funding graduate medical - uwmedicine.org constraint or "target" for drg xxx $9,500...
TRANSCRIPT
Funding Graduate Medical Education in Maryland’s
All Payer System
Mary Beth Pohl – Maryland HSCRC March 23, 2012
GME Summit 3/23/2012 2
Maryland’s all payer rate setting system funds GME in hospital rates
• Central components of Maryland’s all payer system
• Recognition of DME and IME in rates
• Future directions in Maryland
GME Summit 3/23/2012 3
The State of Maryland
• 5.65 Million people • 12% of population > age 64 • 3rd highest income per capita state • 46 acute care hospitals • $13 billion in hospital revenue • 700,000 discharges per year
Baltimore City
GME Summit 3/23/2012 4
Maryland established the Health Service Cost Review Commission in the 1970s
• The HSCRC is an independent Commission that sets hospital rates – Independent of the Health Department, Insurance Admission
• Seven commissioners – Serve four-year terms; appointed to serve the public interest
– Include individuals with a variety of health care backgrounds
• Much of the HSCRC’s work is a balance of rate setting accomplished through a cooperative rule-making process with the hospital and payer industries
GME Summit 3/23/2012 5
Waiver from Medicare payment is the basis for Maryland’s all payer system
• First negotiated in 1977, one of five states
• Under the Waiver, federal government & Medicaid
agreed to pay HSCRC approved hospital rates
• State insurance law requires private insurers to pay
rates
• Maryland must pass a financial test to retain the
waiver (per case payment growth)
• All payers pay their fair share of hospital costs
(uncompensated care, GME)
GME Summit 3/23/2012 6
Key Maryland hospital rate setting principles are articulated by statute
• HSCRC must: – Certify the costs of a facility are
reasonable
– Set rates for a service reflecting the cost of that service
– Set rates without “undue discrimination or preference”
– Set rates “prospectively”
– Include a provision in rates for reasonable uncompensated care
Agreement that DME/IME are a components of cost
GME Summit 3/23/2012 7
Key rate setting tenets
• HSCRC regulates inpatient and outpatient hospital services • HSCRC takes other factors into account in setting rates:
– Use financial incentives to control cost (bundled payments) – Ensure sufficiency of rates for “effective and efficient”
hospitals – Strive for a high degree of fairness in setting and adjustments
to rates – Avoid unnecessary intervention – Establish overall targets but give hospital managers a high
degree of decision-making autonomy (macro-regulation)
GME Summit 3/23/2012 8
Initial hospital rate setting involved a bottom-up approach
• Initial approach relied heavily on very detailed cost and volume data from hospitals – These data are reported to the HSCRC in a uniform and
consistent fashion, as prescribed by the Commission
• Approach reflected the principles articulated by statue:
HSCRC established standards of reasonableness for the costs by service for particular types of hospitals
These reasonable costs per service then were the basis for establishing a rate per service
Approved rates established and in place at the beginning of each year and remain for the entire year
Costs are marked-up to the rate level – largely by the provision for uncompensated care
Reasonable costs
Rates must relate to costs
Prospective payment
Pay for care to uninsured
GME Summit 3/23/2012 9
Cost report data used for baseline rate setting
Accounting and Reporting Manual
Step 1-UARS
3-Setting Rates – Full Budget or Cost Review
Overhead Center Expenses
Capital
Direct Exp
Other Exp
2-Submit Cost Reports
Establish peer groups
City Hospitals
Rural Hospitals
Teaching Hospitals
Study hospital costs based on averages of peer costs at various levels
Level I
Level II
Direct & Overhead Exp
Cost by functional center are established by allocation methods Total approved costs established by multiplying cost by functional center times budgeted volume Rates by functional center are established by applying the mark-up
Other Exp III
Capital Exp
IV Mark-Up
Approved rate base of hospital $100,000,000 per year
GME Summit 3/23/2012 10
Example of a patient bill under the unit rate system (fee for service)
Medical/Surgical Unit
Intensive Care Unit
Admission
Operating Room
Radiology
Pulmonary
Blood
Lab
Physical Therapy
Cost of Drugs Sold
Medical Supplies
Per day
Per day
Per case
Per minute
RVU
RVU
RVU
RVU
RVU
Invoice cost
Invoice cost
Center
Approved Rate
Unit
$500
$1,000
$100
$15
$20
$3.00
$15
$2.00
$16
$1,200
$2,100
Units of Service
5
2
1
150
25
10
5
25
5
1
1
X
X
X
X
X
X
X
X
X
X
X
= $2,500
= 2,000
= 100
= 2,250
= 500
= 30
= 75
