Revenue Forecast is Positive, House Moves Omnibus Budget by cometjunkie45

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									Monday Report May 22

Vol. XXXVII, Number 20 Michigan Health & Hospital Association 6215 West St. Joseph Highway Lansing, MI 48917 (517) 323-3443 Fax: (517) 3230946 www.mha.org

May 22, 2006

IN THIS ISSUE Revenue Forecast is Positive, House Moves Omnibus Budget U.S. Senate Amends Bill to Address Passport Requirement Comments on Medicaid OPPS Implementation Due Thursday Reports Help Analyze Medicare Inpatient DRG System Changes Cost Report Filing Deadline Extended Occupational Mix Proposed Rule Released Governor Signs Health Information Technology Legislation 2006 HEALTH PAC Campaign in Final Weeks Governor Appoints New CON Commissioners MHA Service Corporation Offers Service NEWS TO KNOW

Revenue Forecast is Positive, House Moves Omnibus Budget
Last week, the state held its regular May Revenue Estimating Conference. Chaired by House Fiscal Agency Director Mitch Bean, the conferees also include state treasurer nominee Robert Kleine and Senate Fiscal Agency Director Gary Olson. Compared to the January estimates, which the governor uses to prepare the initial executive budget recommendation, projected state general fund revenues for the next fiscal year increased by $58 million. The School Aid Fund revenue estimate decreased, but projections of overall revenues for K12 education are up by more than $350 million compared to the current year. The MHA will ask lawmakers to protect and restore Medicaid funding with the new dollars expected to be available. This week, the House Appropriations Committee is expected to report out an omnibus budget bill that
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incorporates the majority of general fund spending for fiscal year (FY) 2006-2007 in a single piece of legislation. The Michigan Department of Community Health (MDCH) budget for FY 2007, as reported by the House Appropriations Subcommittee on Community Health, will be incorporated in the bill. The House version of the MDCH budget is $75 million below the executive budget proposal. The House budget proposal includes boilerplate language prohibiting the department from processing graduate medical education (GME) funds through health maintenance organizations. It also incorporates another MHA priority, the partial restoration of a 2002 executive order cut to GME. Under the House plan, physician reimbursement for all Medicaid procedures will be increased by 5 percent. For more information, contact Laura Appel or Dave Finkbeiner at the MHA. Back to Top

U.S. Senate Amends Bill to Address Passport Requirement
Last week, the U.S. Senate adopted an amendment to S. 2611 to extend the deadline for compliance with the Western Hemisphere Travel Initiative, currently scheduled to take effect Jan. 1, 2008. Known as WHTI, this law requires anyone traveling into the United States, including U.S. citizens, to have a passport or its equivalent. Currently, only 20 percent of U.S. citizens and 40 percent of Canadian citizens have passports. Because Michigan hospitals employ several hundred Canadian citizens who commute regularly into the U.S., the MHA is part of a large coalition of businesses and employers that operate near the northern border of the nation. This coalition, called Business for Economic Security, Trade and Tourism (BESTT), is advocating for an extension of the implementation date and a bilateral solution for border-crossing documentation. The amendment adopted in the Senate would extend the deadline for WHTI implementation to June 2009. Assuming passage of the Senate immigration bill, the BESTT coalition will next advocate with U.S. House members to keep this provision in the conference report. For more information, contact Laura Appel at the MHA. Back to Top

Comments on Medicaid OPPS Implementation Due Thursday
As reported previously, the Medical Services Administration (MSA) intends to implement an outpatient prospective payment system (OPPS) to replace the existing Medicaid fee-based payment system, effective Oct. 1, 2006. All hospitals, including critical access and children's hospitals, would be subject to the OPPS for both Medicaid fee-for-service and health plan claims. The Medicaid OPPS would mirror the Medicare OPPS, with adjustments for certain populations, such as maternity and pediatrics. The MHA has drafted a comment letter (attach letter) that identifies issues that are of concern to hospitals, including those described below.

