“Reaching across Arizona to provide comprehensive quality health care for those in need” AHCCCS Hospital Provider Meeting February 22, 2012

“Reaching across Arizona to provide comprehensive quality health care for those in need” Our first care is your health care arizona health care cost containment system AHCCCS Update

“Reaching across Arizona to provide comprehensive quality health care for those in need” AHCCCS Budget Status  Implemented $2.5 billion in budget changes – 21% reduction in FY 2012  Medicaid in FY 2012 is currently balanced  Funds need to be moved between agencies  Risks include ongoing lawsuits – one resolved  Awaiting final approval on 25 day limit  FY 2013 AHCCCS GF Request –historically low  Growth returns in FY 2014 & 15 with ACA expansion  Short term savings (rates–services-benefits) maxed Our first care is your health care arizona health care cost containment system 3

“Reaching across Arizona to provide comprehensive quality health care for those in need” Our first care is your health care arizona health care cost containment system 4 Total AHCCCS Population

“Reaching across Arizona to provide comprehensive quality health care for those in need” Our first care is your health care arizona health care cost containment system 5

“Reaching across Arizona to provide comprehensive quality health care for those in need” Our first care is your health care arizona health care cost containment system 6 AHCCCS Budget Request Increases

“Reaching across Arizona to provide comprehensive quality health care for those in need” Our first care is your health care arizona health care cost containment system 7 AHCCCS Spending

“Reaching across Arizona to provide comprehensive quality health care for those in need” Our first care is your health care arizona health care cost containment system 8

“Reaching across Arizona to provide comprehensive quality health care for those in need” Our first care is your health care arizona health care cost containment system Future Challenges 9

“Reaching across Arizona to provide comprehensive quality health care for those in need” Our first care is your health care arizona health care cost containment system 10 Health Care Reform  PPACA expands Medicaid to 133% of the federal poverty limit on January 1, Nationally Medicaid is estimated to grow by 16 million lives  Create Health Exchange provide tax credit subsidy for individuals from 133% to 400% Nationally Exchanges are expected to cover 24 million lives by 2019 State needs to determine who will operate Exchange  Made a number of commercial insurance reforms  Established Individual Mandate

“Reaching across Arizona to provide comprehensive quality health care for those in need” Federal Health Care Reform 11 Our first care is your health care arizona health care cost containment system

“Reaching across Arizona to provide comprehensive quality health care for those in need” Our first care is your health care arizona health care cost containment system 12 Health Care Reform Est. EligibleParticipants Exchange621,000479,000 AHCCCS431,000247,000 SHOP Exchange1,822,000510,000

“Reaching across Arizona to provide comprehensive quality health care for those in need” Triple Crown of Contracting - Integration Efforts (5 year contracts)  Behavioral Health – RBHA plus establish Single plan in Maricopa County responsible for all care for individuals with Serious Mental Illness  Children’s Rehabilitative Services - Establish single plan for all services for children designated eligible for this program  Acute - Unprecedented competition – Exchange-Medicaid continuum 13 Our first care is your health care arizona health care cost containment system

“Reaching across Arizona to provide comprehensive quality health care for those in need” 14

“Reaching across Arizona to provide comprehensive quality health care for those in need” Dual Members  Arizona has been leader with model to build on  Unique historical opportunity to change structure  Changes being made at federal level with new Office for the Duals  Demonstration program available to states  Establishes contract between Feds – State – Plans  AHCCCS evaluating demo as opportunity to improve alignment 15 Our first care is your health care arizona health care cost containment system

“Reaching across Arizona to provide comprehensive quality health care for those in need” Other News  Medicaid E.H.R Incentive Payments Thru Jan 2012 – 37 facilities paid - $43.7m  Stakeholder Discussion Open door to address Issues Efficiencies established to date Payment reform opportunities

“Reaching across Arizona to provide comprehensive quality health care for those in need” Questions??? Our first care is your health care arizona health care cost containment system

“Reaching across Arizona to provide comprehensive quality health care for those in need” Proposition 202 into SNCP

