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Texas Medicaid Update
Michelle Apodaca, J.D. - Waller
John Berta – Texas Hospital Association
2014 TAHFA Annual Fall Symposium
September 22, 2014
© 2013 Waller Lansden Dortch & Davis, LLP. All Rights Reserved.
Presentation Topics
 Texas Political Climate
 ACA and Medicaid
 State Medicaid Budget
 1115 Transformation Waiver
 Texas Medicaid Items
 HHSC Initiatives
 Advisory Committees
 Sunset Review – Medicaid Focus
 Interim Studies
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About THA

The Texas Hospital Association is a nonprofit
trade association representing Texas hospitals
and health systems.

In addition to providing a unified voice for health
care, THA serves its 500+ members with timely
information, data analysis, education on essential
operational requirements, networking and
leadership opportunities.
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THA’s Family of Companies
HealthShare markets products and services offered through THA-endorsed
vendors. HealthShare also manages and markets voluntary insurance
programs, THA’s PDS program and the THA Retirement Plan.
Texas Hospital Insurance Exchange, managed by the Texas Hospital
Insurance NetworK, a wholly owned subsidiary of THA , provides dependable,
competitively priced liability insurance and workers’ compensation coverage
designed specifically for the Texas health care market.
Texas Healthcare Trustees is affiliated with THA and provides an education,
advocacy and leadership role for the governing board members of Texas health
care organizations.
Texas Center for Quality & Patient Safety is an initiative of THA and the
Texas Hospital Association Foundation focused on improving the quality of care
at the bedside, and reducing costs, through evidence-based practices.
HOSPAC, composed of THA’s state and federal political action committees, is
the voice for more than 355,000 health care professionals working in Texas
hospitals
5
Political Climate
 Governor Perry’s decision not to run again
created a domino effect on state-wide offices
 Next governor: Attorney General Greg Abbott (R) (received 1.2 million
votes in the primary) vs. Wendy Davis (432,000 votes)
 In January, Speaker Straus must be re-elected by the House of
Representatives to retain his leadership of the House
 Unprecedented vacancies in key leadership positions: House
Appropriations and Senate Finance
will trigger a round of
musical chairs for other legislative committee chairmanships
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General Election – November 4th

Ugly Primary –
–
Tea Party Affiliated Candidates Prevailed
–
Low voter turnout (951,461 of 13.6 m of Registered
Votes
–
Senate District 2 – Hall (R) – (defeated Senator Deuell
by 300 votes)

Governor – Abbott (R) vs. Davis (D)

Lt. Governor – Patrick (R) vs. Van de Putte (D)

Attorney General – Paxton (R) vs. Sam
Houston (D)

Agriculture Comm. – Miller vs. Hogan (D)

Railroad Comm. – Sitton (R) v. Brown (D)
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Texas Senate Preview

Lieutenant Governor: Senator Dan Patrick (R) (beat current Lt.
Gov. David Dewhurst vs. Leticia Van de Putte (D)

Republican majority

At least 6 new members:

