Updates to Quality Assurance Fee and 340B Drug Discount Pricing Program

Amber OttCalifornia Hospital Association

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Agenda

Hospital Fee Program• Background• Medicaid Managed Care Final Rules• Implementation Timeline• Encounter Data Files• Network Providers340B Drug Discount Program• State Updates• Federal Updates

Hospital Fee Program -Background

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• The state Department of Health Care Services (DHCS) administers the Medi-Cal program and pays hospitals directly for fee-for-service enrollees. DHCS also makes monthly capitation payments to Medi-Cal managed care plans based on how many members they enroll.

• A number of supplemental payment programs also exist: Disproportionate Share

Hospital Fund Private Hospital Supplemental

Fund Trauma Fund Other

Despite the array of payments from multiple sources, hospitals are left with massive losses from treating Medi-Cal patients.

Losses for Private Hospitals total about $8

billion a year

Why did CHA Develop the Hospital Fee Program?

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Losses incurred by Private Hospitals

$4 billion Hospitals

pay to DHCS

TO FILL THE $8 BILLION GAP

Hospitals Pay $4 billion

The State Keeps -$1 billion (24%) of net benefit

Remaining Funds $3 billion+

Federal Funds $5 billion

Total Funds $8 billion

This fills the $8 billion gap and maximizes the federal contribution…

Amounts are rounded and estimated to simplify equation – actual funding varies.

Basic Funding of the Hospital Fee Program

$5 billion Federal

govt. (CMS) sends a

matching contribution

to DHCS

$8 billion a year

Reimbursement Shortfall For

Medi-Cal Services

SB 239 Hospital Protections:• State share cannot exceed 24% of net benefit• DHCS fee-for-service Medi-Cal payments to hospitals

cannot be reduced• All Federal Medicaid funds available must be drawn

down• Construct is preserved for the future• Creates “program periods” (period one: 1/1/14 thru

12/31/16, period 2: 1/1/17 thru 6/30/19)• Program ends if Federal funds no longer available• 100% of supplemental managed care funds must go

to hospital services• The program “sunsets” 12-31-17

SB 239: Hospital Fee Program Statute

Prop 52 was developed to “protect the protections” by repealing the sunset date – leaves all other protections in place with further protection by the California Constitution

Proposition 52: Medi-Cal Funding and Accountability Act

A Legislature cannot tie the hands of a future Legislature

These “protections” were only good until the next Legislative Session

This puts hospitals and patients at risk for shenanigans!

Prop 52 was passed by a vote of the people in November 2016. Makes the current construct of the hospital fee program “permanent”

$4 billion in supplemental Medi-Cal fee-for-service payments are increased to hospitals for:

• Inpatient Services• Including General Acute, Subacute, High

Acuity and Psychiatric Days• Outpatient Services

$4 billion in increased capitation payments to managed care plans for supplemental “pass-through” payments to hospitals in lump sums based on prior known inpatient and outpatient utilization.

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New federal rules require changes to these payments to

hospitals

Hospital Fee Program Payments

Medicaid Managed Care Final Rules

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Medicaid Managed Care Final Rules

• Pass-through payments must be phased out over 10 years beginning on July 1, 2017

• Imposes an annual cap on pass-through payments equal to the aggregate pass-through payment amount submitted to CMS as of July 5, 2016 Approximately $2 billion in California

• Remaining supplemental Medi-Cal managed care payments must be made through a new permissible methodology (e.g. Directed Payments)

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Medicaid Managed Care Final Rules(cont.)

• Per SB 239, 100% of supplemental Medi-Cal managed care payments must be spent on hospital services

• Risk losing $2 billion in supplemental directed payments if cannot guarantee all $2 billion goes toward hospital service

• CHA worked with CMS and DHCS to find a solution that complied with the new Federal rules and ensured that 100% of supplemental payments will go to hospitals

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$2 billion new “directed payment”

method

$2 billion current “pass-through”

method

$4 Billion Managed Care Payments Directed Payments

• Uniform add-on per inpatient day and outpatient visit

• Network Providers for Contracted Services

• Current Utilization Data• Only Paid/Partially Paid

Claims

Pass-Through Payments• Uniform add-on per inpatient

day and outpatient visit• No requirement to be a

Network Provider• Historic Utilization Data• All Claims

Medicaid Managed Care Final Rules(cont.)