“Reaching across Arizona to provide comprehensive quality health care for those in need” Prop 202 into SNCP  Doesn’t need statute or rule exemption  Will be a separate attachment to the Waiver Standard Terms and Conditions, similar to DSH  AHCCCS brought this idea to CMS in late 2011 and continues to work on specifics with CMS  Will be in effect for FFY 2012 and 2013 only

“Reaching across Arizona to provide comprehensive quality health care for those in need” Principles for Rule  Notwithstanding the guideline under R through R , for federal fiscal years 2012 and 2013, the Administration shall pay the Trauma and Emergency Services Fund Payments under the arrangements pertaining to the Safety Net Care Pool.  The calculation for the allocation of Trauma funds will be determined by the number and acuity of trauma cases. The proportion of each hospital’s share of the fund for trauma readiness will be allocated based upon the proportion each hospital’s acuity-adjusted volume to the total for trauma hospitals.  The calculation for the allocation of Emergency funds will be determined by each hospital’s Emergency Services cost data as reported on the hospital’s Medicare Cost Report, Worksheet B, column 0, line 61. The percentage of each hospital’s share of the fund for uncovered emergency services will be allocated based upon the proportion of each hospital’s emergency services cost to the total emergency services costs for all hospitals in Arizona that have an Emergency Room.  In line with Medicare cost principles, no hospital’s payment will exceed that hospital’s FFY OBRA limit and these payments will be reconciled in the federal fiscal year that is two years subsequent to the payment. Payments that exceed a hospital’s OBRA limit will be re- allocated.

“Reaching across Arizona to provide comprehensive quality health care for those in need” Trauma Calculation  Existing calculation uses acuity-adjusted volume (using injury severity score) and the lesser of direct readiness and total trauma unrecovered costs reported by hospitals on application.  SNCP calculation would use acuity-adjusted volume as basis for distribution  Allocations very closely mirror current distribution percentages

“Reaching across Arizona to provide comprehensive quality health care for those in need” ED Calculation  Current calculation uses charity care and bad debt from UAR  SNCP calculation will use Emergency Department Expense recorded on MCR Worksheet B, Part I, column 0, line 61

“Reaching across Arizona to provide comprehensive quality health care for those in need” Trauma Fund Splits  AHCCCS posted several options on the web  Other options can be considered

“Reaching across Arizona to provide comprehensive quality health care for those in need” Questions??? Comments??? Our first care is your health care arizona health care cost containment system

“Reaching across Arizona to provide comprehensive quality health care for those in need” Supplemental Payment Timeline  CAH – 1 st Payment Feb. 24, 2012; 2 nd Payment August 2012  SNCP and Prop 202 funds mid-summer 2012  DSH 2010 Pool 5 – All partnership arrangements approved by CMS as of April 15, Final distribution of 2010 funds in June  DSH 2011 Pool 5 – All partnership arrangements approved by CMS as of April 15, Final distribution of 2011 in 2013  DSH 2012 – Applications due Feb. 29, 2012  GME – Data due by April 1,  RHIF – Distributed in June via MCOs  EHR – Payments made within 45 days of a clean application

“Reaching across Arizona to provide comprehensive quality health care for those in need” Potentially Preventable Readmissions

“Reaching across Arizona to provide comprehensive quality health care for those in need” AHCCCS Readmissions  Like CMS and other Medicaid states, AHCCCS is reviewing hospital readmission rates and associated costs  AHCCCS engaged national consultants, Sellers Dorsey, to examine 2 years of claims/encounter data  Draft Report was distributed to all hospitals and provides the definitions, methodology and exclusions (Final Report will be posted to web)  Analysis shows that 5% of hospital inpatient readmissions were potentially preventable

“Reaching across Arizona to provide comprehensive quality health care for those in need” National Efforts to Reduce Readmissions  CMS – 12 th Scope of Work – Health Services Advisory Group No Place Like Home campaign Statewide effort to engage hospitals, SNFs, hospice, clinician practices, pharmacies, health plans and other health care providers in an effort to reduce avoidable hospital readmissions that occur within 30 days of hospital discharge  CMS Payment Adjustments