–
Rep. Van Taylor (R) (replacing Ken Paxton in runoff for AG)
–
Don Huffines (R) (beat John Carona in the primary)
–
Newly elect Senator Brandon Creighton (R)
–
Konni Burton (R), vs. Libby Willis (D) (to replace Wendy Davis)
–
Paul Bettencourt (R) is expected to win Sen. Patrick’s seat or ? to replace
–
Senator Robert Duncan (R) will be the new Texas Tech Chancellor
And potentially 2 more new faces:
–
Special election for Glenn Hegar’s seat if he is elected Comptroller
–
Special election for Leticia Van de Putte’s seat if she is elected Lt. Governor
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Texas House Preview
 At least 20 new House members
 Small changes in party split expected, but most
newly elected Rs are Tea Party supported
 About 2/3rds of the House will have 2 or less
sessions of experience
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Texas - Status of ACA Reforms
No Medicaid expansion
No state run health
insurance Exchange
No enforcement on state
level
-Texas is one of six states
with no enforcement authority
- Legislature hostile to ACA –
no statutory authority likely to
pass
- Federal rules - if state does
not enforce, CCIIO will
Federal Exchange
10
ACA Delivery Reforms
Improving Quality and Efficiency
 ACA Title III –
Improving the Quality
and Efficiency of Health
Care
– Numerous demonstration
projects and initiatives
aimed at encouraging
development of alternative
payment models
 CMMI
– Established by ACA to test
innovative payment and
service delivery models
– $10 B appropriated for
CMMI activities between
FFY 2011 – 2019 and per
decade thereafter
 Primary care transformation
– Advanced primary care
practice (patient-centered
medical home)
 Bundled payment programs
– Payment for all services
furnished during an episode of
care
 Shared savings programs
– Accountable care organizations
 State-based demonstration
programs
– Dual eligible
– - Section 1115 demonstration
authority
11
Medicaid Payments to Hospitals – IGT
& GR
64%
65%
57%
60%
56%
56%
55%
50%
45%
IGT
40%
GR
35%
36%
43%
44%
44%
GR
30%
SFY
2008
SFY
2009
IGT
SFY
2010
SFY
2011
12
Medicaid Shortfall
Federal Funds and GR for DSH and UC
Hospital Medicaid Shortfall FY2013-16
3,600
(amounts in Billions)
3,400
3,200
3,000
2,800
2,600
Medicaid Shortfall
Federal Funds & GR for DSH & UC
2,400
FY2013
FY2014
FY2015
FY2016
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HHS State Budget Issues – Legislator’s
View
 Expand managed care
– Budget certainty
– Premium tax revenue
 No more lump-sum payments for uncompensated care
– 1115 Transformation Waiver
– Pay-for-performance / rate increases
 Arbitrarily reduce hospital payments for inappropriate
ER utilization
 Relax scope-of-practice
shortages
rules to help ease physician
 Expanded focus on audit and OIG oversight
HHS State Budget Issues – Provider
View
 How to Fund Medicaid
– State Share for Medicaid Supplemental Payments
– Acute Care Provider Rates
– Graduate Medical Education
– Physician Rates and Participation
 Mental Health
 Trauma Funds
 Nursing School Funds
State Budget
S.B. 1
Hospital Supplemental Payments
SB1 – The biennial budget bill FY 2014-15
 Rider 86
– Appropriating as much as $300 million in state
General Revenues in fiscal years 2014 ($160m) and
2015 ($140m) to improve Medicaid hospital payments
either as DSH or through rate adjustments;
– Developing a framework/plan to improve the
system for providing Medicaid payments to hospitals
that addresses:
• Proportional allotment of DSH and UC among:
– Large public hospitals
– Small public hospitals; and
– Non-public hospitals
State Budget
Hospital Supplemental Payments cont.
 SB1 – Rider 86 – THHSC Plan (Continued)
•
Allotment based on care rendered to Medicaid and low
income patients and on IGT provided by large public
hospitals;
•
The impact of Medicaid shortfalls and uncompensated care
costs;
•
Methods to:
– Flow at least some of these payments through
Medicaid MCOs;
– Transition payments from DSH to quality-based
payments; and
– Eliminate the use of state GR for DSH after 2015.
Linking the appropriation to demonstrable measures:
•
In 2014 – documenting progress towards the development
of the plan mentioned above; and
•
In 2015 – finalizing the plan;
State Budget
Cost Containment Rider
Rider 51 – HHSC Cost Containment Initiatives:
 Directs THHSC to use a variety of methods to achieve
savings of as much as $400 Million General Revenue / $963
Million All Funds
 Nine of these would impact hospitals potentially totaling
$185.9 M GR / $445.5 M All Funds
State Budget
Cost Containment Rider in S.B. 1
Rider 51 components with direct impact on hospitals:
 Quality-based payment adjustments.
 Improve birth outcomes/reduce preterm births.
 Transition outpatient payments to prospective
payment system that maximizes bundling,
including imaging (EAPGs).
 Develop hospital ER rates for non-emergency visits.
 Strengthen prior authorization requirements.
 Expand initiatives to pay more appropriately for outlier
payments.
 Adjust reimbursement for labor and delivery services
provided to adults at children’s hospitals.
 Re-establish hospital 30-day spell of illness
limitation in STAR+PLUS.
1115 Transformation Waiver – Overview
 Five-Year Medicaid 1115 Demonstration Waiver
(2011 – 2016)

