Slide 1 Texas State University (PowerPoint download)

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					The 2011 Legislative Session in Review
    Highlights and Issues of Importance to Hospitals

Dan Stultz, M.D., FACP, FACHE
Texas Hospital Association

Texas State University HCA Students-Annual Conference
October 21, 2011
         2012-2013 State Budget

 House and Senate both filed initial versions of budget that
  assume no new revenue
 Projected $72B in available revenue to fund an estimated
  $99B in current services
 Shortfall approximately $27B
   – Current services impacted by Medicaid caseload
     growth, public school enrollment, etc.
   – Loss of Federal stimulus funding
 Historically dire budget situation – 2003 shortfall was
  “only” $10B resulting in significant cuts
    Factors driving the shortfall

 Structural deficit – business margins tax
 Sales tax projections down over biennium
 – Sales taxes are 56% of state revenue
 Teacher and state employee retirement and
 health care costs have skyrocketed
 Increased demand for services as state
 population grows, ages
 Loss of enhanced FMAP
 under federal stimulus act
 Factors driving the shortfall (cont.)

 Missed projections for Medicaid caseload,
 service utilization in 2010-2011

 No Political Will to Address Revenue

 Nov. 4, 2010 elections
  – 101/150 Republicans in House
  – Tea Party effect on “no new revenue”, no RDF
 Rainy Day Fund only used for current biennial shortfalls
 Focus on temporary “non-tax revenue”
 Payment deferrals
 Unwillingness to modify margins tax
 Focus on “administrative efficiency:”
  – Higher and public education
  – Medicaid
          Spreading the Pain?

 $4 billion cut from public schools
 $4.8 billion unfunded in Medicaid
 $1 billion cut to higher education, including
 financial aid and institutional funding
 $2.2 billion ”smoke and mirrors” deferred
  payments to the Foundation School Program
 $0 appropriated from $6.6 billion Rainy Day
  Fund for the current biennium

    Budget Overview - Medicaid

 Substantial $4.8B under-funding of program
 – Expected to be made up thru supplemental
   appropriation in 2013 (Rainy Day Fund)
 True spending reductions
 – Cost-containment initiatives
 – Medicaid managed care expansion statewide
 Gray area
 – Cost-containment for federal “flexibility”

      Budget – Hospital Impact

 8% rate cut for hospitals (added to 2% cut in
 No rate cut for doctors (had 2% cut in 2010-11)
 Statewide Hospital SDA ($30 M savings - $20M
 Expansion of Medicaid managed care ($272 M
 in savings)
 Potentially punitive UPL riders replaced with
 enhanced HHSC data collection requirements
Cost Containment Riders in Budget

 Rider 61 requires HHSC to achieve $450m
 GR funds through: (of 30 items)
 – Payment reform and quality based payments
 – Increasing neonatal intensive care management
 – More appropriate ER rates for non-emergent care
 – Maximizing copays in Medicaid
 – Improving birth outcomes by reducing birth trauma
   and elective inductions
 – Increasing fraud, waste and abuse detection
Cost Containment Riders in Budget

 Rider 59 requires HHSC to save $700m GR
 funds by pursuing a waiver from CMS to
 allow Medicaid flexibility including:
 – Greater flexibility in standards and levels of eligibility
 – Better designed benefit packages to meet
   demographic needs of Texas
 – Use of co-pays
 – Consolidation of funding streams for transparency and
 – Assumed responsibility by the Feds of 100% of the
   health care costs of unauthorized immigrants.                10
Concerns with Hospital Payment System

 Impact of rebasing / SDA system that pays
  similar hospitals differently
 Unequal ways to access supplemental
  payments (reimbursement = 61% of costs)
 “Inability” of state to adequately fund
 Limited interest in provider tax
 “Transparency” of local UPL programs
 Need to protect of UPL under Medicaid
 managed care expansion
      Nursing & Trauma Funding

 Nursing Shortage Reduction Fund = $30 M total for the
 biennium – will allow nursing schools to maintain
 increased enrollment
 Nursing education received $5-6 million from tobacco
 settlement funds
 Provides for $57.5 million per year in funding for
 designated trauma facilities, which is a 23 percent
 reduction from the $75 million per year originally
 appropriated for the current biennium.

                  Next Steps

 Keep an eye on D.C.
 - Deficit reduction = cuts to hospitals
 - “Medicaid reform”
 Continued discussions about hospital
 payment reform
 - UPL waiver
 - Provider tax
 Develop coalitions to address state’s
 structural revenue deficit
          THA Mission

THA brings value to Texas
hospitals by leading change that
enhances access to safe,
affordable, quality health care.

Key Implications and Questions for
Hospitals That Are Troublesome

1) Delivery System Reform or Payment Reform
2) Is it or isn’t it reform? Feels “stalled”.
3) Managing in transition; budgeting in change.
4) Acquisition and consolidation of hospitals and systems
   will continue.
5) New models of care delivery
6) Physician alignment strategy - issues
7) Can we pay the physicians in a way that incentivizes
   the right behavior and care, that “gets them in the
Key Implications and Questions for

Payment System Reform
 UPL Waiver – monitoring, input; the need for the
 government to work this out with us.
 The Provider Tax issue and the need for an in-depth
 State DSH Program
 Federal Payment Cuts
 The Future of Medicaid and Medicare – are they
 Bundling of Payments and Other “Ideas” to Reduce the
 Costs or to Reduce the Reimbursement to Providers
Key Implications and Questions for

The Elephants In The Room:
 There are unnecessary and duplicative costs in the
 There is high variation in all parts of the country and all
  parts of the state.
 We know the physicians are key, but no one (very few)
  has changed the payment system to control costs.
 UPL in Texas is a publically, not well known, huge
  financing vehicle that keeps hospitals above water.
  Tremendous anxiety over this issue is in the state now.

Overview: Market Changes

 Realignment of capital investments
 Constrained reimbursement levels from state and
 federal pressure
 Passive payers transitioning to active purchasers
 Market consolidation
 Growth in physician employment – at what rate?
 Workforce shortages
 Careful watch by financial groups, banks, markets

Mandatory Medicare Quality P4P
Initiatives – Still Coming

            FFY 2013                                            FFY 2015

Inpatient                 Inpatient Value-          Health Care-         EHR Meaningful
Readmissions              Based Purchasing          Acquired             Use (ARRA)
• Implemented             • Implemented             Conditions           • Medicare payment
  October 1, 2012           October 1, 2012         • Implemented          penalties assessed
  (FFY 2013)                (FFY 2013)                October 1, 2014      against eligible
• Reduces Medicare        • Budget neutral;           (FFY 2015)           hospitals and
  reimbursement by          redistributive within   • Reduces Medicare     physicians that
  $7 billion / 10 years     PPS system                inpatient hospital   fail to be
  nationwide                                          reimbursement by     meaningful users
                                                      $ 1.4 billion /      by October 1, 2014
                                                      10 years             (FFY 2015)

        The Future For You

 Manpower Needs
 Response to Care/Evidence Based
 Physician Comp Formulas that
  Incentivizes the Right Behavior
 It has to change
 Get rid of the elephants in the room


             Dan Stultz


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