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

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

1

3

• 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.

Maryland Hospitals are Exempt from CMS Quality Programs

4

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.

5

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

6

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 Program30-day, all-cause, all hospital readmissions

Readmission Shared Savings

GBR Efficiency Adjustments

Additional Performance-Based Payment Adjustments

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

8

Potentially Avoidable Utilization (PAU)

PAU

Potentially Avoidable

Admissions

Readmissions/Revisits

Hospital Acquired

Conditions

HSCRC Calculates Percent of Revenue Attributable to PAU

Definition: “Hospital care that is unplanned and can be prevented through improved care coordination,

effective primary care and improved population health.”

Components of PAU

9

Year 1 Progress

10

Monthly Risk-Adjusted PPC Rates

Jul-1

2

Sep-

12

Nov-1

2

Jan-

13

Mar-

13

May

-13

Jul-1

3

Sep-

13

Nov-1

3

Jan-

14

Mar-

14

May

-14

Jul-1

4

Sep-

14

Nov-1

40.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

All-Payer

Linear (All-Payer)

Medicare FFS

Note: Based on final data for January 2013 - December 2014.

New Waiver

Start Date

Risk Adjusted PPC Rate

All-Payer Medicare

Dec. 13 YTD 1.25 1.44Dec. 14 YTD 0.93 1.02

Percent Change -25.97% -29.07%

11

Monthly Risk-Adjusted Readmission Rates

Jul-1

2

Sep-

12

Nov-1

2

Jan-

13

Mar-

13

May

-13

Jul-1

3

Sep-

13

Nov-1

3

Jan-

14

Mar-

14

May

-14

Jul-1

4

Sep-

14

Nov-1

4 10.00%

10.50%

11.00%

11.50%

12.00%

12.50%

13.00%

13.50%

14.00%

14.50%

All-Payer

Linear (All-Payer)

Medicare FFS

Note: Based on final data for January 2013 - December 2014, and preliminary data through January 2015.

New Waiver Start Date

Risk Adjusted Readmission Rate

All-Payer Medicare

Dec. 13 YTD 12.52% 13.25%Dec. 14 YTD 12.00% 12.95%

Percent Change -4.16% -2.25%

12

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

13

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.)

• 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 2014. Currently Maryland risk is 2.72 percent above national

Maryland P4P Risk Compared to the Nation

14

Maryland Quality Approach Compared to National

• 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

1 25 50 75 1000123456789

10

National Quality Program Per-formance Expectation

Performance Scores

Num

ber

of h

ospi

tals

Lowest quartile

Penalties

1 25 50 75 100

Maryland Quality Program Per-formance Expectation

Performance Scores

Nu

mb

er

of

ho

spita

ls

Lowest quartile

Penalties

15

Rewards

• 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

MHA Quality-Related Policy Strategy

16

• 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

MHA Quality Priorities for FY 2018 (CY 2016 Measurement)

17

18

Enhance Readmissions PolicyThe 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.

19

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?

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

20

Enhance Readmissions Policy

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

• Data available through AprilJuly• Joint Quality Finance meets August 26August• Share recommendations with Council on Financial Policy on

September 17September• Joint Quality Finance meets October 6• Share recommendations with CCQI on October 13• Share recommendations with HSCRC staff

October

• HSCRC staff proposes draft recommendationsNovember• Commissioners approve final recommendationsDecember

21

MHAC and Readmissions Policy Timeline

January 1 New performance year begins

ICD-10 Transition: Timing and Grouper VersionsPayment 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

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) Base Year Version 32 I-9 Version 32 logic

CY 2016 (I-10) Performance Yr Version 33 I-10 Version 32/33 logic

*FY 2016(1Q in I-9)

Likely to modify

Base Year Version 33 or 34 with modified base period

*(Oct 2015-Sept 2016)

I-10

Version 32/33 logic or Version 34 logicCY 2017 Performance Yr Version 33 or 34, TBD

based on review of data grouped under each

version

I-10

FY 2017 (I-10) Base Year Most current version I-10

CY 2018 Performance Yr Most current version I-10

ICD-10 Transition: Timing and Grouper Version Options

23

24

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. 

25

Appendix

ProgramAmount at Risk

HSCRC FY 16CY 2014 Performance

CMS FFY 16HSCRC FY 17

CY 2015 PerformanceCMS FFY 17

QBR/VBP1%

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

1%Medicare penalty (lowest quartile of hospitals are penalized; no credit for

improvement)

+1% to -3% proposed 1%

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

3%

*Readmissions Shared Savings

-0.33% incremental increase from prior

yearAll-payer

-0.2% incremental risk

Total 5.83% 5.75% 7.0% (1) 6.0%

Inpatient Revenue at Risk on Quality

(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 2.00% $2.4M

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

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

28

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% 3.0%

RRIP 0.5% 2.0%

QBR 0.50% 0.50% 1.00% 2.0%

Shared Savings 0.41% 0.86% 0.86%* 0.86%*

Global Budget Revenue Potentially Avoidable Utilization: 0.50% 0.86% 0.86%* 0.86%*

MD Aggregate Maximum At Risk 3.41% 5.22% 7.22% 8.72%

*Estimated numbers based on current policy.