Establishes Regional Healthcare Partnerships
(RHPs) anchored by public hospitals or another
public entity in coordination with local
stakeholders

Allows expansion of managed care while
protecting hospital supplemental payments under
a new methodology

Incentivize delivery system improvements and
improve access and system coordination
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1115 Waiver – Uncompensated Care & DSRIP
 Under the Waiver, historic UPL funds and new funds are
distributed to hospitals and other providers through two
pools:
 Uncompensated Care (UC) Pool - Replaces upper payment limit
(UPL) funding; Costs for care provided to individuals who have no third
party coverage for hospital and other services
 Delivery System Reform Incentive Payments (DSRIP) Pool New program to support coordinated care and quality improvements
through 20 Regional Healthcare Partnerships (RHPs); transform delivery
systems to improve care for individuals (including access, quality, and
health outcomes), improve health for the population, and lower costs
through efficiencies and improvements; DSRIP providers include hospitals,
physician groups, community mental health centers, and local health
departments
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1115 Transformation Waiver – UC Status

Demonstration year (DY) 1 UC payments
totaling $3.7 billion were completed in
June 2013

Half of the UC payments for DY 2 were
advanced to providers in August 2013


DY 2 UC pool totals $3.9 billion
Final DY 2 UC payments of approximately
$1.95 billion are scheduled for distribution
in June 2014
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Waiver Funding
Program
DY 1
(2011-12)
DY 2
(2012-13)
DY 3
(2013-14)
DY 4
(2014-15)
DY 5
(2015-16)
Total
UC
$3.7 B
$3.9 B
$3.534 B
$3.348 B
$3.1 B
$17.6 B
DSRIP
$500 M
$2.3 B
$2.666 B
$2.852 B
$3.1 B
$11.4 B
Total/DY
$4.2 B
$6.2 B
$6.2 B
$6.2 B
$6.2 B
$29.0 B
% UC
88%
63%
57%
54%
50%
60%
% DSRIP
12%
37%
43%
46%
50%
40%
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HHSC Terminates Contract with Xerox – May 9,
2014

HHSC is finalizing an agreement with Accenture for
the transition period.


HHSC to rebid the work.
During transition - HHSC will break the large contract
into as many as 5 contracts to make it easier to take
action against a vendor without disrupting medical
care for people with Medicaid. (processing Medicaid
claims; requests for prior authorization of services;
provider enrollment; maintaining data on Medicaid
managed care transactions; collecting drug
manufacturer rebates and staffing call centers for
Medicaid providers.)
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STAR+PLUS Expansion – as per SB 7

