1. The Maryland “Experiment” Evolution of Maryland’s Medicare Waiver
Brian Sims
Maryland Hospital Association
November 17, 2017

2. Objective Pre- and Initial Waiver Environment System Redesign
New All-Payer Model
Enhanced Total Cost of Care Model

3. Pre- and Initial Waiver Environment (1970’s-2000)

4. Maryland Pre-Waiver Healthcare Environment
Significant amount of inefficiency in delivery system (Late 60’s early 70’s)
Over utilization
Length of stay for patients exceeded national averages
Weak financial performance for Maryland Hospitals
Inconsistent access to hospital care for the poor and uninsured
By 1971, hospital cost per case in Maryland exceeded the National average by 25%!

5. The Formation of the Health Services Cost Review Commission (HSCRC)
Initial legislation enacted by the General Assembly
Independent body within the Department of Health and Mental Hygiene
HSCRC given the authority to establish hospital rates
1974 – HSCRC began setting unit rates for hospitals after 3 year phase-in
Authority extended only to non-federal insurers (commercial payers)
1977 – Maryland granted temporary “waiver” by federal government to test alternative payment approaches
Exempted the state from national Medicare and Medicaid reimbursement requirements
Base rates created
1980 – Medicare exemption became “permanent” in Maryland
Continue to be the only state with this “waiver”
But, there’s a “catch”!

6. The “Waiver Test”
On-going demonstration that the cumulative rate of growth in Medicare inpatient payments per admission to Maryland hospitals is no greater than the cumulative rate of growth in Medicare inpatient payments per admission to hospitals nationally over the same time period
Maryland inpatient costs per case had improved dramatically from 25% higher than nation to 12% below in 1992
Growth in Medicare spending per inpatient hospital stay less than nation

7. HSCRC Regulatory Jurisdiction
Hospital Rates:
Includes:
Inpatient services
Hospital-based outpatient services
Excludes:
Physician / Professional Fee / Part B Activity
Other operating revenue
Non-operating revenue

8. All-Payer Hospital Rate Setting System
HSCRC
Establish and approve rates for each unit of service (Room and Board, imaging, lab, etc.)
Hospital specific
Unit rates are to be reasonably related to underlying costs
Hospitals
Required to charge ALL payers at HSCRC approved unit rates
Payers (All)
Required to pay hospitals based on each hospitals approved unit rates
Payers given the ability to deny payment of care for lack of medical necessity

9. System Redesign ( )

10. Initial System Redesign (2000)
After more than 25 years of sustained success, widespread support for redesign gained momentum
Goals of the redesign included:
Provide predictability and stability
Be prospective in nature
Recognize input cost inflation
Streamlined approach
Reflective of the national experience
Frustration in lack of consistency and constant modifications to methodologies.
Key Component was the inclusion of an annual update factor

11. Modern System Redesign
Around 2010 we began to experience further and rapid deterioration of our waiver cushion
Projections of the future rate of deterioration demonstrated a likely failure of the waiver test by 2013

12. Overarching Concern for Maryland Hospitals
Changes to the healthcare delivery system that challenged the waiver test:
Less expensive care shifted to outpatient settings or outside of the hospital
Shift of cases to observation increases the average charge per admission in Maryland
Medicaid budget issues
New payment initiatives designed to control volume

13. Initiatives Designed to Control Spending
Quality Related Programs
Maryland Hospital Acquired Condition (MHAC) program
Designed to incentivize hospitals to reduce Potentially Preventable Complications
Hospitals are rewarded or penalized based on performance relative to their peers
Quality-Based Reimbursement (QBR) program
Pay-for-performance system of rewards/penalties using evidence-based process of care measures
Similar to MHAC, hospital scores are scaled based on relative performance
Expansion of Total Patient Revenue (“TPR”) Methodology

14. New All-Payer Model (2014-2018)

15. Birth of a New Model
On October 10, 2013, the State of Maryland applied to the Center for Medicare and Medicaid Innovation (CMMI) for a demonstration project focusing on The “Triple Aim”:
To improve outcomes / quality
To enhance patient experience
To reduce the cost of care
The application was approved on January 10, 2014
The Beginning of the “New” All-Payer Model
Better Care
Lower Costs
Better Health
On October 10, 2013, the State of Maryland applied to the Center for Medicare and Medicaid Innovation (CMMI) for a demonstration project to improve outcomes, to enhance patient experience and to control costs.
The application was approved effective January 1, 2014
The resulting All-Payer Model (“the Model”) shifts the focus from historic price per encounter controls to a focus on overall revenue growth, including price and use.