= 50
= 80
= 1,200
= 2,100
$10,885 Total charge to the patient for this case
GME Summit 3/23/2012 11
System refinements were necessary to control volume
• Once the HSCRC established unit rates (rates per unit of service), the HSCRC updated the rates by inflation each year
• While we could control the growth of hospital unit prices – there were no incentives to control the number of services provided (volume)
• Fee for service systems like this actually provide incentives to provide MORE services
• HSCRC looked to control hospital’s revenues on a more bundled basis
GME Summit 3/23/2012 12
Using DRGs to create bundled constraints
• HSCRC currently uses APR-DRGs – Refined sub-categories to account for variations in
severity of illness within each larger category
• System provides appropriate revenue to hospitals based on the types of cases treated
• DRGs provide a target for the hospital that it can meet if the hospital is efficient
• DRGs are used as a back-end constraint, patient/ payer continues to receive a line item bill
GME Summit 3/23/2012 13
Hospital’s per case target constrains average across of all patients
Current Charge Per Case (Itemized charges) $10,885
DRG Constraint or "Target" for DRG XXX $9,500
Hospital A has 200 cases w/average "charge" of $10,885
Cases 200
Total billed charges $2,177,000
Hospital A's DRG Constraint $9,500
Cases 200
Total allowed revenue $1,900,000
Allowed $1,900,000
Charged $2,177,000
Reduction to hospital the following year ($277,000)
GME Summit 3/23/2012 14
Advantages to DRG constraint system
• Patient is charged an itemized bill – pays for the resources consumed (fairness)
• Unit rates patient is charged reflect the costs of services • Hospital has a reasonable target it must meet on average
when delivering care per case (promotes efficiency)
• Per case target reflects the average costs hospitals expend for any given type of case (fairness)
• Hospitals have financial incentive to manage care per case (incentive to control cost)
• Payers have the same incentive to manage the case (aligns incentives)
• System promotes efficiency – HSCRC can control hospital costs (bend the cost curve)
GME Summit 3/23/2012 15
Bending the Cost Curve
• 2nd Lowest Rate of Cost Growth of any State 1976-2007 – 1976: Maryland Cost per case
was 25% ABOVE the US average – 2007: Maryland Hospital cost per
case 2% BELOW the US average – Estimated $40 billion savings to
the State over the period 1976-2007
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
76 80 84 88 92 96 '00 '04
US hospital cost growth
Maryland hospital slower cost growth
“Bending the Curve” Growth in Hospital Costs per case (MD vs. US)
Had MD grown at the more rapid US rate:
MD hospital expenditures would have been $40 billion higher
Had the US grown at the slower Maryland rate of growth:
US hospital expenditures would have been $1.8 trillion lower
GME Summit 3/23/2012 16
Bundled payment strategies
• HSCRC initiated new types of payment strategies aimed to promote efficiency and quality
• Total Patient Revenue: Provides global inpatient/outpatient revenue cap
• Admissions/ Readmissions Revenue Constraint System: inpatient incentive to reduce readmissions
• Others: Population-based rat setting, Urban capitation/urban revenue cap
GME Summit 3/23/2012 17
Further Refinements
• HSCRC is refining outpatient cost constraint
• Currently investigating other more bundled payment structures – more effective incentives to control cost
• Simultaneously linking payment incentives to performance on quality of care (MD uniquely positioned on quality)
• Quality of Care initiatives linked to payment incentives: – Evidence based process measure (2008)
– Hospital Acquired Complications/Infection rates (2009)
GME Summit 3/23/2012 18
GME
GME Summit 3/23/2012 19
GME is a fundamental component of hospital costs
• HSCRC founders saw GME as a public good and as an acceptable component of cost and rates
• DME and IME are “baked in” to the unit rate structure
• Cost associated with GME are an important component of comparing hospital rates in reasonableness of charges (ROC) methodology
GME Summit 3/23/2012 20
Annual ROC methodology aligns costs among peer groups through scaling
• HSCRC assigns each of the 46 acute facilities a peer group based on hospital characteristic: – Suburban, teaching
– Non-urban, non-teaching
– Urban/suburban, non-teaching
– Urban, teaching
– “Virtual” peer group
• ROC methodology aims to “strip” certain charges out of rates and then scale based comparisons among hospitals by peer group
• Policy scaled ~$12 M last year
• DSH and IME are stripped before ROC comparison – Calculation of GME impacts
ROC outcome!