Takes effect
September 1, 2014

Expands STAR+PLUS
statewide to the
Medicaid Rural
Service Areas (MRSA)
– MRSA Central, MRSA
Northeast and MRSA
West
 Estimated to serve an
additional 80,000
members in
STAR+PLUS
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STAR+PLUS Expansion
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Additional September 1, 2014 Implementation
 Two additional behavioral health services will be
added to Medicaid Managed Care:
– Mental health rehabilitation and mental health targeted
case management for persons that have severe and
persistent mental illness or 3-17 yrs old with mental
health diagnosis or exhibit serious emotional
disturbance (Currently provided through FFS and delivered through
the Local Mental Health Authorities (LMHAs))
 Integration of acute care for clients with
Intellectual and Developmental Disabilities (IDD)
– Excludes Dual Eligibles, Individuals residing in state
supported living center, and persons under 21 receiving
voluntary SSI or SSI-related benefits.
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Nursing Home Carve-in Postponed
 HHSC announced on March 18 that expansion of
Medicaid Managed Care to nursing homes would
be postponed until March 2015
– Was scheduled for September 2014
– Nursing facility services will be provided through
STAR+PLUS statewide
– Intended to improve quality of care and promote care in
the least restrictive, most appropriate setting
– Between 50,000 - 60,000 nursing facility residents will
transition to STAR+PLUS
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DSH Part I
Appropriates up to $300M as DSH or
rate payments
– $160M – 2014
– $140M – 2015
Appropriations linked to:
– 2014 – HHSC’s progress towards development of a
plan
– 2015 – Finalization of the plan
DSH Part II
Plan to address:
– Appropriate balance/proportional allocation of DSH
and UC among large publics, small publics, and
non-publics
– Medicaid shortfall and its impact on DSH and UC
– Managed care payment mechanisms
– The need for supplemental payments to cover
Medicaid and UC shortfalls
– Plan to transition from supplemental payments to
rates
– Elimination of state GR for DSH after 2015
HHSC Initiatives
Sunset Commission Review
Dual Eligibles Demonstration
Presumptive Eligibility
84th Texas Legislature – January
2015
Perinatal Advisory Council
PAC Working on Guidelines
Rules are NOT Guidelines
Rules later this summer
Dual Eligible Demonstration
6 Counties
Blended Rates
STAR+PLUS MMPs
Wide Latitude for Care
Presumptive Eligibility
Jan 1 2015
Restrictive Criteria
Work with CMS to improve State
plan
Advisory Committees – Recommending New
Policy?
 Medicaid/CHIP Quality-Based Payment Advisory Committee
 STAR+PLUS Quality Council
 Hospital Payment Advisory Committee
 Physician Payment Advisory Committee
 Perinatal Advisory Council
 Electronic Health Information Exchange System Advisory
Committee
 Medicaid and CHIP Regional Advisory Committees
 Medical Care Advisory Committee
 State Medicaid Managed Care Advisory Committee
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HHSC Payment Reform: Opportunities/Challenges Multiple Payors/Systems
Medicare Quality
Measures and
Processes
RHP DSRIP Hospital and
Other Performing
Provider Quality
Measures and Processes
(PPEs, NCQA, NQF, Other)
(Value-Based
Purchasing,
Readmissions)
Commercial Carriers Quality
Measures and Processes
Medicaid FFS Hospital
Quality Measures and
Processes
(PPEs, NCQA, NQF, Cost of
Care, etc.)
(PPR, PPC)
Medicaid and CHIP MCO
Quality Measures and
Processes
(MCO capitation (PPEs), MCO P4Q,
MCO PIPS, MCO report cards, MCO
report cards and payment
structures with providers, MCO
quality based enrollment incentive
(potential future)
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Sunset Review
 Audit of each state agency’s functions and
effectiveness to determine if the agency
should be reauthorized, reorganized, or
allowed to expire after (generally) a 12-year
period
 Concurrent review of the Health & Safety
Code was announced to “clean up”
inconsistencies with current practices
 Healthcare-related agencies under review:
–
Health and Human Services Commission; Department of
State Health Services; Department of Aging and Disability
Services; Department of Assistive and Rehabilitative
Services; Texas Health Services Authority; Texas Health Care
Information Council; and Interagency Task Force for Children
With Special Needs
–
Hearings in late June and August
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Questions?
Michelle Apodaca, JD
Waller
512.685.6406
Michelle.Apodaca@wallerlaw.com
John Berta
Texas Hospital Association
512.465.1556
jberta@tha.com
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