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ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM APR-DRG Payment System Implementation February 6, 2014 - DRAFT.

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Presentation on theme: "ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM APR-DRG Payment System Implementation February 6, 2014 - DRAFT."— Presentation transcript:

1 ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM APR-DRG Payment System Implementation February 6, DRAFT

2 TABLE OF CONTENTS Section 1»Overview of DRG Payment Model Section 2»AHCCCS Guiding Principles and Considerations Section 3» New DRG System Pricing Formulas Section 5» DRG Pricing Model Section 6» Policy Issues Section 7» Hemophilia and Blood Clotting Factors Section 8» Documentation and Coding Improvement Page 2

3 OVERVIEW OF DRG PAYMENT MODELS

4 OVERVIEW OF DRG MODELS Page 4 »DRG models generally pay a fixed amount, which is known in advance, on a “per discharge” basis, and based on the patient’s DRG assignment »DRG Patient Classifications Systems, or “Groupers”, assign each patient discharge to a DRG, based on the patient’s diagnoses, surgical procedures performed, age, gender, birth weight and discharge status »Each DRG has a relative weight factor, which recognizes the differences in resource requirements based on patient’s assigned DRG

5 OVERVIEW OF DRG MODELS Page 5 » Payment is generally determined by multiplying a hospital’s “base rate” by the assigned DRG’s relative weight factor » An “outlier” payment provision is typically incorporated to provide additional payments where the base DRG amount is not appropriate – generally cases with extraordinarily high costs » Payment models are also commonly modified to affect payment for specialty services or providers, including behavioral health, rehabilitation, neonatal, pediatric and others

6 OVERVIEW OF DRG MODELS Page 6 » There are two DRG grouper models that are broadly used by public and commercial payers for classifying patients into DRGs ›All Patient Refined DRGs (APR-DRGs) ›Medicare Severity DRGs (MS-DRGs) » While a number of state Medicaid programs rely on MS- DRGs for DRG payment models, the APR-DRG groper is considered to be a superior model for payments targeted to the Medicaid (i.e., non-aged) population

7 Page 7 Source: Quinn, K, Courts, C. Sound Practices in Medicaid Payment for Hospital Care. CHCS: November 2010, updated with current information by Navigant. OVERVIEW OF DRG GROUPERS

8 Page 8 Source: Quinn, K, Courts, C. Sound Practices in Medicaid Payment for Hospital Care. CHCS: November 2010, updated with current information by Navigant. OVERVIEW OF DRG GROUPERS

9 CMS-DRGs AP or Tricare DRGs APR-DRGs (Using or Moving Toward Use) MS-DRGs (Using or Moving Toward Use) Per Stay/Per Diem/Cost Reimbursement/Other Page 9 OVERVIEW OF DRG GROUPERS What Are Other State Medicaid Programs Doing?

10 OVERVIEW OF DRG GROUPERS Page 10 Benefits of Migrating to APR-DRGs Facilitates Measurement of Potentially Preventable Readmissions and Complications Enhances Recognition of Acuity Related to Specialty Hospitals, Including Children’s and Teaching Hospitals Enhances Recognition of Resources Necessary for High Severity Patients Reduces Occurrences of Outlier Cases Incorporates Age into Classification Process – Critical for Neonatal Cases Enhances Homogeneity of Classifications – Superior Measurement of Resources Enhances Homogeneity of Classifications – Superior Measurement of Resources

11 MS-DRGs designed for classification of Medicare patients … Source: CMS, “Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2008 Rates; Final Rule,” Federal Register 72:162 (Aug. 22, 2007): Page 11 “The MS-DRGs were specifically designed for purposes of Medicare hospital inpatient services payment…We do not have comprehensive data from non- Medicare payers to use for this purpose. The Medicare program only provides health insurance benefits for people over the age of 65 or who are disabled or suffering from end-stage renal disease. Therefore, newborns, maternity, and pediatric patients are not well represented in the MedPAR data that we used in the design of the MS–DRGs. We simply do not have enough data to establish stable and reliable DRGs and relative weights to address the needs of non- Medicare payers for pediatric, newborn, and maternity patients. For this reason, we encourage those who want to use MS-DRGs for patient populations other than Medicare [to] make the relevant refinements to our system so it better serves the needs of those patients.” OVERVIEW OF DRG GROUPERS