GME Summit 3/23/2012 21
Graduate medical education is focused at two major hospital systems
• Maryland has 46 acute care hospitals
– Distributed geographically across the State
– Retains independent facilities
• 17 hospitals with GME
– Johns Hopkins and University of Maryland provide the largest share of teaching (66% together)
GME Summit 3/23/2012 22
HSCRC gathers DME data through our financial reporting system
Residents
Wages &
Salaries
Physician
Supervision/
Other Expenses
Resident FTE Supervisory FTE
DME Per
Resident W&S
Cost
DME Per
Resident
Program Cost
Johns Hopkins $ 47.6 M $ 32.4 M 970 101 $ 49,105 $ 82,546
Univ of MD $ 30.6 M $ 32.6 M 658 156 $ 46,446 $ 96,004
MedStar $ 14.4 M $ 10.7 M 238 37 $ 60,270 $ 104,953
Other Hospitals $ 26.3 M $ 9.7 M 379 35 $ 69,276 $ 94,874
GME Summit 3/23/2012 23
HSCRC strips DME costs directly out of revenue for ROC
• Larger academic centers request acknowledgement in the ROC for economies of scale
• Smaller teaching programs request acknowledgement in the ROC for requirements related to recruitment and retention
Methodology has moved from DME
strip at the average cost per resident to the actual cost per
resident
GME Summit 3/23/2012 24
HSCRC staff quantifies IME through a predictive regression
• Regression variables
– Dependent: Adjusted cost
– Independent: IME, poor share
• IME = Count of residents/EIPA
• Poor share = Percentage of Medicaid as primary payer, bad debt, charity care, dual eligibles
• Coefficients represent dollars for IME and poor share,
– Capturing unexplained rate differences
GME Summit 3/23/2012 25
Does the IME regression accurately capture costs associated with IME?
• FY 2011 IME coefficient represented $244,000 per resident
• IME prediction tied closely with outlier methodology
• Concern regarding:
– Over adjustment for hospital inefficiencies
– Over adjustment for case mix
GME Summit 3/23/2012 26
IME reporting changed recently to reduce reporting burden
• For over 20 years, HSCRC used one day snapshot to count residents – Count in-house residents
the Tuesday after Labor Day
– System prior to Medicare’s IRIS
• Change was necessary – Reporting methodology
high potential for gaming – Need to recognize resident
workforce changes
• This reporting year HSCRC moved to IRIS-like template – Established auditing
practices for GME – Begin auditing next month
GME Summit 3/23/2012 27
Substantial questions around the recognition of poor share
• The regression’s second independent variables is poor share
– Not really DSH as Maryland directly funds uncompensated care in rates
• Recognition for complex, difficult to serve patient populations
GME Summit 3/23/2012 28
Future Directions
GME Summit 3/23/2012 29
Are financial incentives driving hospitals to develop GME programs?
• The ROC provides substantial incentives for hospitals to develop/maintain GME programs – Hospital mergers allow sharing of residents
• HSCRC pools uncompensated care, why not GME and IME?
• If the regression over-predicts IME, what are the implications? Should the HSCRC redefine outlier methodology?
• To incentivize primary care training, should the HSCRC scale credit in the ROC?
GME Summit 3/23/2012 30
What community benefits do Maryland hospitals provide?
• Charity care, bad debt = funded in rates
• Medicare and Medicaid pay all payer rates
• GME is a major component of community benefits → also in rates!!
GME Summit 3/23/2012 31
Maryland's All Payer System Hinges Upon Decisions in Upcoming Months
• Maryland’s funding of GME rests on the Medicare Waiver
– Erosion of the waiver cushion questions the Waiver’s future
– Working with CMS to establish new wavier test