0. Traci La Valle, Vice President, Maryland Hospital Association*
07/16/96
Overview of Maryland’s Quality Programs and Performance Based Payment Methodologies
Alyson Schuster, Associate Director, Health Services Cost Review Commission
Traci La Valle, Vice President, Maryland Hospital Association
August 21, 2015
I put in order of talking, but can reverse to match agenda if preferred *

1. Presentation Overview
Introduction
Current Programs and Year 1 Progress
HSCRC Current Priorities/Future Direction
Maryland Quality Approach Compared to National Medicare
MHA Quality Strategy and Rate Year 2018 Priorities
ICD-10 Transition and Grouper Versions

2. Maryland Hospitals are Exempt from CMS Quality Programs
All-payer demonstration agreement provides exemptions from CMS Hospital Acquired Conditions policy and CMS readmissions policies provided that Maryland meets annual performance targets.
Exemption from CMS Value Based Purchasing (VBP) program requires annual exemption request and performance evaluation.
Failure to meet quality tests does not result in loss of waiver, but may lead to loss of exemption from national quality programs.

3. Introduction
Maryland’s hospital quality initiatives are part of overall efforts in the State to achieve the three-part aim of better care for individuals, better health for populations, and reduced costs for all patients.
Since 2008, Maryland has steadily expanded the magnitude and scope of its quality payment reform initiatives to ensure they remain consistent in design and intent with Medicare’s quality programs.
In addition, the HSCRC has implemented several payment strategies designed to reduce utilization and readmissions, and improve the efficiency and effectiveness of hospital care in the State.
The HSCRC performance-based payment methodologies, magnitudes “at risk”, and global payment arrangements are important policy tools for to promote hospital quality improvement.

4. New Waiver Model
The new waiver contract requires that the breadth and impact of Maryland’s quality programs must meet or exceed Medicare’s quality programs in terms of measures and aggregate revenue at-risk.
The new waiver contract also sets specific targets for complications, readmissions, and overall cost-savings:
30% reduction in hospital-acquired conditions across 65 PPCs
Reduction in Medicare readmissions rate to at or below national rates
$330M in Medicare savings under the national Medicare trend

5. Maryland Quality-Based Payment Programs
QBR (Quality Based Reimbursement)
Clinical Process of Care Measures
Patient Experience of Care (HCAHPS)
Mortality, Outcomes
MHAC (Maryland Hospital-Acquired Conditions)
65 Potentially Preventable Complications
Readmissions Reduction Incentive Program
30-day, all-cause, all hospital readmissions
Additional Performance-Based Payment Adjustments
Readmission Shared Savings
GBR Efficiency Adjustments

6. Quality Programs for FY 2017 Rates
QBR (2% penalty, 1% reward)
Changes in domain weighting, addition of more infection measures, and emphasis on HCAHPs
Relative scaling eliminated; predictable payment adjustments linked to score
MHAC (3% penalty, 1% reward)
Updated thresholds and benchmarks; CY2015 performance compared to FY2014 base period
7% minimum statewide improvement target
Readmissions (2% penalty, 1% reward)
Added scaled penalties of up to 2% and rewards of up to 1%
9.3% minimum reduction comparing CY2013 to CY2015

7. Potentially Avoidable Utilization (PAU)
Definition: “Hospital care that is unplanned and can be prevented through improved care coordination, effective primary care and improved population health.”
PAU
Potentially Avoidable Admissions
Readmissions/Revisits
Hospital Acquired Conditions
Components of PAU
HSCRC Calculates Percent of Revenue Attributable to PAU

8. Year 1 Progress

9. Monthly Risk-Adjusted PPC Rates
Still need to check for most up-to-date data
Do you think I should also show slides with anonymized hospital improvement bar graph?

