State of Rural Healthcare In US

According to the American Hospital Association (AHA): There are 5564 registered

hospital in US 4862 are considered

community hospitals 1829 are rural hospitals

Aging Population in Rural Geographies

According to the US Census Bureau, adults in rural areas are older than those living in non-rural areas, with a median age of 51, compared to age 45 in non-rural areas

Hospitalization rates and lengths of stay increase with age among adults, peaking for those over 65

This creates increased demand for healthcare in rural areas

As a result, the majority of rural providers serve a greater proportion of patients over the age of 65 than two-thirds of all U.S. acute care hospitals

State of Rural Healthcare In US

80 rural hospitals have closed since 2010

Across the US 673 rural hospitals are vulnerable to closure

Although nearly all rural hospitals are feeling the squeeze, facilities in states that have not expanded Medicaid are under more financial pressure

63% of hospitals vulnerable to closure are in states that have not expanded Medicaid.

According to a report from iVantage Health Analytics, a firm that compiles a hospital strength index based on data about financial stability, patients and quality indicators:

CLOSED 2012

State of Rural Healthcare In US Rural America includes

approximately 57 million people, about 18% of the population and 84% of the geographic area of the USA

There are 1,855 rural hospitals that support nearly 2 million jobs

Every dollar spent by a rural hospital produces another $2.29 of economic activity

A typical critical access hospital employs 141 community members

Rural hospitals handle more than 21.5 million emergency visits

State of Rural Healthcare In USAccording to the iVantageStudy: Across the U.S., 673

rural hospitals are vulnerable to closure

Of the 673 hospitals, 355 are in markets with great health disparities

If the 673 vulnerable hospitals were to close, 99,000 healthcare jobs in rural communities across the nation would be lost

Closure of the at-risk hospitals would result in an estimated $277 billion loss to the gross domestic product

State of Rural Healthcare In USDiabetes

Rural hospitals serve communities with greater rates of diabetes

Diabetes is the seventh-leading cause of death in the nation

The American Diabetes Association estimates the total cost of diabetes has risen 41 percent from $174 billion in 2007 to $245 billion in 2012

Particularly prevalent in rural America, rural hospitals are on the frontline in providing diabetic screening and care for populations which may not have access to primary or specialty care

State of Rural Healthcare In USOpioid Epidemic

• According to the CDC, the death rate from opioid-related overdoses is 45 percent higher in nonmetropolitan counties

• Distances in rural geographies mean longer wait times for critical interventions and antidotes like Naloxone

• Rural communities are isolated from treatment facilities and addiction counseling

• Nationwide, only 11 percent of patients seeking addiction treatment receive care

Maryland Hospitals Maryland hospitals are protected with the “all

payer waiver with CMS GRMC was first hospital in US with global

budget revenue reimbursement - 1987 GBR created by the Maryland Health Services

Cost Review Commission (HSCRC) to give hospitals a financial incentive to change the way they manage their resources

With the ultimate goal of slowing down cost increases while preserving the quality of care

Maryland already regulated charges in all the state’s acute care hospitals, but GBR takes it a step farther

Maryland Hospitals focus:Value, not Volume

• HSCRC sets rates annually based on patient mix and services Revenue becomes predictable

• Revenue is adjusted population, service levels or shifting services to other settings

• Focus is shifted from volume to improving care and managing health at the community level

• Hospitals are financially motivated to control lengths of stay, reduce unnecessary testing, prevent inappropriate admissions, and generally operate in a more efficient manner

• Hospitals are incentivized to reduce readmissions, a motivator for careful patient education and post-discharge follow-up

Hospital ReimbursementMaryland vs. Rest of Nation

12

0%

50%

100%

150%

200%

250%

300%

Maryland Nation

Cost Mark-up

1.2 to 1

2.5 to 1

Charge to Cost Ratio (Illus.)

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

Medicare/Mcaid Comm. SelfPay Avg.

Cost Payments

Nation

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

Medicare/Mcaid Comm. SelfPay Avg.

Cost Payments

Maryland

The Statewide UCC pool fund

The Statewide UCC % is built into allhospitals’ rates; the UCC Pool acts as asettlement methodology to account forhospitals that experience more or less UCCthan the State

13

Statewide UCC

Included in all

hospital rates

Low UCC FundingHospital pays into UCC Pool

High UCC FundingHospital receives

payments from UCC Pool

Hospital ReimbursementMaryland vs. Rest of Nation

HSCRC’s Mandate Ensure Equity / Fairness / Stability

Maximize Access to Care

Contain Hospital Costs

Reduce the Total Cost of Care perMedicare Beneficiary

Provide Accountability

14

CMS Demonstration ModelEffective January 1, 2014

5 Year Pilot Project - 2014 Annual all-payer, per capita, total hospital cost growth

limited to 3.58% Maryland’s Medicare per beneficiary total hospital cost

growth rate must be below the national Medicare per beneficiary average, resulting in $330m of Medicare savings over five years Maryland’s Medicare per beneficiary total cost growth rate

cannot exceed the national average by more than 1 percentage point, and must be “break even” with the national average by year 4.