12 GUIDING PRINCIPLES AND CONSIDERATIONS FOR DESIGN AND IMPLEMENTATION BY AHCCCS

13 GUIDING PRINCIPLES AND CONSIDERATIONS Page 13 Guiding Principles for Evaluating Options Cost Effectiveness Is the option aligned with incentives for providing cost effective care? Access Does the option promote access to quality care, consistent with federal requirements? Equity Does the option promote equity of payment through appropriate recognition of resource intensity and other factors? Resource Recognition Does the option recognize measurable differences in resource requirements? Predictability Does the option provide predictable and transparent payment for providers and the State? Transparency and Simplicity Does the option enhance transparency, and contribute to an overall methodology that is easy to understand and replicate? Quality Does the option promote and reward high value, quality-driven healthcare services?

14 GUIDING PRINCIPLES AND CONSIDERATIONS Page 14 Other Design Considerations Budget Neutrality Funding is not unlimited – goal for design is to be budget neutral. Adaptability Does the option promote adaptability for future changes in utilization and the need for regular updates? Forward Compatibility Is the option flexible enough to support payment structures in anticipated future service models? Policy Is the option consistent with State and Federal policy priorities?

15 NEW DRG SYSTEM PRICING FORMULAS

16 NEW DRG SYSTEM PRICING FORMULAS Page 16 DRG Base Payment Outlier Add- on Payment (If applicable) Claim Payment += DRG Base Payment DRG Relative Weight DRG Base Rate x = x Policy Adjustor Note: DRG base payment is sometimes reduced on transfer and partial eligibility claims. DRG base payment formula Provider DRG Transition Multiplier x )(

17 DRG base rate » DRG base rates are based on a statewide standardized amount of $5, » The labor portion of the statewide standardized amount is adjusted by each hospital’s Medicare wage index ›Wage index is a factor that represents differences the relative hospital wage level in the geographic area compared to the national average hospital wage level ›Example base rate calculation: ($5, X labor portion X wage index) + ($5, X non-labor portion) = 5, DRG base rate » High volume “hold harmless” adjustment applied to providers who meet specific Medicaid volume criteria and are projected to incur a loss under the new system ›ADD SPECS Page 17 NEW DRG SYSTEM PRICING FORMULAS

18 DRG relative weights » DRG relative weight is a factor that represents the average resource requirements for each DRG ›DRG relative weight of 1.0 indicates average resource requirements (relative to all other inpatient services) » The new system APR-DRG relative weights are based on the “National Weights” calculated annually by 3M using a national dataset 15 million inpatient claims Page 18 NEW DRG SYSTEM PRICING FORMULAS ExampleAPR-DRGWeight Low weightDRG – Normal newborn Average weightDRG – Appendectomy High weightDRG – Heart transplant

19 USE OF POLICY ADJUSTORS Page 19 Policy adjustor factors »Key Medicaid services targeted for enhanced payment to ensure access to care »Policy adjustor factors applied to DRG base payments: ›Normal newborn DRGs: 1.55 factor ›Neonate DRGs: 1.10 factor ›Obstetric DRGs: 1.55 factor ›Psychiatric/Rehabilitation DRGs: 1.65 factor ›Other pediatric cases (age 18 and under): 1.25 factor »Policy adjustor values set at levels for each service to achieve same pay- to-cost ratio as statewide average (including allocated static payments) ›Exception: Psychiatric/Rehabilitation policy adjustor set to achieve current system spending