16. New All-Payer Model OLD NEW Healthcare Delivery Volume Revenue
Fragmentation
Care Coordination
Volume
Episodic Care
Population Health
Revenue
Fee-for-service
Global budget

17. New All-Payer Model: Financial Tests
Annual All-Payer hospital SPENDING CAP − 3.58% all payer per capita growth
Medicare dynamic hospital SAVINGS TARGET −
$330 million over 5 years
Medicare Total Cost of Care (TCOC) spending GROWTH per beneficiary not to exceed the Nation
All-payer per capita growth rate of 3.58% is the ten year average annual growth rate in Maryland Gross State Product (GSP) per capita (2002 – 2012)
The all-payer per capita growth rate is expected to be calculated using:
Regulated, inpatient and outpatient hospital charges, from Maryland hospitals for Maryland residents receiving services.
Population growth from the Maryland Department of Planning
Rather than defined savings, Maryland’s Medicare per beneficiary total cost growth rate cannot exceed the national average by more than 1 percentage point in year 1, and must be “break even” with the national average by year 3.
CMS concerned with shifts to unregulated or other services

18. New All-Payer Model: Quality Targets
Reduction of 30-day Medicare READMISSION rate to the national average in 5 years.
30% Reduction of Potentially Preventable Complications (PPC) over 5 years.
All-payer per capita growth rate of 3.58% is the ten year average annual growth rate in Maryland Gross State Product (GSP) per capita (2002 – 2012)
The all-payer per capita growth rate is expected to be calculated using:
Regulated, inpatient and outpatient hospital charges, from Maryland hospitals for Maryland residents receiving services.
Population growth from the Maryland Department of Planning
Rather than defined savings, Maryland’s Medicare per beneficiary total cost growth rate cannot exceed the national average by more than 1 percentage point in year 1, and must be “break even” with the national average by year 3.
CMS concerned with shifts to unregulated or other services

19. Maryland Waiver Performance Dashboard Cumulative Performance – Jan 2014 to Most Recent Data Available

20. HSCRC Policy Impacts
Under Global Budget Revenue (GBR), hospitals receive annual adjustments for:
Inflation
Change in markup (payer mix and UCC via the UCC pool)
Population/Demographics
Market Shift
Infrastructure
There are no explicit adjustments for changes in:
Volume (I/P or O/P)
Case Mix/Severity
How do you recognize changes in volume due to changes in population demographics?
How do you adjust budgets for changes in market share and movement to unregulated services?
How do you measure efficiency on a per capita basis?
What limits, if any, do you place on unit rate increases within global budgets?
How do you fund capital within a global budget environment?
How do you address unforeseen adjustments, such as extraordinary inflation, a flu epidemic, or ACA-related volume growth (or today, potential loss of coverage), within the global budgets?
How do you align global budgets with other payment models (ACOs, PCMH)?
How do you align global budgets with providers still under volume-driven incentives?

21. Future Initiatives: Enhancement of the All-Payer Model
Align Measures and Incentives
Align updated measures across providers and programs
Increased physician engagement
Payment and Delivery System Transformation
Promote innovation
Development of additional initiatives focused on Behavioral Health and Post-Acute Care
Foster Accountability
Enhance provider accountability for population health through value-based incentives
Increased Consumer Engagement

22. Enhanced Total Cost of Care Model (2019-)

23. Enhanced Total Cost of Care Model
Term sheet in clearance process; when approved, next step would be developing contract for state/federal signature
Policy Development: Current Model
Policy Development: Enhanced Model
Changes/Challenges: Enhanced Model

24. Policy Development: Current Model
Full rate review application regulations and update to HSCRC’s Inter-hospital Cost Comparison (ICC) methodology
Capital funding approach
Update to market shift methodology
Unit rate compliance
Data availability and access

25. Care Redesign Care Redesign Amendment to the All-Payer Model Agreement
Addresses need for greater provider alignment and transformation tools under the All-Payer Model
The Amendment aims to modify the All-Payer Model by supporting:
Effective care management and population health activities
Improvement in care for high and rising risk populations
Efforts to provide high quality, efficient, well-coordinated episodes of care
Hospitals and their Care Partners in monitoring and controlling Medicare beneficiaries' Total Cost of Care (TCOC) growth 
The Amendment proposes two voluntary, hospital-led programs, which align hospitals and their Care Partners through common goals and incentives.  The Hospital Care Improvement Program (HCIP) and Complex and Chronic Care Improvement Program (CCIP)
Care redesign amendment proposed by the state

26. Care Redesign Programs: HCIP
Hospital Care Improvement Program (HCIP) to be implemented by participant hospitals and hospital-based providers 
Aims to:
Improve inpatient medical and surgical care delivery Provide effective transitions of care
Ensure an effective delivery of care during acute care events, beyond hospital walls
Encourage the effective management of inpatient resources Reduced potentially avoidable utilization with a byproduct of reduced cost per acute care event
Care Partners who choose to participate may receive incentive payments based on reducing internal costs through a reduction in unnecessary utilization and resources, efficient practice patterns, and improved quality.