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Medicaid Managed Care Final Rules(cont.)

$2 billion new “directed payment”

method

$2 billion current “pass-through”

method

$4 Billion Managed Care Payments

Pass-through payments must be phased out over 10

years

Directed payments will grow over 10

years

Implementation Timeline

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Two Year Federal Claiming Limit

• Per Section 1132 of the Social Security Act, states must file for federal matching funds within 2 years of the calendar quarter in which the expenditure was made

• Supplemental Medi-Cal managed care payments for SFY 17/18 must be paid to the health plans by September 30, 2019

• Failure to comply results in forfeiture

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Pass-Through Payments

1/1/17 – 6/30/17 Rate Package• DHCS plans to submit to CMS by end of June 2018• Supplemental capitation payments to plans scheduled by

March 31, 2019• Supplemental Medi-Cal Managed Care payments made to

hospitals in May 2019

7/1/17 – 6/30/18 Rate Package• DHCS plans to submit to CMS by end of June 2018• Supplemental capitation payments to plans scheduled by

September 30, 2019• Supplemental Medi-Cal Managed Care payments made to

hospitals in November 2019

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Directed Payments

ACTIVITY Q1 CY2018 Q2 CY2018 Q3 CY2018 Q4 CY2018 Q1 CY2019 Q2 CY2019 Q3 CY2019 Q4 CY2019Volume Charts - 1st Release(Time Period Jul’17-Dec’17)

June 2018

Submit Initial SFY 17/18 Managed Care Rates to CMS

July 2018

Volume Charts - 2nd Release

(Time Period Jul’17-Mar’18)September 2018

Deadline for SFY 17/18 Claim Submission to Health

Plans

Exact Due Dates are Plan Specific

Deadline for Health Plans to Submit SFY 17/18

Encounter Data to DHCS

December 2018

Final Encounter Data Pull for Payment Calculation

March 2019

Submit Updated SFY 17/18 Managed Care Rates to CMS

June 2019

CMS Approves Updated SFY 17/18 Managed Care Rates

August 2019

Health Plans Receive Supplemental Capitation

PaymentsSeptember 2019

Hospitals Receive Supplemental Medi-Cal

Managed Care Payments

November 2019

* Estimates and subject to change. All activity estimated to occur by end of month.

Encounter Data Files

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Encounter Data Files

• Hospitals submit claim data to health plans and other payers using the 837 transaction format

• Medi-Cal managed care plans transmit the 837 encounter data for paid claims to DHCS on a daily, weekly or monthly basis

• DHCS accepts or rejects each claim based on Medi-Cal eligibility and data completeness

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DHCS Encounter Data Flow

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Encounter Data Files

• CMS requires encounter data files be used to calculate directed payment amounts

• DHCS will distribute hospital-specific volume summaries, by plan• June volume summaries cover 7/1/17 –

12/31/17• September volume summaries cover 7/1/17 –

3/30/18

• Hospitals are encouraged to compare volume summaries with internal utilization data

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Encounter Data Files (cont.)

Volume summaries created using hospital reported National Provider Identifiers (NPIs)https://app.smartsheet.com/b/publish?EQBCT=425fbe695a4749c2a883616707292acd

Inpatient • General Acute Care• Acute Rehab Units• Acute Psych Units

Outpatient• Outpatient Department• Hospital Based Outpatient Clinics

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Counting Logic

Inpatient

• Days = Discharge Date - Admit Date

• If Discharge Date = Admit Date, 1 day counted

• Excludes Long Term Care Days

Emergency Room

• Not resulting in an inpatient admission

• 1 visit = Unique Client Index Number (CIN), Date of Service, (NPI)

Outpatient

• 1 visit = Unique CIN, Date of Service, NPI

• Excludes Rural Health Clinics, Federally Qualified Health Centers and Cost- Based Reimbursement Clinics