20 POLICY ADJUSTORS IMPACT Page 20 Policy adjustor modeled results

21 Outlier Add-on Payment (if claim qualifies) = Outlier Threshold DRG Marginal Cost Percentage Claim Cost x- ( ) Note: Outlier payments are only applied if claim cost is greater than the outlier threshold. NEW DRG SYSTEM PRICING FORMULAS Page 21 Outlier add-on payment formula DRG Base Payment Outlier Add- on Payment (If applicable) Claim Payment += Provider DRG Transition Multiplier x )(

22 Outlier add-on payment components » Outlier add-on payment made for extraordinary cost cases where the claim cost exceeds the outlier threshold for a DRG » Outlier threshold equal to the base DRG payment plus the fixed loss threshold ›Provider must incur a “fixed loss” on the claim for costs exceeding the base DRG payment ›Fixed Loss Amount is $5,000 for Critical Access Hospitals (CAH)/small rural providers and $65,000 for all other providers. » Outlier add-on payment calculated as the cost exceeding the outlier threshold, multiplied by the DRG marginal cost percentage ›DRG marginal cost percentage is 90% for burn DRGs and 80% for all other DRGs Page 22 NEW DRG SYSTEM PRICING FORMULAS

23 Provider DRG Transition Multiplier = Documentation and Coding Improvement Factor Transition Impact Factor x Note: Outlier payments are only applied if claim cost is greater than the outlier threshold. NEW DRG SYSTEM PRICING FORMULAS Transition adjustment factor formula DRG Base Payment Outlier Add- on Payment (If applicable) Claim Payment += Provider DRG Transition Multiplier x )(

24 Provider DRG transition multiplier components » Transition adjustment factor is a temporary (first two years only) provider-specific factor that limits the payment gain or loss under the new system based on the payment simulation model ›Year 1 factor limits the gain or loss to 33% of the full estimated gain/loss ›Year 2 factor limits the gain or loss to 66% of the full estimated gain/loss » Documentation and coding improvement factor is a statewide factor that is a preemptive adjustment for an expected 3 percent increase in DRG case mix over “real” case mix increases as a result of improved documentation and coding under the new system › factor in Year 1 ›Adjustments in future periods may depend on actual trends Page 24 NEW DRG SYSTEM PRICING FORMULAS

25 Page 25 Transfer DRG Base Payment = DRG National Average Length of Stay Claim Length of Stay +1 DRG Base Payment x / ( ) »Claim payment where an acute patient is transferred to another hospital is pro-rated based on claim length of stay »Transfer payment cannot exceed the full DRG base payment Transfer payment formula

26 AHCCCS DRG PRICING MODEL

27 Page 27 New system DRG payment simulation »DRG pricing model simulates payments under the new DRG system, including the DRG base payment, outlier payment and policy adjusters, using historical claims data »Model used to establish what the DRG base rates can be given all other payment methodology parameters, while maintaining budget neutrality »Model also compares simulated payments under the new system to payments under the current system and estimated provider costs, at the following levels: ›Provider level ›Service line level ›System aggregate

28 AHCCCS DRG PRICING MODEL Page 28 Standardized amount determination »DRG pricing model is based on FFY 2011 Arizona Medicaid FFS claims and managed care encounter data and Medicare cost report data for in- state providers and critical out-of-state providers »Funding pool for determination of budget neutrality is based on FFY 2011 model claim/encounter total reported payments, with reductions applied to reflect payment rate/methodology changes since 2011 »DRG base rates “solved for” to be budget neutral to current system payments ›DRG base rates result in aggregate simulated DRG payments that are approximately equal to FFY 2011 aggregate adjusted reported payments

29 POLICY ISSUES

30 POLICY ISSUES – ENROLLMENT CHANGE DURING HOSPITAL STAY Page 30 »Recipient may change payers during a single hospital stay, while maintaining Medicaid eligibility throughout entire stay »This may occur under a variety of scenarios including ›Enrollment change from fee-for-service to managed care plan ›Enrollment change from managed care plan to fee-for-service ›Enrollment change between managed care plans within the same program ›Enrollment change between managed care plans in different programs, for example moving from an Acute MCO to the Arizona Long Term Care System (ALTCS) »Services paid via DRG method will be paid by the payer to which the recipient is enrolled at the date of discharge »Providers to submit a claim to the appropriate payer

