1. Washington State Hospital Association The Medicaid Rebasing: What It Will Mean For Your Hospital Webcast February 24, 2014

2. Washington State Hospital Association Presenters Scott Palafox Health Care Authority Section Manager Hospital Finance & Premium Section Dylan Oxford Health Care Authority Hospital Rates Manager Hospital Finance & Premium Section Claudia Sanders Washington State Hospital Association Senior Vice President Policy Development Andrew Busz Washington State Hospital Association Policy Manager, Finance Policy Development

3. Washington State Hospital Association History

4. Institutional Payment Rebase and Implementation February 24, 2014

5. Topics Background Inpatient Services Outpatient Services Rebasing Issues System Changes Next Steps 5

6. Background Why Rebase? – Update payment methods – Analyze current payment incentives – Improve specificity and reporting Goals – Budget neutrality – Establish stronger methods – Focus on Medicaid services 6

7. Guiding Principles Access Ensure Medicaid clients have access to quality care. Quality Promote and reward high value, quality driven healthcare services. Efficiency Provide incentives for efficient care. Equity Recognize resource intensity for all providers. Predictability Provide predictable, understandable payment methods. Ensure payments can be replicated. Transparency Ensure payment methods and decisions are transparent. 7

8. Taskforce Meetings Designed to seek hospital input and improve transparency Topics – Relative weights – Policy adjusters – Reviewing and refining payment models HCA would like to thank all of the hospitals for participating! 8

9. Inpatient All Patient Refined Diagnosis Related Groups (APR-DRG) – ICD-10 Compliant – Severity of Illness (SOI) Increases specificity on services Relies on service intensity to determine payment New targeted implementation date is July 1 st, 2014 9

10. Outliers Outliers will be determined based on a fixed loss threshold of $40,000 – Loss is determined as the cost beyond base DRG payment – Cost is estimated based on billed charges x RCC The outlier adjustment factor will vary based on SOI – SOI 1 or 2 will pay 80% of costs above threshold – SOI 3 or 4 will pay 95% of costs above threshold 10

11. Outpatient Enhanced Ambulatory Patient Grouping (EAPG) – Extend OPPS methodology to additional services – Larger service groups Pays more for major services, less for ancillary Removes dependency on Medicare New targeted implementation date is July 1 st, 2014 11

12. Rebasing Issues Psychiatric Services – HCA shifted $3.5M from acute inpatient services to inpatient psychiatric services at acute hospitals Indirect Medical Education (IME) on Outpatient – IME is currently applied to inpatient services – HCA did not incorporate this in the final rates Transfer payments – An issue was identified with transfers in the claims baseline – HCA recalculated the baseline payment amounts 12

13. Rebasing Issues (cont.) Budget Neutrality – Caseload intensity – Population change – Claim coding Temporary Budget Neutrality Adjustment – HCA will apply a 3% downward adjustment to FFS rates Measuring – HCA will begin analyzing neutrality six months after implementation 13

14. System Changes Inpatient Relative WeightsHCA will use standard 3M relative weights, instead of Washington state specific rates. DRG ExclusionsTransplants, bariatric surgeries, and claims which group to psychiatric, detox, or rehab DRGs will not pay DRG. Rate UpdatesHCA will update the rates annually, beginning July 2015. Rate updates will include new wage and education adjustments. Medical EducationHCA will not change the medical education adjustment in inpatient rates. Charge CapPayments will be limited to billed charges. Caesarean deliveryHCA will pay Caesarean deliveries at the corresponding relative weight(s). 14

15. System Changes Outpatient Relative WeightsHCA will use standard 3M relative weights. DentalHCA will pay dental services through EAPG. EAPG exclusionsDurable Medical Equipment and Physical Therapy & Rehabilitation will not pay EAPG. Pediatric ServicesHCA will apply an adjustment of 1.35 for EAPG services to children under the age of 18 at any hospital. Cancer DrugsHCA will apply an adjustment of 1.10 for chemotherapy and pharmacotherapy EAPGs. Consolidated and Ancillary EAPGs HCA will pay at zero on procedures grouped to consolidated and ancillary EAPGs based on default EAPG settings. 15

16. Next Steps Targeted implementation date of July 1 st, 2014 Hospital specific data requests Communication with MCOs Update Rules (WAC, SPA, MPG) System readiness 16

17. Washington State Hospital Association Questions and Comments

18. Washington State Hospital Association For More Information Scott PalafoxDylan OxfordHealth Care Authority Section ManagerHospital Rates ManagerHospital Finance & Premium Section (360) 725 1848(360) 725 2130 ScottPalafox [at] hca.wa [dot] govDylanOxford [at] hca.wa [dot] gov Andrew Busz Washington State Hospital Association Policy Development Team Policy Director, Finance (206) 216 2533 AndrewB [at] wsha [dot] org