Row Labels S01_IP S02_ER S03_OP S04_OT Grand TotalHospital A 848 787 209 566 2410

1639123456 812 475 189 560 2036304 615 272 119 421 1427305 3 1 24 28306 2 7 20 29352 174 187 59 94 514360 23 11 3 1 38

1895123456 11 6 17304 11 6 17

1942123456 36 312 9 357304 30 189 6 225306 4 0 4352 6 119 3 128

Grand Total 848 787 209 566 2410

Hospital A Volume (7/1/17 - 12/31/17)

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Volume Summaries

Unique NPI’s

Row Labels S01_IP S02_ER S03_OP S04_OT Grand TotalHospital A 848 787 209 566 2410

1639123456 812 475 189 560 2036304 615 272 119 421 1427305 3 1 24 28306 2 7 20 29352 174 187 59 94 514360 23 11 3 1 38

1895123456 11 6 17304 11 6 17

1942123456 36 312 9 357304 30 189 6 225306 4 0 4352 6 119 3 128

Grand Total 848 787 209 566 2410

Hospital A Volume (7/1/17 - 12/31/17)

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Volume Summaries (cont.)

Plan Codes(crosswalk included)

Row Labels S01_IP S02_ER S03_OP S04_OT Grand TotalHospital A 848 787 209 566 2410

1639123456 812 475 189 560 2036304 615 272 119 421 1427305 3 1 24 28306 2 7 20 29352 174 187 59 94 514360 23 11 3 1 38

1895123456 11 6 17304 11 6 17

1942123456 36 312 9 357304 30 189 6 225306 4 0 4352 6 119 3 128

Grand Total 848 787 209 566 2410

Hospital A Volume (7/1/17 - 12/31/17)

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Volume Summaries (cont.)

Inpatient, Emergency Room

And Outpatient (Eligible for directed

payments if in-network)

Other(Not eligible for

directed payments)

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Volume Summaries (cont.)

• Volume summaries grouped by primary Medi-Cal Managed Care Plan Example: If LA Care delegates a population to

Anthem and the hospital has a contract with Anthem, the utilization will be listed under LA Care as the primary plan in the volume summary, not Anthem

• Volume summaries will be shared using an SFTP site and only the primary contact person listed with DHCS will be sent the log-in details

• Volume summaries will include a tab with claim-level details

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Troubleshooting Volume Summaries

Hospitals are encouraged to work with Medi-Cal managed care plans to address significant variations in volumes summaries

Examples leading to variations in volume:• Missing or Incorrect NPI(s)• Capitated volume not submitted• Pending state eligibility response• Pending as duplicate claim• Fully or partially denied claim• Full dual-eligible claims should be excluded• Third party vendor or clearing house delays in

reporting

Network Providers

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Contracted Service Definitions

Directed payments can only be made to network providers for contracted services

A contracted service must meet the following criteria:

• A Medi-Cal covered service• Rendered to a Medi-Cal member actively

enrolled in a Medi-Cal managed care plan• By a “network provider” of the Medi-Cal

managed care plan who is contracted: To provide the rendered service To the member receiving the service For the applicable dates of service

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Network Provider Definitions

• A service qualifies for a directed payment only if there is an unbroken “contracting path” for the dates of service between the Medi-Cal managed care plan and the hospital for the particular service rendered and the member receiving the service

• Services provided under a patient specific Letter of Agreement (LOA) or Memorandum of Understanding (MOU) are not considered “contracted”

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Network Provider Database

• DHCS must create a database that captures all network providers

• Medi-Cal managed care plans and hospitals will be required to provide information to DHCS

• Completion goal for final database-February, 2019

• Database to be updated on a monthly basis

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Contracting Scenarios

Direct Contracts• Between hospital and

primary Medi-Cal Managed Care Plan

• Population and Services under contract

• Capitated or Fee-for-Service

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Contracting Scenarios (cont.)

Delegated Contracts• Between hospital and

delegated Medi-Cal Managed Care Plan

• Population and Services under contract

• Capitated or Fee-for-Service

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Contracting Scenarios (cont.)

