measures are combined to find overall Domain scores. On each domain, a minimum number of measures must be scored in order to be eligible for the domain. Once domain scores are calculated, a total performance score is calculated, combining domain scores based on the program year's applicable domain weights. For the FFY 2013 and 2014 programs, hospitals must be scored on all domains to be eligible for the program. For FFY 2015 and future program years, domain weights are reweighted proportionally when hospitals are not eligible for one or more domains. VBP Slope/Linear Function, Payout Percentage, Adjustment Factor, and Program Impact Calculation Once TPS scores are calculated for all eligible hospitals, the VBP slope is calculated such that all program contributions are paid out, making the program budget nuetral nationally. The VBP slope/linear function is used to determine each hospitals payout percentage (the amount of their contribution to the VBP pool they receive back) as well as final adjustment factors, and impacts under the program. Safety of Care (All other): Performance Period Efficiency and Cost Reduction: Performance Period Imbedded in CHA Quality Matrix is a Quality Program Reference Guide with complete program detail Measure details and links to specifications Year over Year Program Changes (Measures, Domains, Domain Weights) General Program Methodology Process of Care Patient Experience of Care Outcomes of Care Efficiency Process of Care Measure ID Measure Description National Floor 3 National Patient Experience of Care Outcomes of Care Efficiency Value Based Purchasing (VBP) Overview: FFY 2016 Program Safety of Care Clinical Care: Process Clinical Care: Outcomes Patient Experience of Care Efficiency and Cost Reduction FFY 2016 VBP Program Timeframes National Threshold 1 National Benchmark 2 Value Based Purchasing (VBP) Overview: FFY 2017 Program FFY 2017 VBP Program Timeframes Program Impact National Threshold 1 National Threshold 1 National Threshold 1 National Threshold 1 National Benchmark 2 National Benchmark 2 National Benchmark 2 National Benchmark 2 National Benchmark 2 Top 10% Hospitals *** Minimum Standards 4 Minimum Standards 4 Minimum Standards 4 Minimum Standards 4 Minimum Standards 4 CHA Member Value http://www.calhospital.org/resource/cha-federal-quality-measure-inventory 66

Proposed Updates to Medicare and Medicaid EHR Incentive Programs CMS proposes a 90-day reporting period for new and returning participants attesting to the Medicare and Medicaid EHR Incentive Program for CY 2018 CMS proposes changes to the Medicare and Medicaid EHR Incentive Programs to align with proposed ecqm requirements in the IQR program 2017: Report 6 of 16 available ecqms for two selfselected quarters of 2017 2018: Report 6 of 16 available ecqms for first three quarters of 2018 67

Accrediting Organization Changes CMS proposes a new requirement that AO s must release to the public via its website final accreditation survey reports (including statements of deficiencies) as well as acceptable plans of correction within 90 days after the information is released to the facility Three years worth of information All triennial, full, follow-up, focused and complaint surveys performed onsite or offsite Parallel change for diagnostic imaging centers 68

DRAFT CHA Comments Agree with stated goal of transparency, but need to reconsider approach. CMS lacks the legal authority to proceed at this time, and as such has time to more fully develop a proposal that makes sense Release of information must be understandable to the consumer and fair to the providers AO reports go far beyond the CMS required standards and as such any release of information must be limited (e.g. to CMS COPs and only Certified Medicare Providers) AO s would need time to prepare More stakeholder input needed 69

RFI on Regulatory Reform Improve CMS Survey Process More flexible life and safety code compliance, alignment with NFPA more frequently Update additional COPs and SOM as needed and be more timely; the pace of health care is rapid Look to improve transparency in all aspects of regulation development and implementation (more vetting of guidance in advance of release) Additional stakeholder workgroups designed to problem solve together 70