10. Monthly Risk-Adjusted Readmission Rates

11. HSCRC Current Priorities
Readmissions: Modify payment methodology to measure both improvement and attainment.
Socio-demographic factors, Out-of-State Readmissions
MHAC: Update benchmarks, thresholds, and normative values based on FY2015 base period.
3M Clinical Criteria Subgroup, Coding audits, ICD-10
QBR: QBR Subgroup meeting to review FY18 measures and domain weighting.
PSI-90 may be suspended due to ICD-10, efficiency measure, patient and caregiver-centered experience of care/care coordination measures
PAU: Consider additional measures for PAU methodology

12. Future Direction: Patient Centered Outcomes
Measures specific to certain patient population
Cancer, Orthopedic Surgery, Colonoscopy, Deliveries etc.
Composite measures with different domains (e.g., STAR Rating)
Episode cost, quality outcomes, satisfaction, efficiency
Population based
Population health, provider alignment, cost per capita
Electronic Medical Records- clinical outcomes (Diabetes, hypertension control, etc.)
Develop measures meaningful to patients and providers, focused on outcomes (especially patient-reported outcomes), safety, patient experience, care coordination, appropriate use, and cost

13. Maryland P4P Risk Compared to the Nation
All-payer demonstration contract language
The state must ensure that the aggregate percentage of regulated revenue at risk for quality programs…is equal to or greater than the aggregate…at risk under national Medicare quality programs.
Compares the Maryland all-payer percent of inpatient revenue to the national Medicare inpatient revenue
Includes readmissions reduction policy and readmissions shared savings; complications; QBR/VBP; and for Maryland, PAU in the demographic adjustment
Federal regulators interpret this language to require 3 separate ways of evaluating amount at risk
Percent at risk for all programs, including readmissions, complications, and QBR/VBP is equivalent. Currently at 6 percent.
“Realized risk” or the percent of inpatient revenue actually awarded or penalized is equivalent to the nation. In this measure, it’s the absolute value of the risk, so a 1 percent reward and a 1 percent penalty add up to 2 percent. Currently, Maryland is estimated to be 0.23 percent above nation.
Cumulative percent at risk beginning with FY Currently Maryland risk is percent above national

14. Maryland Quality Approach Compared to National
Penalties
Rewards
Lowest quartile
Maryland sets performance expectations tied to specific, pre-determined payment consequences. National quality programs do not attempt to define performance targets, instead they penalize the lowest quartile of hospitals, regardless of score
All Maryland programs include penalties and rewards with the possibility that all hospitals achieving performance expectations can receive payment rewards. In Maryland, quality programs are designed to improve performance at all hospitals; not explicitly for the purpose of cost savings
Nationally, only the VBP program provides rewards; national HAC and readmissions programs are penalty-only and count penalties as “cost savings” to the system
Maryland performance targets are clear, predictable, and prospective
National-rank hospitals and penalize. Hard to predict in advance whether your hospital is getting a penalty

15. MHA Quality-Related Policy Strategy
Focus on the complications that really make a difference in health care outcomes, health care costs and people’s lives
Sharpen focus on Medicare readmissions and continue to measure all-payer readmissions
Structure payment policies to support good performance on those metrics
Continue to build on progress in reducing complications and readmissions, where it is appropriate and beneficial to patient outcomes
Questions about how to focus the MHAC program in CY Where are the clinical opportunities? Reducing complications reduces unnecessary utilization and cost of care. Do we need a statewide MHAC target next year, or is it better to focus incentives at the individual hospital level?
On readmissions, should the payment policy include measurement of Medicare and all-payer?

16. MHA Quality Priorities for FY 2018 (CY 2016 Measurement)
Readmission payment policies
Recognize attainment and improvement
Important to consider other factors in evaluating actual readmission rate
Consider: payer-mix, presence of a behavioral health or substance abuse diagnosis, patient’s age and socioeconomic status, and possibly others in addition to variation by case-mix and severity of illness
Coordinate with HSCRC socio-demographic sub-group and other work HSCRC may be doing separately to revise readmissions policy
Maintain incentive to address health disparities
Hospitals must be able to monitor status with monthly data
Complications
Maryland hospitals have met the 30% MHAC reduction target
Focus on PPCs with greatest clinical opportunity to improve patient outcomes and cost savings
Continue to work with hospitals and 3M on MHAC definitions
Readmissions: consider the socio-demographic factors, but be careful not to set expectations too low. This is were there are the most opportunities to improve care outcomes and to reduce health disparities

17. Enhance Readmissions Policy
The goals of the MHA recommendations are to:
Develop a readmissions policy that provides additional incentives beyond global budgets to lower the statewide readmission rate to the national rate
Take into account factors that hospitals can control and recognize other factors, especially sociodemographic, that are harder to influence
Ensure hospitals that have achieved a clinically optimal number of readmissions are not penalized by the program
Validating the measurement of Maryland Medicare readmission rate compared to the nation is a separate, but related, work effort.