31 POLICY ISSUES – MEDICARE PART A BENEFITS EXHAUSTED Page 31 »In the event recipient exhausts Medicare Part A benefits during a single hospital stay, providers must submit a second claim for the Medicaid covered portion of the stay »A full DRG payment will be paid for the Medicaid claim

32 POLICY ISSUES – ADMINISTRATIVE DAYS Page 32 »AHCCCS may offer reimbursement for Medicaid recipients occupying a bed while not in need of care ›These days are referred to as administrative days »Administrative days must be prior authorized by AHCCCS »Administrative days will be reimbursed using a negotiated per diem rate »Reimbursement for administrative days will be separate from DRG reimbursement for acute care services and provider must bill such days on a separate claim

33 POLICY ISSUES – INTERIM CLAIMS Page 33 »A recipient may be in the hospital for an extended period of time »If patient stay exceeds a 29 day period, hospitals may submit interim claims related to the patient stay in increments of 30 days »Interim claims will be reimbursed under a per diem rate of $500 per day »Hospitals must submit a final claim associated with the patient stay upon the patient’s discharge – all previously submitted interim claims will be voided and final claim will be paid

34 POLICY ISSUES – RECIPIENT GAINS ELIGIBILITY AFTER ADMISSION Page 34 »A recipient may be ineligible for Medicaid upon admission, however, may become eligible for Medicaid during the hospital stay »Providers will be reimbursed for the Medicaid covered days of the hospital stay ›The DRG payment designed to cover the full hospital will be prorated based on the number of Medicaid covered days ›This prorated payment to providers will not exceed the full DRG payment »Only claims with dates of service where the recipient is an eligible member will be accepted

35 POLICY ISSUES – RECIPIENT LOSES ELIGIBILITY PRIOR TO DISCHARGE Page 35 »A recipient may be eligible for Medicaid upon admission, however, may lose eligibility for Medicaid prior to being discharged »Providers will be reimbursed for the Medicaid covered days of the hospital stay ›The DRG payment designed to cover the full hospital will be prorated based on the number of Medicaid covered days ›This prorated payment to providers will not exceed the full DRG payment »Only claims with dates of service where the recipient is an eligible member will be accepted

36 POLICY ISSUES – SAME DAY ADMISSION AND DISCHARGE Page 36 »A recipient may be admitted and discharged on the same day »Inpatient claims with a date of admission matching the date of the discharge will be paid under the reimbursement policy that is currently in place for AHCCCS, with one exception. »Maternity and nursery claims will be reimbursed under the AHCCCS Outpatient Hospital Fees Schedule Methodology (OPFS)

37 POLICY ISSUES – HEALTH CARE ACQUIRED CONDITIONS (HCAC’S) Page 37 »For claims paid via DRG methodology, AHCCCS will utilize DRG assignment to determine payment reductions in cases of health care acquired conditions »A present on admission (POA) indicator will continue to be required on all inpatient claims as the HCAC payment reduction policy only applies if the HCAC condition(s) were acquired in the hospital after admission »Under the DRG methodology, two DRGs will be assigned to every claim (“pre-HCAC” and “post-HCAC”). The DRG will the lower relative weight will be used to price the claim.