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Redistributive impact on individual hospital payments — While the MSA intends for the financial impact of the OPPS implementation to be budget-neutral statewide, the MHA is concerned about its impact on individual hospitals. Based on the MSA's financial impact analysis, which uses a limited data set based on fee-forservice claims for the first quarter of 2005, some hospitals are projected to experience payment decreases of 25 percent, while others are projected to experience increases of 40 percent. The MSA has not released the financial impact by individual procedure, which would allow hospitals to understand the impact by product line. Implementation timeframe — The MHA believes the currently planned timeframe for implementation is insufficient for providers to make necessary modifications to current Medicaid billing systems and procedures. Payment Conversion Factor — The MSA intends to pay each ambulatory payment classification (APC) based on a percentage of the Medicare APC payment rate. Language in the proposed policy is unclear whether the percentage will initially be set at 58 percent or 42 percent of the Medicare rate. Monitoring of Payment Conversion Factor — The MSA has not indicated its methodology for adjusting the conversion factor to maintain budget neutrality, and the MHA is concerned that quarterly adjustments will add undue fluctuations to hospital payments.

The MHA urges hospitals to review the MSA's financial impact analysis and submit their comments to the MSA by the Thursday deadline, with a copy to the MHA. Members with questions should contact Vickie Seal at the MHA. Back to Top

Reports Help Analyze Medicare Inpatient DRG System Changes
In April, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule to update the Medicare hospital inpatient prospective payment system for fiscal year (FY) 2007. The rule included a major revamping of the diagnosis-related-group (DRG) weights, which would result in a significant redistribution of Medicare inpatient payments among hospitals. For FY 2007, the CMS calculated the DRG weights using hospital costs rather than charges. In addition, the CMS is proposing a further refinement to the DRGs and implementation of consolidated severity-adjusted DRGs to adjust for patient acuity in FY 2008 or earlier. Since the CMS has not yet released for purchase the Consolidated Severity-Adjusted DRG Grouper program that assigns DRGs, the only current source to evaluate the impact of the proposed FY 2008 DRGs is the 2004 CMS Medicare Provider Analysis and Review (MedPAR) file. Therefore, the CMS assigned DRGs for fiscal years 2004 through 2008 based on individual hospital 2004 Medicare claims data.

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Later this week, the MHA will distribute hospital-specific data reflecting the change in each hospital's Medicare case mix index (CMI) through FY 2008, based on that hospital's actual 2004 Medicare claims data from the 2004 MedPAR file. The significance of the proposed DRG changes requires in-depth analysis of the differences between the current DRGs and the proposed severity-adjusted DRGs. Through its partnership with the Healthcare Association of New York State (HANYS), the MHA is making available an extensive CMI analysis and the 2004 MedPAR claims file for each member hospital. A sample report set is available that includes the following:
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impact of DRG changes on CMI by product line impact by DRG conversion from the current 2006 DRGs to the proposed 2008 consolidated severity-adjusted DRGs

Upon purchase, these reports will be provided in an Excel file, allowing hospitals to analyze the data to meet their specific needs. It is important to note that changes in hospital services since 2004 would not be reflected in this data. The MHA's comments on the CMS proposed rule will be available in the near future. Hospitals are urged to submit comments to the CMS regarding the proposed rule by the June 12 due date, with a copy to the MHA. Members with questions should contact Vickie Seal at the MHA. Back to Top

Cost Report Filing Deadline Extended
Last week, the Centers for Medicare & Medicaid Services (CMS) informed Medicare cost report software vendors of their plans to postpone the deadline for filing Medicare cost reports for inpatient rehabilitation facility (IRF) hospitals and hospitals with IRF subproviders for fiscal years ending Dec. 31, 2005. These cost reports will be due Aug. 31, 2006, rather than May 31, 2006. Due to modifications in the payment formula for low-income patient (LIP) payments, these cost reports must be submitted using software transmittal number 16 rather than the current software transmittal number 15. The CMS has not yet approved transmittal number 16 for any software vendors, but intends to do so in the near future. If hospitals submit their cost reports using the current software, it will be necessary to resubmit them using the updated software by the Aug. 31 deadline. The Medical Services Administration has also indicated that it is extending the cost report deadline to Aug. 31 for IRFs and hospitals with IRF subproviders for fiscal years ending Dec. 31, 2005. Members with questions should contact Vickie Seal at the MHA. Back to Top

Occupational Mix Proposed Rule Released
Last week, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule detailing the

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methodology for calculating the occupational mix adjustment that will take effect Oct. 1, 2006. The proposed rule stems from the recent court decision that requires the CMS to apply a 100 percent occupational mix adjustment beginning Oct. 1, 2006, using new data collected from hospitals. In addition, the proposed rule modifies hospital procedures for withdrawing geographic reclassification requests for fiscal year (FY) 2007 Medicare wage index purposes. The proposal requires hospitals to collect occupational mix data for two time periods and includes the following deadlines:

Hospitals to submit occupational mix data for Jan. 1 June 1 through March 31, 2006, for use in calculating the FY 2007 occupational mix adjustment June 22 Fiscal intermediary review of hospital-submitted data

June 29 CMS to post submitted data on Web site July 13 Hospitals to submit requests to fiscal intermediary for corrections to interim occupational mix data Fiscal intermediary to submit corrected July 27 occupational mix survey data for Jan. 1 through March 31, 2006 Hospitals to submit occupational mix data for April Aug. 31 1 through June 30, 2006, for use in developing the FY 2008 occupational mix adjustment

For hospitals that fail to submit an occupational mix survey, the CMS is proposing to assign an adjustment factor from four options:
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an occupational mix adjustment of 1.0 the average occupational mix adjustment factor for its labor market the lowest occupational mix adjustment factor for its labor market area the average occupational mix factor for similar hospitals, based on factors such as location, bed size, teaching and case mix

Since the occupational mix adjustment will impact the area wage index for all areas, the CMS will reevaluate which counties are newly eligible for the out-migration adjustment in FY 2007, based on the revised data adjusted for occupational mix. The CMS intends to publish an updated version of Table 4J, which shows eligible hospitals and their corresponding wage index adjustments, on the CMS Web site after it publishes the inpatient prospective payment system (IPPS) final rule, which is anticipated Aug. 1, and prior to Oct. 1, 2006. In addition, the proposed rule includes a provision for hospitals that received geographic reclassifications by the Medicare Geographic Classification Review Board (MGCRB), permitting them to withdraw an application for reclassification or terminate an existing three-year reclassification for FY 2007. The CMS procedures previously required that hospitals submit the request

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to the MGCRB within 45 days of publication of the IPPS proposed rule. The CMS intends to suspend the 45-day deadline and establish a new procedure to withdraw FY 2007 reclassifications, since the final occupational mix adjusted wage indexes and out-migration adjustments will be released between Aug. 1 and Oct. 1, 2006. The CMS will allow hospitals 30 days to submit a written request to reverse the reclassification decision made by the CMS. Members with questions should contact Vickie Seal at the MHA. Back to Top

Governor Signs Health Information Technology Legislation
House Bill 5336, introduced by Rep. Gary Newell (RSaranac), was recently signed into to law by Gov. Granholm and took immediate effect. The MHA-supported bill, which is now Public Act 137 of 2006, adds a new section to the Michigan Public Health Code to create the Health Information Technology Commission within the Department of Community Health. The MHA was successful in ensuring that one of the commission's 13 members will represent hospitals. The commission is charged to develop and maintain a strategic plan to guide the implementation of an interoperable health information technology system that would reduce medical errors, improve quality of care, and produce greater value for health care expenditures. The commission will not only identify critical technical, scientific, economic, and other issues affecting the public and private adoption of health information technology, but will also promote more efficient and effective communication among multiple health care providers. Members with questions should contact Dave Finkbeiner at the MHA. Back to Top

2006 HEALTH PAC Campaign in Final Weeks
With three weeks remaining in its annual fundraising campaign, the MHA HEALTH PAC has raised more than $147,500 toward its $350,000 statewide goal. Two additional MHA members have achieved their organizational goals: Crittenton Hospital Medical Center, Rochester Hills, and the North Central Council of the MHA, Petoskey. All those who contribute to the campaign secure membership to one of the following clubs: Chairman's Circle ($1,000+), Trustees' Club ($750+), President's Club ($500+), Capitol Club ($350+) and Century Club ($250+). For more information on the campaign, goal achievers and club members, visit the HEALTH PAC Web site. The MHA HEALTH PAC strongly encourages those hospitals/systems that have not met or exceeded their organizational goals to immediately launch or ramp up local fundraising campaigns. Members with exceptional fundraising performance will be formally recognized at the MHA Annual Membership

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Meeting; therefore, all contributions must be received by June 9. In related news, the MHA recently partnered with Lansing health care providers Sparrow Health System and Ingham Regional Medical Center to host a fundraiser for U.S. Rep. Mike Rogers (R-Brighton). Rogers provided the participants an "inside the beltway" perspective on health care legislation under consideration in Washington, DC. The congressman recently declared his intention to run for re-election this fall. Members with questions should contact Lori Latham at the MHA.