18. Enhance Readmissions Policy
Barriers:
Data limitations, especially on the social factors that influence readmissions, such as support at home, health literacy, family income
If this was easy, it would already have been done
Threshold question: do we think we can improve on existing methodology?

19. Enhance Readmissions Policy
Patient Level Risk
Age
Prior utilization
SNF resident
Economic
Health literacy
Family and social support
Environmental Risk
Resources available in community
Proximity to state border (some readmissions not counted)
Hospital Composite Risk
A composite score may be a qualitative risk category (high, medium, low) or an index of risk
Hospitals with similar composite risks (category or percentile range)
Similar readmission policy targets
Evaluate risk-adjusted readmission rates within broad ranges
Adjust penalties based on composite risk

20. MHAC and Readmissions Policy Timeline
Data available through April
July
Joint Quality Finance meets August 26
August
Share recommendations with Council on Financial Policy on September 17
September
Joint Quality Finance meets October 6
Share recommendations with CCQI on October 13
Share recommendations with HSCRC staff
October
HSCRC staff proposes draft recommendations
November
Commissioners approve final recommendations
December
January 1 New performance year begins

21. ICD-10 Transition: Timing and Grouper Versions
Payment methodologies relay on APR and PPC software
APR-DRG, SOI and PPC assignment directly impact HSCRC market shift and MHAC payment methodologies
APR-DRG, SOI, and Risk of Mortality assignment is used to risk adjust measurement of readmission rates and mortality rates (within QBR)
CPT assignment also affects PQI identification, which is included in the HSCRC’s demographic adjustment to Global Budgets
Facts about 3M software versions
Version 33, available October 2015, only accepts I-10; there is no I-9 version 33 grouper. Version 33 maps to version 32 in I-9.
Version 33 will include the most updated ICD-10 codes. Version 32 will not be maintained after October 2015
Version 34 available October 2016, incorporates new logic
There will be new PPC inclusions and exclusions to learn in version 34

22. ICD-10 Transition: Timing and Grouper Version Options
FY 2014
Base Year
Version 32
I-9
Version 32 logic
CY 2015
(1Q in I-10)
Performance Year
Version 32 (Jan-Sept)
Version 33 (Oct-Dec)
I-9 (Jan-Sept)
I-10 (Oct-Dec)
Version 32/33 logic
FY 2015 (I-9)
CY 2016 (I-10)
Performance Yr
Version 33
I-10
*FY 2016
(1Q in I-9)
Likely to modify
Version 33 or 34 with modified base period *(Oct 2015-Sept 2016)
Version 32/33 logic or Version 34 logic
CY 2017
Version 33 or 34, TBD based on review of data grouped under each version
FY 2017 (I-10)
Most current version
CY 2018

23. Speaker Biographies
Alyson Schuster, PhD, MPH, MBA is the Associate Director of Performance Measurement at the Health Services Cost Review Commission. In this role, Alyson oversees hospital quality-based payment initiatives designed to improve hospital quality and reduce costs. Prior to joining the HSCRC, she managed a team of analysts responsible for implementing and evaluating care management interventions at a managed care organization. Alyson has a doctorate in health services research from Johns Hopkins Bloomberg School of Public Health.
Traci La Valle is Vice President, Rate Setting, at the Maryland Hospital Association where she advocates for Maryland's hospitals, health systems, communities, and patients primarily before state regulatory bodies. In her role, she works to ensure fair and reasonable hospital payment policies that provide appropriate incentives to improve quality and reduce avoidable costs. In her twelve years at MHA, she has held progressively responsible roles covering a range of issues that affect Maryland hospitals’ finances. Most recently, she worked with hospital representatives and state regulators to restructure the incentives to reduce hospital complications and is currently revising policies related to readmission measurement and related payment incentives. Traci has a Master of Public Health and a Certificate in Health Finance and Management from Johns Hopkins School of Public Health, and a Bachelor of Science in Physical Therapy from Temple University. 