27. Care Redesign Programs: HCIP
Examples of categories of care redesign interventions in the HCIP include:  
care coordination
discharge planning
clinical care
patient safety
patient and caregiver experience
population health
efficiency and cost reduction 

28. Care Redesign Programs: CCIP
Complex and Chronic Care Improvement Program (CCIP), to be implemented by participant hospitals and community providers and practitioners
Aims to:
Strengthen primary care supports for complex and chronic patients in order to reduce avoidable hospital utilization
Enhance care management through tools such as effective risk stratification, health risk assessments, and patient-driven care profiles and plans
Facilitate overall practice transformation towards person-centered care that produced improved outcomes and meets or exceed quality standards.
In the CCIP, Participant Hospitals deploy care management resources and technology that align and support community-providers who work with the Participant Hospital. Care Partners who choose to participate will have access to care management tools and resources targeted to high utilizer and rising risk patients that will support implementation of care plans, provide care coordination, and help manage care transitions. Participation in the CCIP is also tailored to leverage the Medicare Chronic Care Management (CCM) fee. Care Partners who choose to participate may receive incentive payments from hospitals based on defined activities that improve quality of care and reduce potentially avoidable utilization of hospitals.​

29. Care Redesign Programs: CCIP
Examples of categories of Care Redesign Interventions in the CCIP include:
care management,
workforce capacity development
health information technologies.

30. Policy Development: Enhanced Model
Medicare Performance Adjustment (MPA)
Management of TCOC savings
Medicare discount / differential
Health care services supply alignment with the Model
Policies to implement the Maryland Primary Care Program
Policies regarding hospital accountability for population health metrics
Updates to quality programs with “aggressive and progressive” targets
State/CMS policy on access to patient-identifiable data needed to manage TCOC

31. Enhanced Model Operational Changes/Challenges
Building/strengthening provider alignment
Workforce shortages and workforce development
Developing capability to utilize data to strategically manage population health, including behavioral health
Continued cultural change (internal and in the community) of movement from volume to value
Cost management strategies, particularly regarding capital structure
Adequacy of revenues within a capped system

32. Enhanced Model at a Glance
Hospital Focused
Hospital Savings
Hospital Quality Metrics
Acceleration of Prevention/Chronic Care Managment
Hospital Alignment
All-Provider/Person-Centered Focused
Total Cost of Care Savings
Population Health Metrics
Maryland Comprehensive Primary Care Program (MDPCP)
Physician Alignment Through MACRA Bonus – eligible Programs & Post Acute Alignment
To achieve a patient-centered system, the Total Cost of Care Model includes the following key elements:
Care will be coordinated across both hospital and non-hospital settings, including mental health and long term care.
The Model will invest resources in patient-centered care teams and primary care enhancements. ​
Maryland will set a range of quality and care improvement goals.  Providers will be paid more when patient outcomes are better.
Maryland will set a range of population health goals addressing opioid use and deaths, diabetes, and other chronic conditions.
State flexibility will facilitate programs centered on the unique needs of Marylanders, the provider community, geographic settings, and other key demographics.  
As part of the federal agreement to put the new Total Cost of Care Model in place, all-payer hospital cost growth will continue to be limited to 3.58% per capita, a limit that was set in 2014 based on long term growth in Maryland’s economy.  As part of this Model, Maryland commits to saving $300 million in annual, total Medicare spending by the end of 2023. The Medicare savings required in the TCOC All-Payer Model will build off of the ongoing work of Maryland stakeholders, which began in 2014. 

33. Enhanced Model at a Glance
Current Model
Current Model
Enhanced Model
All-payer hospital revenue annual growth cap of 3.58 percent per capita
Same
Medicare hospital savings-cumulative savings of $330 million over five years
Medicare Total Cost of Care (TCOC) savings of at least $300 million by end of 2023, relative to 2013 base year
Targeted reduction in hospital-acquired infections (MHAC) & hospital readmissions
Expanded focus on populations health metrics; opportunity to revise MHAC program
Physician alignment through participation in care redesign programs
Enhanced physician alignment through Maryland Comprehensive Primary Care Program (MDPCP) & use of Medicare performance adjustment (MPA) to have all-payer model qualify as an Advanced Alternative Payment Model (AAPM) for MACRA bonus purposes

34. Enhanced Model at a Glance
Current Model
Enhanced Model
Medicare TCOC guardrail managed through adjustment to all-payer rates
Medicare TCOC savings requirement managed through MPA, with amount of adjustment dependent on size of Medicare TCOC savings variance. Savings shortfall may also be managed through adjustment to all-payer rate updates
Ends 12/31/2018
Runs at least through 12/31/28, as long as savings are on target, with an opportunity to make the model permanent after that
Use of global budgets
Use of global budgets & other population-based models, such as ACOs
Care redesign waivers for physician gain-sharing
Application for additional waivers, including three-day SNF rule, telehealth, and beneficiary inducements
Triggering events
Waiver transition to national system over two-year period
Same
Current Model

35. National Policy and Trend Implications
Medicare IPPS/OPPS rate updates
Growth in total Medicare beneficiaries: MD vs. Nation
Growth in Medicare Advantage participants: MD vs. Nation
Population growth: MD vs. Nation
Growth in non-hospital spending: MD vs. Nation
Medicaid expansion
Affordable Care Act repeal / replacement

36. Questions?
Contact:
Brian Sims 35