Dennis Litos, former president & CEO, Ingham Regional Medical Center; Paula Cunningham, RN, Ingham Regional Medical Center; Dennis Swan, chief executive officer, Sparrow Health System; U.S. Rep. Mike Rogers; and MHA President Spencer Johnson pause for a photo at a recent fundraiser in Lansing.

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Governor Appoints New CON Commissioners
Last week, Gov. Granholm appointed three new members and two returning members to the bipartisan, 11member state Certificate of Need Commission. Marc Keshishian of Farmington Hills, vice president and medical director of clinical affairs for Blue Care Network, was appointed to represent Democrats and nonprofit health care corporations operating pursuant to the Nonprofit Health Care Corporation Reform Act for a term expiring Jan. 1, 2008. Adam Miller of Grosse Pointe Park, senior benefit consultant with the International Union, United Auto Workers, was appointed to represent Democrats and organized labor unions for a term expiring Jan. 1, 2009. Kathie Vanderploeg-Hoekstra of Portage, chairwoman of the board and chief executive officer for Ship-Pac, Inc., was appointed to represent Republicans and companies not self-insured for health coverage for a term expiring Jan. 1, 2009. Current commissioners Bradley Cory of Marquette, former administrator of the Marquette County Medical Care Facility and Republican appointee representing nursing homes, and Michael Sandler, MD, of West Bloomfield, senior staff physician of diagnostic radiology with Henry Ford Health System and Democratic appointee representing allopathic physicians, were reappointed for terms expiring April 9, 2009. A list of all of the CON Commission members is available online. For more information on Certificate of Need issues, contact Amy Barkholz at the MHA. Back to Top

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MHA Service Corporation Offers Service
The MHA Service Corporation's Healthcare Equipment Loan Program (HELP) provides low-cost capital financing for equipment, renovation, new construction, and elimination of existing loans. At a current rate of 3.6 percent, loans range from $500,000 to $25 million, with amortization up to 20 years. Contact Gary Henriksen at the MHA Service Corporation for more information on HELP.

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The MHA Financial Policy Panel will meet from 9 a.m. to noon Wednesday at the MHA. The group will discuss the Medicare inpatient proposed rule and other financial issues affecting hospitals. For more information, contact Marilyn Litka-Klein at the MHA.

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The MHA Patient Safety Committee will meet from 9:30 a.m. to noon Thursday at the MHA. The group will discuss the town hall meeting on collection of patient-level data that is scheduled for June 5 with representatives of the Joint Commission on Accreditation of Healthcare Organizations. For more information, contact Sam Watson at the MHA.

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The MHA Quality & Compliance Committee will meet from 1 to 3:30 p.m. Thursday at the MHA. The group will review the standards for organ donation. For more information, contact Sam Watson at the MHA.

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A recording and related information from an April 27 Webcast titled Increasing Inpatient Influenza and Pneumococcal Immunizations in Michigan Hospitals have been made publicly available on the Web site of the Michigan quality organization MPRO. The Webcast was presented as a joint national partnership with the U.S. Centers for Disease Control and Prevention and the Alliance of Community Health Plans and includes useful suggestions and recommendations for overcoming barriers to immunizations. Successful efforts of some Michigan hospitals to increase inpatient immunizations are also highlighted. Questions should be directed to Dianne L. McCagg at MPRO at (248) 465-7342 or to Cassandra Dowling at the MHA.

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Last week, the Medical Services Administration (MSA) distributed payments to hospitals for the third quarter of fiscal year 2006 as part of the Medicaid Access to Care Initiative (MACI), also known as the quality assurance assessment program (QAAP). Corresponding tax bills will be issued soon, with tax payments due in full to the state on June 30. Members with questions should contact Vickie Seal at the MHA. Back to Top

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MHA Members can also refer to these items in our Weekly Mailing:

Detroit Chamber to Receive MHA-Commissioned Study on “A AB 1152 Decade of Quality & Efficiency Improvements at Michigan Hospitals” MHA MHA Service Corporation Report Released on Caring for Patients with Chronic Illness May Generate Media and Consumer Inquiries SEARCH newsletter - May 2006 issue

©2006 by the Michigan Health & Hospital Association. All rights reserved. Materials may not be reproduced without permission.

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