Admission readmission revenue methodology update

Admission-

Readmission Revenue

Methodology Update

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Agenda

Background

Limitations of Existing ARR Methodology

Potential Modifications to ARR Methodology

What Should Hospitals and Health Systems be Doing?



Background

Implementation of the Admission-Readmission Revenue (“ARR”) Program

In January 2012, the HSCRC approved the Staff’s recommendation for the template and

negotiation of the ARR Program

31 Maryland hospitals entered into ARR agreements commencing in the 2012

As part of the May 2012 Update Factor and Waiver Margin response Staff recommendation, the

HSCRC approved the following:

ARR seed funding for FY 2012 (0.5% of inpatient revenue) would not have to be repaid

ARR seed funding for FY 2013 would not be allocated



Background

Organizational Design of the Existing ARR Methodology

The design of the ARR methodology was loosely based on the HSCRC’s existing CPC

methodology.

Hospital Charge per Episode (“CPE”) targets are calculated based on the hospital’s approved

unit rates

Episodes are a bundle of initial admissions and readmissions within 30 days of the initial

admission

As hospitals are at risk for 100% of the growth in readmissions and receive 100% of the benefit

of reductions in readmissions on a permanent basis

Hospital readmissions are risk-adjusted by a modified case-weight methodology using APR-

DRGs

Weights are developed based on Statewide admissions and readmissions within 30 days

Weights for initial admissions and readmissions are combined to calculate an overall weight

for each APR-SOI



Limitations and Risks of the Current ARR Methodology

1) CMS will require the ARR methodology to include a shared savings component going forward

2) The program only measures intra-hospital readmissions and linked system hospital

readmissions.

3) Compliance with CPE targets is difficult for hospitals to manage in real time due to a lack of

timely data

4) Communication to clinicians of the financial benefits of reducing readmissions is challenging



Potential Modifications to the ARR Program

On January 24th 2013, the HSCRC convened a workgroup to discuss modifications to the ARR

program.

The purpose of the workgroup is to discuss the limitations of the program and how they can be

addressed:

Shared Savings Options

– Create a scaling methodology that is not revenue neutral Statewide

– Adjust hospital case-mix adjusted CPE Targets for Statewide benchmarks by APR-SOI

Interhospital Readmissions

– The HSCRC Staff is working with CRISP to better match the abstract tape data to identify

interhospital readmissions

Compliance Timing and Management

– By going to a 6 month case-mix lag, the HSCRC hopes to address some of the issues

related to the timeliness of data




Ideas being considered by the HSCRC and industry are as follows:

Set expected readmission targets for each hospital based on a standard applied at the APR-SOI

level.

For example, at the 25th percentile.

For each hospital, the APR-SOI expected rates would be rolled up into a risk-adjusted single

expected rate

Performance relative to expected rates would be the basis for applying a penalty

Discount the weights by an amount to hit the CMS savings targets

May be done for only a handful of targeted DRGs.




Other technical modifications to the program may include:

Adjustments to Hospital CPE targets for Transfers

Refinement of the Hospice and Palliative Care Criteria

Discuss the treatment of pediatric readmissions

Increased enforcement of the submission of EMPIs for linked system hospitals



What Hospitals Should be Doing?

Send hospital finance and quality representatives to participate in the HSCRC’s and MHA’s

workgroup discussions

Quantify the impact of ARR methodology modification on existing data

Benchmark hospital readmission performance to Statewide rates by APR-SOI

Understand the risk related to interhospital readmissions at your facility

© 2011 KPMG LLP, a Delaware limited liability

partnership and the U.S. member firm of the KPMG

network of independent member firms affiliated with

KPMG International Cooperative (“KPMG

International”), a Swiss entity. All rights reserved.

The KPMG name, logo and “cutting through

complexity” are registered trademarks or trademarks

of KPMG International.

Admission readmission revenue methodology update

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