38 POLICY ISSUES – READMISSION POLICY Page 38 »A recipient may be readmitted to a hospital after receiving a service or treatment »For claims paid under DRG methodology, the Administration will identify certain readmission cases and conduct a medical review to determine if the readmission was preventable by the hospital »The following criteria will prompt a medical review ›Recipient is readmitted to the same hospital within 72 hours, and ›The base DRG assignment on the readmission claim must match the base DRG assignment on the initial claim, and ›The readmission claim has not been prior authorized

39 POLICY ISSUES – READMISSION POLICY Page 39 »Claims which meet the criteria described, will be pended for medical review »The payment associated with the readmission claim will be held until the completion of the medical review process »If the claim is determined to have been preventable by the hospital, the payment associated with the readmission claim will be disallowed »Alternatively, if upon the medical review it is determined the hospital would not have been able to prevent the readmission, the claim will be paid under DRG methodology

40 PRICING EXAMPLES

41 Claim / Encounter InformationValue Submitted Charges$84, Length of Stay (Admit through Discharge) 3 Medicaid Covered Days3 TransferNo Patient Age55 Provider IDXXXX DRG (knee joint replace)3022 Final Allowed AmountValue Covered Day Reduction Factor1.00 Provider DRG Transition Multiplier Final Base DRG Payment$8, Final Outlier Add-on Payment$0.00 Final Allowed Amount$8, Base Payment InformationValue DRG Relative Weight DRG Base Rate$5, High Medicaid Volume Hold Harmless adjustor 1.00 Max of DRG Service Adjustor And DRG Age Adjustor 1.00 Unadjusted DRG Base Payment$8, Outlier Add-on PaymentValue Hospital Specific CCR Claim Cost$19, Fixed Loss Amount$65,000 Outlier Threshold$73, Marginal Cost Percentage80% Unadjusted Outlier Add-on Payment$0.00 Page 41 Note: The Final Reimbursement Amount to providers is subject to other insurance payments and prompt pay adjustments PRICING EXAMPLE – BASIC EXAMPLE

42 Claim / Encounter InformationValue Submitted Charges$350,000 Length of Stay (Admit through Discharge) 10 Medicaid Covered Days10 TransferNo Patient Age55 Provider IDXXXX DRG (knee joint replace)3022 Final Allowed AmountValue Covered Day Reduction Factor1.00 Provider DRG Transition Multiplier Final Base DRG Payment$8, Final Outlier Add-on Payment$7, Final Allowed Amount$15, Base Payment InformationValue DRG Relative Weight DRG Base Rate$5, High Medicaid Volume Hold Harmless adjustor 1.00 Max of DRG Service Adjustor And DRG Age Adjustor 1.00 Unadjusted DRG Base Payment$8, Outlier Add-on PaymentValue Hospital Specific CCR Claim Cost$82, Fixed Loss Amount$65,000 Outlier Threshold$73, Marginal Cost Percentage80% Unadjusted Outlier Add-on Payment$7, Page 42 Note: The Final Reimbursement Amount to providers is subject to other insurance payments and prompt pay adjustments PRICING EXAMPLE – OUTLIER EXAMPLE

43 Claim / Encounter InformationValue Submitted Charges$84, Length of Stay (Admit through Discharge) 3 Medicaid Covered Days3 TransferNo Patient Age8 Provider IDXXXX DRG (knee joint replace)3022 Final Allowed AmountValue Covered Day Reduction Factor1.00 Provider DRG Transition Multiplier Final Base DRG Payment$10, Final Outlier Add-on Payment$0.00 Final Allowed Amount$10, Base Payment InformationValue DRG Relative Weight DRG Base Rate$5, High Medicaid Volume Hold Harmless adjustor 1.00 Max of DRG Service Adjustor And DRG Age Adjustor 1.25 Unadjusted DRG Base Payment$11, Outlier Add-on PaymentValue Hospital Specific CCR Claim Cost$19, Fixed Loss Amount$65,000 Outlier Threshold$76, Marginal Cost Percentage80% Unadjusted Outlier Add-on Payment$0.00 Page 43 Note: The Final Reimbursement Amount to providers is subject to other insurance payments and prompt pay adjustments PRICING EXAMPLE – MAXIMUM POLICY ADJUSTOR EXAMPLE