Maryland will reduce its 30-day Medicare readmission rate to the national average in five years

Annual Potentially Preventable Complication (PPC) reduction of 6.89%, for a cumulative 5 year reduction of 30%

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Global Budget Revenue (GBR) Inpatient and outpatient revenue is constrained by the

GBR System◦ GBR provides hospitals with a “global” revenue base

that is 100% fixed Approved revenue amount in a given year is fixed cap No adjustment for changes in volume or service mix No adjustment for changes in Case Mix Index (CMI) Overall incentive to reduce service utilization and

encourage improvements in population health If hospitals are successful in reducing utilization, AND,

associated variable costs, profitability should increase Changes to hospital’s rate order are made annually

16

Rate Order Revenue Center: Hospitals

have different revenue centers depending on the services they provide

Service Unit: The service unit is the same for all hospitals (i.e. every hospital charges for Operating Room services by the minute)

Unit Rates: Unit rates (prices) vary by hospital ◦ These rates must be

charged to all payers -no contract negotiations

17

Service UnitRevenue Center Unit Rates

Med./Surg. Acute Patient Days $1,169.6980Obstetric Acute Patient Days $892.5342Med./Surg. I.C.U. Patient Days $2,344.1673New Born Nursery Patient Days $733.7898Admissions Admission $189.3488Emergency Services MD RVU'S $49.6919Clinic Services RVU'S $43.2071Operating Room Minutes $27.3030Laboratory MD RVU'S $1.3387Radiology-Diagnostic HSCRC RVU'S $32.1426Physical Therapy MD RVU'S $7.7004Observation RVU'S $83.3950

18

Rate Center

+5 %

+10 %

- 5 %

- 10 %

Rate Center Corridors

Total GBR charged at the end of each 6 month incrementMust be with 0.5% of the Total Budget

Updates to Rate Orders

Hospitals generally receive an updated rate order once per year - effective July 1

Unit rates are updated for:◦ Inflation (Update Factor)◦ Change in Markup (Payer Mix and UCC)◦ Population◦ Infrastructure Investments◦ Price Variances and Penalties◦ NSP I and NSP II◦ Assessments and Fees◦ Quality Measures (MHAC, QBR)◦ Other Adjustments (RRR, Market Share)

19

Maryland’s System Spurs Innovation:GRMC’s Well Patient Program

GRMC developed an innovative approach to Care Coordination called the Well-patient Program

Patients are identified as high utilizers of hospital care via data analytics (CRISP) integrated to hospital IT system (Care Alerts)

Patients Enrolled into Well-patient Program:◦ Assigned Nurse Navigator◦ Social Worker◦ Psychiatrist or psychologist◦ PCP’s partner to manage chronic conditions

Hospital Services Supporting Wellness: Cardiopulmonary Rehabilitation Obesity Management and Education Smoking Cessation Classes Chronic Kidney Disease (CKD) Clinic CHF Clinic Health Education and literacy programs Community Health Workers Home Health Telemedicine

Maryland’s System Spurs Innovation:GRMC’s Well Patient Program

Maryland’s system allowed GRMC to be the first hospital in the US to implement a Global Budget - 1987

RESULTS:According to CRISP data,GRMC has an extremely low cost per Medicare beneficiary

Below state average Below national average

9.278.31 7.92

12.3211.52 11.27

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2

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6

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CY 15 CY 16 Jan-April CY 16 Jan-Jun

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Potentially Avoidable Utilization Revenue PAU Rate for CY15 and CY16 Compared to the State PAU Rate

GRMC PAURate

IMPROVEMENT

GRMC Surgical Site Infection Rate(Drives Readmission Rates and indicator for quality and safety)

0.26% 0.22% 0.16%0

0.10.20.30.40.50.60.70.80.9

11.11.21.31.41.51.61.71.81.9

2

2014 2015 2016

Perc

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GRMC Self Directed Goal was for SSI to be < 0.6%

IMPROVEMENT

One of the drivers of GRMC’s low readmission rate is surgical site infection rate

— Very Low in 2014, still made improvement in 2015— CDC January 2015 SSI event Module- reports NHSN data for 2006-2008— (16,147 SSI’s following 849,659 operative procedure) showed an overall

SSI rate of 1.9%

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GRMC 5.9%

Garrett Regional Medical CenterHSCRC reported Risk Adjusted 30 Day Inpatient All Payer

Readmission Rate Comparative for All Maryland Hospitals for Jan-April 2016

Statewide Average 11.4%

POSITIVE

92.11

93.95

96.316

97.23

98.2697.19 96.83

97.71 97.8497.98

8990919293949596979899

Final Jan-Sep 2014

Final Sep-Dec 2014

Final Jan-Jun 2015

Final Jan-Dec 2015

Prelim Jan-Jun 2016

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Garrett Regional Medical CenterRisk Adjusted Survival Rate Trend Mortality Rate

Rapid ImprovementGRMC State

IMPROVEMENT

Source: CRISP Data Report

0.42

0.47

0.54 0.55

0.82

0.810.78

0.81 0.8

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Jan- JunePrelim CY14

Jan- JuneCY14n= 43

Jan- SeptCY14n= 56

Jan- DecCY14n=71

Jan-MarCY15 Final

n= 5

Jan-JuneCY15 Final

n= 11

Jan- SeptCY15 Final

n= 25

Jan- DecCY15 Final

n=25

Jan-FebCY16n=4

Garrett Regional Medical CenterMaryland Hospital Acquired Conditions

(MHAC) Scores

GRMC Maryland Hospital Acquired Conditions…

Impr

ovem

ent

2015 3rd best performance in Maryland!

According to Senator Ben Cardin“GRMC is the role model for rural healthcare in the US today”

According to GRMC CEO: “It’s Because of the Maryland System”