IPPS Model - Hospital Report Inpatient Prospective Payment System (IPPS) Federal Fiscal Year (FFY) 2018 Proposed Rule Analysis Estimated Change in Medicare Payments FFY 2017 Final Rule Compared to FFY 2018 Proposed Rule Sample Hospital Estimated FFY 2017 IPPS Payments Dollar Impact % Change Dollar Impact % Change Dollar Impact Provider Type Changes $0 0.0% $0 0.0% $0 0.0% Marketbasket Update (Includes Budget Neutrality) $3,303,600 2.6% $155,600 1.6% $3,459,300 2.5% ACA-Mandated Marketbasket Reductions ($1,385,100) -1.1% Not Applicable ($1,385,100) -1.0% Forecast Error Adjustment Not Applicable $0 0.0% $0 0.0% 21st Century Cures Act-Mandated Coding Adjustment $562,300 0.4% Not Applicable $562,300 0.4% 2-Midnight Rule Adjustment ($734,300) -0.6% ($57,800) -0.6% ($792,100) -0.6% Wage Index/GAF $1,232,200 1.0% $112,100 1.2% $1,344,300 1.0% DSH: UCC Payment Changes [1] ($1,442,300) -1.1% Not Applicable ($1,442,300) -1.0% Change in Hospital Specific Rate $0 0.0% $0 0.0% MS-DRG Updates ($27,900) 0.0% ($2,200) 0.0% ($30,100) 0.0% Quality Based Payment Adjustments [2] $109,300 0.1% $0 0.0% $109,300 0.1% Net Change due to Low Volume Adjustment $0 0.0% $0 0.0% $0 0.0% Estimated FFY 2018 IPPS Payments Operating Capital Total $129,014,000 $9,540,800 $138,554,800 $130,631,800 $9,748,500 $140,380,300 % Change Total Estimated Change FFY 2017 to FFY 2018 $1,617,800 1.3% $207,700 2.2% $1,825,500 1.3% The IQR marketbasket (MB) penalty for FFY 2018 is a 25% reduction to the full MB increase of 2.9%, or 0.725 percentage points. If this facility were to receive the penalty, the impact on FFY 2018 IPPS-specific payments would be: -$874,600. The EHR meaningful use marketbasket (MB) penalty for FFY 2018 is a 75% reduction to the full MB increase of 2.9%, or 2.175 percentage points. If this facility were to receive the penalty, the impact on FFY 2018 IPPS-specific payments would be: -$2,623,800. The bottom line impacts shown in the table above do not include the impact of the 2.0% sequestration reduction to all lines of Medicare payment authorized by Congress through FFY 2025. It is estimated that the impact of sequestration on FFY 2018 IPPS-specific payments would be: -$2,807,600. 1 Detail on DSH UCC Payment Changes The table to the right provides detail on DSH payment changes specific to the UCC component of the DSH program. National DSH program information is from the FFY 2017 IPPS final rule and FFY 2018 IPPS proposed rule. Hospital-specific UCC payment factors are from the FFY 2017 and FFY 2018 DSH Supplemental files published with those same rules. FFY 2017 FFY 2018 Change Total Funding for UCC Payments $10.797 Billion $12.002 Billion +$1.204 Billion ACA-Mandated Reduction -44.64% -41.99% 2.65% Redistribution Pool $5.977 Billion $6.962 Billion +$0.985 Billion Hospital Specific Payment Factor 0.001549 0.001123-0.000426 Hospital UCC Payment Amount $9,260,600 $7,818,300 ($1,442,300) 2 Detail on Quality-Based Payment Adjustments The table to the right provides impact estimates for performance under the Value Based Purchasing (VBP), Readmissions Reduction, and Hospital-Acquired Condition (HAC) Reduction Programs from FFY 2017 to FFY 2018. The proxy FFY 2018 Readmissions adjustment factors are from IPPS proposed rule Table 15, and were calculated by applying the FFY 2018 excess readmission ratios to claims data for the period July 1, 2012 to June 30, 2015. The list of hospitals that could potentially be subject to the FFY 2018 HAC Reduction Program penalty is derived from hospital quality data available with the 4th quarter 2016 update of Hospital Compare (CMS did not provide this list with the proposed rule). Although CMS has stated that no more than 25% of hospitals will be penalized under the HAC program, this analysis assumes that all hospitals at or over the 75th percentile breakpoint will receive a penalty. As a result, HAC penalties may be overstated. The FFY 2018 VBP adjustment factor is estimated based on hospital quality data available with the 4th quarter 2016 update of Hospital Compare (CMS' FFY 2018 VBP proxy adjustment factors from the proposed rule are based on a prior program year). The FFY 2017 VBP and Readmissions adjustment factors, as well as HAC flags, are from the FFY FFY 2017 FFY 2018 Base Operating Dollars Subject to Quality Programs $95,521,700 $97,858,200 VBP Adjustment Factor 0.9960 0.9977 Dollar Impact ($384,800) ($224,200) Readmissions Adjustment Factor 0.9948 0.9944 Dollar Impact ($496,700) ($548,000) HAC Reduction Program Flag (1.0% Penalty) N N Dollar Impact $0 $0 Net Impact of Quality Programs ($881,500) ($772,200) 71

IPPS Model - DSH Breakout 1 Detail on DSH UCC Payment Changes The table to the right provides detail on DSH payment changes specific to the UCC component of the DSH program. National DSH program information is from the FFY 2017 IPPS final rule and FFY 2018 IPPS proposed rule. Hospital-specific UCC payment factors are from the FFY 2017 and FFY 2018 DSH Supplemental files published with those same rules. FFY 2017 FFY 2018 Change Total Funding for UCC Payments $10.797 Billion $12.002 Billion +$1.204 Billion ACA-Mandated Reduction -44.64% -41.99% 2.65% Redistribution Pool $5.977 Billion $6.962 Billion +$0.985 Billion Hospital Specific Payment Factor 0.001549 0.001123-0.000426 Hospital UCC Payment Amount $9,260,600 $7,818,300 ($1,442,300) 72

Questions? 73