44 Claim / Encounter InformationValue Submitted Charges$84, Length of Stay (Admit through Discharge) 1 Medicaid Covered Days1 TransferYes Patient Age55 Provider IDXXXX DRG (knee joint replace)3022 Final Allowed Amount0Value Covered Day Reduction Factor1.00 Provider DRG Transition Multiplier Final Base DRG Payment$5, Final Outlier Add-on Payment$0.00 Final Allowed Amount$5, Base Payment InformationValue DRG Relative Weight DRG Base Rate$5, High Medicaid Volume Hold Harmless adjustor 1.00 Max of DRG Service Adjustor And DRG Age Adjustor 1.00 DRG National Average LOS3.30 Unadjusted DRG Base Payment$5, Outlier Add-on PaymentValue Hospital Specific CCR Claim Cost$19, Fixed Loss Amount$65,000 Outlier Threshold$70, Marginal Cost Percentage80% Unadjusted Outlier Add-on Payment$0.00 Page 44 Note: The Final Reimbursement Amount to providers is subject to other insurance payments and prompt pay adjustments PRICING EXAMPLE – TRANSFER EXAMPLE

45 Claim / Encounter InformationValue Submitted Charges$95, Length of Stay (Admit through Discharge) 5 Medicaid Covered Days2 TransferNo Patient Age55 Provider IDXXXX DRG (knee joint replace)3022 Final Allowed AmountValue Covered Day Reduction Factor0.60 Provider DRG Transition Multiplier Final Base DRG Payment$5, Final Outlier Add-on Payment$0.00 Final Allowed Amount$5, Base Payment InformationValue DRG Relative Weight DRG Base Rate$5, High Medicaid Volume Hold Harmless adjustor 1.00 Max of DRG Service Adjustor And DRG Age Adjustor 1.00 Unadjusted DRG Base Payment$8, Outlier Add-on PaymentValue Hospital Specific CCR Claim Cost$22, Fixed Loss Amount$65,000 Outlier Threshold$73, Marginal Cost Percentage80% Unadjusted Outlier Add-on Payment$0.00 Page 45 Note: The Final Reimbursement Amount to providers is subject to other insurance payments and prompt pay adjustments PRICING EXAMPLE – COVERED DAY EXAMPLE

46 » Recipient is enrolled in the Federal Emergency Services Program (FES) » Recipient gains Medicaid eligibility after admission into the hospital » Recipient loses Medicaid eligibility after admission and before discharge PRICING EXAMPLE – REASONS FOR COVERED DAYS ADJUSTMENT

47 » The Final Reimbursement Amount will be calculated as: » Final Reimbursement Amount = Final Allowed Amount - Other Insurance Payment + / - Prompt Pay Adjustment Note: The current prompt pay policy (slow pay penalties and quick pay discounts) will continue to apply. PRICING EXAMPLE – FINAL REIMBURSEMENT AMOUNT

48 DOCUMENTATION AND CODING IMPROVEMENT

49 Page 49 The Need for a Documentation and Coding Adjustment: » Documentation and Coding Improvement (DCI) is necessary, and as such are expected to be made by providers as an appropriate response to the coding requirements under the APR-DRG model » Because the same level of coding rigor was not required for payment purposes under the legacy per diem model, AHCCCS expects that case mix will increase as a result of DCI coding once the system is implemented – beyond actual increases in acuity » To maintain budget neutrality, it will be necessary to incorporate an adjustment to offset increases in case mix after implementation » AHCCCS expects that actual payments, in the aggregate, will be greater than simulated amounts, and as such, resulting actual payments will remain budget neutral DOCUMENTATION AND CODING IMPROVEMENT

50 Page 50 Preemptive adjustment »Up-front 3 percent adjustment for expected Documentation and Coding Improvement (DCI) ›Simulate a 3% casemix increase and determine an adjustment factor (“DCI Factor”) that would be necessary to maintain budget neutrality ›Claim allowed amounts (including the base DRG payment, outlier payment or transfer payment) will be reduced by the DCI factor ›With a 3% casemix increase, the DCI factor is DOCUMENTATION AND CODING IMPROVEMENT