Hospital to Hospital Contracts• Between hospital and

another hospital• Population and Services

under contract• Capitated or Fee-for-

Service

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Contracting Example #1

Scenario• Hospital A has a full-risk capitation

agreement with a Health Plan to care for a specific population

• Hospital A also has a contract with Hospital B to provide quaternary care to this population when the service is not available at Hospital A

• Hospital B receives payment directly from Hospital A for treating this population

Q: If Hospital B is not contracted with the Health Plan, are they considered to be a network provider when providing quaternary services for this population? A: Yes, for the specific population and for quaternary services.

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Contracting Example #2

Scenario• Hospital A and Hospital B each have

capitation arrangements with a Health Plan for unique populations.

• Hospital A and Hospital B have a reciprocity agreement with each other that outlines how they will pay one another if one of their capitated members is treated by the other hospital.

Q: Would Hospital A be considered a network provider when they treat one of Hospital B's capitated members? A: Yes, a reciprocity agreement constitutes a contract.

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Contracting Example #3

Scenario• Hospital has a contract with an

Independent Physicians Association (IPA) to provide ancillary services.

• A patient from the IPA presents to the hospital's emergency room and is ultimately admitted as an inpatient for treatment

Q: Is the Hospital considered a network provider for the inpatient admission?

A: No for inpatient services; Yes for ancillary services.

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Contracting Example #4

Scenario• Hospital A has a contract with

Delegated Entity A to treat their patient population with a Health Plan.

• Hospital A does not have a contract with Delegated Entity B to treat their population with the Health Plan.

Q: Is Hospital A considered a network provider when they treat members of Delegated Entity B?

A: No, Hospital A is only contracted for Delegated Entity A’s population.

340B Drug Discount Program

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340B Drug Discount Program

Overview ● Provides financial relief from high prescription costs to certain safety net hospitals

● Requires drug manufacturers participating in Medicaid to sell outpatient drugs at discounted rates to healthcare organizations that care for a significant number of uninsured and low-income patients

● Allows hospitals to provide free or discounted drugs to low-income patients and expand health services

● Program has undergone significant changes and remains threatened

There are 175 340B hospitals across 1,828 sites in CA

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California’s Budget Proposal

Governor Brown’s 2018 Budget included a proposal to prohibit 340B drugs from being dispensed to Medi-Cal managed care and fee-for-service beneficiaries, regardless of the environment (hospital, clinic, contract pharmacy, etc.)

Why?

● Ensure compliance with federal program standards; guarantee no duplication of discounts

● DHCS can claim additional rebates directly from the drug manufacturers

● Administratively burdensome to manage

Advocacy Efforts

● Met with key members of the Legislature and Governor’s office

● Testified at Assembly and Senate budget sub-committee hearings

● Held 340B advocacy day at the Capitol, including press event

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California’s Budget Proposal

Outcome

● Senate and Assembly budget sub-committees rejected the proposal

● Legislature instructed DHCS and stakeholders to find a solution that addresses the Administration’s concerns related to duplicate discounts

● Legislature must send final budget to Governor by June 15 and Governor must sign by July 1

Next Steps

● CHA and other stakeholder groups will continue to meet with DHCS to explore solutions

● Contract pharmacy environment continues to be a challenge – continue research and outreach to national partners

● Likely that a statutory change needed to ensure compliance with federal requirements

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340B Federal Activity

CHA opposes H.R. 4710 – 340B PAUSE Act● 2 year moratorium on new 340B DSH hospitals and new child sites for current

DSH hospitals (CAHs, SCH, RRCs are exempted)

● New reporting requirements for DSH, children’s and freestanding cancer hospitals

● Uses charity care defined by S-10 and not community benefit

CHA supports H.R. 4392● Nullifies Medicare payment cuts for drugs purchased through the 340B program

CHA supports H.R. 6071 – SERV Communities Act ● Nullifies Medicare payment cuts for drugs purchased through the 340B program

and improves transparency by requiring drug manufacturers to publish ceiling prices.

Questions?

Thank you

Amber OttVice President, Strategic Financing InitiativesCalifornia Hospital Associationaott@calhospital.org

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