Highlights of HSCRC Rate Memo - September 2020

Medicare Performance Adjustment RY 2022 Executive Summary

Medicare Performance Adjustment Background

To further the goal of reducing total cost of care (TCOC), Maryland implemented a value-based payment adjustment, referred to as the Medicare Performance Adjustment (MPA), with the performance period beginning in CY 2018. The MPA brings direct financial accountability to individual hospitals based on the total cost of care of attributed Medicare fee-for-service (FFS) beneficiaries.

The calculation of the policy adjustments includes three components:

—  an algorithm for attributing Maryland Medicare beneficiaries and their TCOC to one or more hospitals without double-counting

—  a methodology for assessing hospitals' TCOC performance based on the beneficiaries and TCOC attributed to them

—  a method of determining a hospital's MPA based on its TCOC performance

HSCRC Staff and the TCOC Workgroup have reviewed the existing MPA policy, with a focus on:

—  Improvements in the MPA attribution methodology

—  Modifications to the financial methodology

—  Assessing the interaction between the CTI and MPA policies 

Attribution Methodology

To-date, a multi-step prospective attribution methodology has assigned beneficiaries and their costs to Maryland hospitals based primarily on beneficiaries' treatment relationship with a primary care provider (PCP) and that PCP's connection to a hospital. The complexity of the attribution methodology is due in part to the fact that CMS requires attribution of at least 95% of Maryland beneficiaries to a hospital.

HSCRC Staff and hospitals have expressed continued concern about the complexity of the MPA attribution methodology. Stakeholders believe that the attribution algorithm's complexity makes it difficult to determine whether TCOC results are due to a hospital's performance or due to churn in the attribution algorithm. 

To simplify the attribution algorithm, Staff compared different attribution algorithms using three criteria:

—  How much TCOC is the hospital responsible for as compared to their revenue?

—  What percentage of the beneficiaries' care is provided by their attributed hospital?

—  What percentage of the services does a hospital provide to its attributed beneficiaries?

Under these criteria, Staff determined that pure geographic attribution performed equally to all other attribution algorithms, except for the Academic Medical Centers. Therefore, Staff intends to recommend moving to geographic attribution.

Financial Methodology

Staff and hospitals also expressed concerns over the use of benchmarking to the national growth rate in the MPA financial methodology. Hospitals believe that benchmarking to the national growth rate makes the MPA policy unpredictable. It is difficult for them to know how much improvement the method requires them to succeed in a given year. Hospitals have suggested moving to an attainment standard rather than an improvement standard for the MPA. 

Staff intends to recommend moving to this attainment standard. The attainment standard would be a TCOC per capita target based on a comparison to the hospital's comparison group costs.

This attainment standard would grow at the national growth rate, but the TCOC target would remain relatively stable. The hospital's reward or penalty would be the difference between their geographic TCOC and their MPA target.

Interaction between MPA and CTI Policies

Since both the MPA and CTI policies attempt to measure how successful hospitals are at reducing the TCOC of Medicare beneficiaries, there is a potential for overlap between the two policies. As a result of this, Staff intends to recommend that hospitals be allowed to "buy out" of the traditional MPA by increasing their participation in CTIs.

To accomplish this, Staff will measure the ratio of TCOC covered by a hospital's CTI to the TCOC attributed to that hospital, and reduce the hospital's MPA penalty by that ratio.  This methodology would only apply to hospitals receiving an MPA penalty, so the method would not impact hospitals that reached their MPA attainment.

Staff will also recommend that the HSCRC require that hospitals that choose to participate in the MDPCP program also participate in a primary care-based CTI. First-year results from MDPCP indicated a minimal impact on TCOC savings, despite large investments of care management fees. While the Staff did not expect significant developments in the first year of the program, there will be a greater need for accountability for a practice's success at reducing hospital utilization and TCOC moving forward.

COVID-19 Surge Funding Policy Update

Background

In April 2020, the Commission approved a recommendation stating that the HSCRC fund hospitals beyond their approved GBR to the extent that COVID-19 cases caused them to exceed their approved GBR.  Under this recommendation, the funding was equal to the amount the standard COVID-19 and non-COVID-19 charges exceeded the original GBR. Staff have completed their review and determined that for FY 2020, no hospital has met these conditions, so no additional funding is required.

For June and July, hospital volumes continued to increase, coming close to historic levels. Inpatient volumes exceeded 95% of historic levels in June and July, while outpatient volumes were 83% of historic levels in June, before increasing to 89% of historic levels in July. ICU and lab rate centers continue to operate above 100% of historical levels for both months, while clinic and same-day surgery remain significantly below historical levels.

Staff Recommendation

Staff recommends the termination of the COVID-19 Surge Funding Policy as of June 30, 2020, due to the substantial return of elective procedures and the transition of COVID-19 cases to an ongoing part of hospital operations.

Staff also emphasized that the Commission can revisit this policy later, should COVID-19 once again significantly impact elective volumes.

FY 2020 GBR Considerations Update

The Staff has compiled information regarding the share of Federal COVID-19 funding received by each hospital. Staff completed this process through both surveys of the hospitals and the CARES Act Federal reporting data. Staff identified several instances where the two sources did not reconcile, and in those cases, assuming that the greater of the two amounts were correct. 

Staff currently estimate that Maryland GBR hospitals have received between $850M in CARES Act and Federal funding dollars. Of this amount, Staff estimate that $810M is related to regulated business.

In addition to this grant funding, Maryland hospitals have received approximately $1.5B in loan funding in response to the COVID-19 pandemic.

Staff also estimate that after accounting for CARES funding, Maryland hospitals were $137M net undercharged in FY 2020. This net undercharge includes eleven undercharged hospital systems ($262M in undercharge) and seven overcharged hospital systems ($125M in overcharge). 

The HSCRC anticipates that any final overcharge will be recovered either by the Federal Government or by the HSCRC. Hospitals will only be able to retain those funds if their FY 2020 Annual Filings justify additional expenses. Until hospitals submit FY 2020 Annual Filings and further information is available regarding Federal recovery, the HSCRC will not pursue recovery of any of the funds. Hospitals should not recognize any of this revenue in their financial statements in the meantime. Additionally, hospitals in an undercharge position may not recover more than their undercharge, net of the regulated portion of CARES funding. Once hospitals submit their FY 2020 Annual Filings, hospitals may use additional amounts to offset costs. For FY 2021, hospitals should eliminate COVID-19-related corridor expansion once hospitals recover their FY 2020 undercharge.