51 Page 51 DCI measurement »Periodically (and based on the availability and completeness of data) AHCCCS will measure actual increases or decreases in case mix attributable to DCI – or “Casemix Differential” »Based on measurement - ›AHCCCS intends to set the DCI Factor for the next year based on actual measured Casemix Differential ›If measured Casemix Differential is significantly different (more than 1 percentage point higher or lower) from the initial 3% assumption, further adjust the DCI Factor for the next year to prospectively correct for the previous year(s) DOCUMENTATION AND CODING IMPROVEMENT

52 Page 52 DCI measurement (continued) »Measure actual increases in acuity using Medicare’s MS-DRG grouper and Medicare relative weights – ›Assumes that measuring actual changes in casemix using MS-DRGs is a reasonable proxy for measuring actual change in acuity ›Assumes that hospitals have already responded to documentation and coding standards needed for payment under MS-DRGs »Measure increases in acuity using APR-DRG grouper and relative weights using the same encounters »The Casemix Differential is the difference between MS-DRG and APR- DRG casemix increases – ›For example, for the same 12 month period, if MS-DRG casemix increases 1%, and APR-DRG casemix increases 4%, the Casemix Differential – the amount attributable to DCI – is 3 percentage points DOCUMENTATION AND CODING IMPROVEMENT

53 Year 1 Claims (DOS 10/1/14 – 9/30/15) Year 2 Claims (DOS 10/1/15 – 9/30/16) Apply DCI Factor to Reflect 3% Reduction in CMI Allowable Corridor is from 2% to 4% Apply DCI Factor –Modify Based on Year 1 Measurement Increase or Decrease Factor to Correct for Year 1 Over or Underpayment 10/1/14 10/1/15 10/1/1710/1/16 Measure CMI Differential Year 3 Claims (DOS 10/1/16 – 9/30/17) 10/1/18 Apply DCI Factor –Modify Based on Year 2 Measurement Increase or Decrease Factor to Correct for Year 2 Over or Underpayment DOCUMENTATION AND CODING IMPROVEMENT Example Scenario Page 53

54 Page 54 Example 10/1/15 CMI differential measurement » AHCCCS intends to measure CMI Differential using available Year 1 encounters. » Set Year 2 DCI Factor to be equal to measured Year 1 CMI Differential » Adjust Year 2 DCI Factor to correct for Year 1 overpayment or underpayment: ›If measured Year 1 CMI Differential is within allowable corridor, make no adjustment ›If measured Year 1 CMI Differential exceeds 4%, increase Year 2 DCI Factor by the difference between actual measured and 4% ›If measured Year 1 CMI Differential is less than 2%, decrease Year 2 DCI Factor by the difference between actual measured and 2% DOCUMENTATION AND CODING IMPROVEMENT

55 Page 55 Example 10/1/16 CMI differential measurement » AHCCCS intends to measure CMI Differential using available Year 2 encounters › Alternatively use available encounters with DOS between 10/1/14 and date of measurement » Set Year 3 DCI Factor to be equal to measured Year 2 CMI Differential » Adjust Year 3 DCI Factor to correct for Year 2 overpayment or underpayment: › If measured Year 2 CMI Differential is within allowable corridor, make no adjustment › If measured Year 2 CMI Differential exceeds Year 2 DCI factor by more than 1 percentage point, increase Year 3 DCI Factor by the difference › If measured Year 2 CMI Differential is more than 1 percentage point below the Year 2 DCI factor, decrease Year 2 DCI Factor by the difference DOCUMENTATION AND CODING IMPROVEMENT

56 Page 56 Example 10/1/17 CMI differential measurement » Rebase System Go Live – new rates become effective » Begin rebasing process 9-12 months prior to go live date » Use most current 12 months of complete encounter data » Based on results of previous analyses, determine need for additional DCI adjustments for 10/1/17, and going forward. DOCUMENTATION AND CODING IMPROVEMENT


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