24. Appendix

25. Inpatient Revenue at Risk on Quality
Program
Amount at Risk
HSCRC FY 16
CY 2014 Performance
CMS FFY 16
HSCRC FY 17
CY 2015 Performance
CMS FFY 17
QBR/VBP 1%
All-payer scaling
1.75%
Medicare scaling (positive and negative adjustments possible)
+1% to -2%
Pre-set targets linked to payment adjustments 2%
Complications
+1 to -4%
All-payer pre-set targets linked to payment adjustments
Medicare penalty (lowest quartile of hospitals are penalized; no credit for improvement)
+1% to -3% proposed
Readmissions Reduction Policy
0.5% All-payer reward potential 3%
Medicare penalty for “excess readmissions” (negative adjustments only; no credit for improvement)
HSCRC policy proposed +1% to - 2% to based on pre-set 2-year improvement target
*Readmissions Shared Savings
-0.33% incremental increase from prior year
All-payer
-0.2% incremental risk
Total
5.83%
5.75%
7.0% (1)
6.0%
Inpatient Revenue at Risk on Quality
This is example of the first “test” and the most familiar. Important points:
National policies are all comparing hospitals to each other—so, no determination of targets or goals in advance
Lowest hospitals get penalized and they don’t know until end of year.
These differences are important b/c they begin to identify how the Maryland programs are structured in a fundamentally different way compared to national.
(1)Individual hospital risk / maximum penalty limited to 3.5% of total revenue
*Readmissions shared savings amounts are permanent adjustments, however, the statewide average amount from the prior year is added back in the annual payment update calculation. The annual statewide incremental increase is 0.33% of inpatient revenue.

26. Maryland Hospitals’ Pay for Performance Risk is Higher Compared to the Nation
For Maryland, penalties affect all inpatient revenue under global budgets
For hospitals in the rest of the nation, penalties only affect Medicare inpatient revenue
Example Maryland Hospital With $200M in Annual Revenue*
$120M in Inpatient Revenue
2017
Program
% at Risk
Dollar Value
MHAC
3.00%
$3.6M
Readmissions
2.00%
$2.4M
QBR
Total
7.00%
$8.4M
Example National Hospital With $200M in Annual Revenue*
$120M in Inpatient Revenue
$48M (40% of Inpatient Revenue) from Medicare
$29M (~60% of Medicare inpatient Revenue) from base MS-DRG
*Readmission penalties apply to full Medicare payment
2017
Program
% at Risk
Dollar Value
HAC
1.00%
$0.3M
Readmissions*
3.00%
$1.4M
VBP
2.00%
$0.6M
Total
6.00%
$2.3M
This example shows the impact of the all-payer nature of the Maryland demo and the importance of structuring the quality programs differently, and in a more sophisticated and targeted way than the national programs.
When the dollar value of potential penalties is considered against total annual revenue, the Maryland hospital in this example would have $8.4 million or 4.2 percent of total revenue at risk versus $2.3 million or 1.2 percent of revenue at risk for the same hospital located elsewhere in the nation
The 3.5 percent of total revenue cap would limit the risk to $7.0 million--still a substantially higher amount of risk compared to hospitals under national Medicare programs.
*Revenues are hypothetical and roughly based on known proportions of inpatient revenue, Medicare inpatient revenue and base MS-DRG revenue relative to total hospital revenue

27. Increased Revenue At Risk for Quality
Under new waiver, aggregate at-risk based on quality must meet or exceed CMS programs.
Maryland - Potential Inpatient Revenue at Risk absolute values
% Inpatient Revenue
FY 2014
FY 2015
FY2016
FY2017
MHAC
2.0%
3.0%
4.0%
RRIP
0.5%
QBR
0.50%
1.00%
Shared Savings
0.41%
0.86%
0.86%*
Global Budget Revenue Potentially Avoidable Utilization:
MD Aggregate Maximum At Risk
3.41%
5.22%
7.22%
8.72%
*Estimated numbers based on current policy.