“Reaching across Arizona to provide comprehensive quality health care for those in need” AHCCCS Efforts to Reduce Readmissions  Contractor Performance Improvement Projects (PIPs) Decrease the rate of inpatient readmissions within 15 and 30 days of a previous admission in order to improve quality of life, promote patient-centered care, and reduce unnecessary health care utilization and costs  AHCCCS will develop contractually-mandated Contractor performance measurements

“Reaching across Arizona to provide comprehensive quality health care for those in need” AHCCCS Efforts to Reduce Readmissions  AHCCCS and Contractors will have increased focus on discharge planning  AHCCCS and Contractors participating in HSAG campaign  AHCCCS will consider future reimbursement strategy to assist with reducing readmissions

“Reaching across Arizona to provide comprehensive quality health care for those in need” Inpatient Hospital Reimbursement Methodology

“Reaching across Arizona to provide comprehensive quality health care for those in need” AHCCCS Activity  AHCCCS exploring options for budget-neutral, revised inpatient hospital reimbursement methodology  HB 2534 introduced in 2012 Session would: eliminate the requirement to use a tiered per diem methodology for inpatient hospital reimbursement effective 9/30/13 allow AHCCCS to utilize a reimbursement methodology consistent with Title XIX of the Social Security Act, effective October 1, 2013  Hired national consulting group, Navigant

“Reaching across Arizona to provide comprehensive quality health care for those in need” AHCCCS Tiered Per Diem Methodology  Tiered Per Diem rates were last rebased in 1998 using 1996 data  Rates are stale and in need of update  Per diem rates focus on quantity rather than quality  Outliers were eliminated by Legislature in 2011 Session thus AHCCCS must take some action

“Reaching across Arizona to provide comprehensive quality health care for those in need” AHCCCS Options – Inpatient Payment Methodologies  Rebase Tiered Per Diem rates + Easily understood in Arizona + Little system change required + Operational procedures/payment policies already established — Doesn’t change focus from quantity!! — Costly — Lengthy

“Reaching across Arizona to provide comprehensive quality health care for those in need” AHCCCS Options – Inpatient Payment Methodologies  DRG-based rates + Align incentives towards quality of care and improved efficiency + Not a unique methodology - hospitals and commercial plans already use + Improved ability to implement quality and efficiency measures (e.g. HCAC, readmissions) + Eliminates need for limits on inpatient days — System changes required — Operational procedures/payment policies to be established — Lengthy

“Reaching across Arizona to provide comprehensive quality health care for those in need” AHCCCS Options – DRG-Based Rates  If HB 2534 signed into law, Navigant recommends APR-DRG payment model  Approximately 6 state’s Medicaid programs using APR-DRG rates  Approximately 6 more states moving to APR-DRG rates  APR-DRG rates intended for all patients – unrelated to Medicare (elderly and disabled)  1258 DRGs as opposed to 746 DRGs in CMS’ MS- DRGs for Medicare

“Reaching across Arizona to provide comprehensive quality health care for those in need” AHCCCS Options – DRG-Based Rates  APR-DRG has the greatest number of newborn DRGs of all options  Preferred by childrens’ hospitals  Decisions would need to be made: Regarding which services, if not all, to be paid under this methodology Regarding which providers, if not all, to be paid under this methodology Regarding outlier and transfer adjustments And a myriad of other payment policy issues…

“Reaching across Arizona to provide comprehensive quality health care for those in need” Next Steps  AHCCCS will monitor progress of HB 2534  If signed into law, AHCCCS will: Form two workgroups:  One for hospitals AzHHA and non-AzHHA representatives Cross-section of urban and rural facilities  One for health plans Work toward 10/1/13 implementation date to coincide with effective date of new AHCCCS Acute Care contracts

“Reaching across Arizona to provide comprehensive quality health care for those in need” Please watch the AHCCCS website for up-to-date information when available Questions??? Our first care is your health care arizona health care cost containment system