RFA14ResponsestoApplicantQuestionsFINAL091313.doc

Executive Office of Health and Human Services

Office of Medicaid

Rate Year 2014 Acute Hospital Request for Applications

(Issued August 19, 2013)

Responses to Applicants’ Questions September 13, 2013 This document provides responses to those questions of general interest raised at the Rate Year 2014 Acute Hospital Request for Applications (RFA) Applicants’ Conference, or submitted in writing, that serve to clarify the RFA, as well as some other questions and comments regarding the RFA. This document does not address questions or comments regarding long-standing methodologies, or questions that have been answered in the context of previous RFAs.

Inflation:

1. Will MassHealth consider using a different inflation factor for operating costs, such as hospital-specific wage proxies, similar to Medicare and local insurer’s practices?

RESPONSE: EOHHS believes that its RY2014 methodology, including the operating cost inflation methodology, is within a range of options for reasonable payment methods and amounts that satisfy state and federal requirements. The inflation factor used reflects the inflation methodology generally used by EOHHS and approved by CMS for hospital reimbursement. The Massachusetts CPI component of the inflation rate is reflective of the costs in the Massachusetts economy. Furthermore, the SPAD calculation includes an adjustment for each hospital’s Massachusetts-specific wage area index.

Outpatient PAPE:

2. Will MassHealth consider removing the two-year PAPE Blend for hospitals whose case mix has increased from the prior Rate Year? Will MassHealth consider using the RY13 PAPE for any hospital whose rate decreased by 10% in each of Rate Years 2013 and 2014?

RESPONSE: Not at this time. The blending (and the 10% cap in rate reduction from the prior rate year) was maintained to mitigate rate swings from year to year, and was applied consistently to all hospitals.

3. Given that several hospitals have experienced a decrease in their PAPE rate, will MassHealth be reviewing the casemix data to ensure accuracy?

RESPONSE: Under the RFA, hospitals may request a review of their casemix data under certain circumstances where the hospitals observes what it believes is an error in MassHealth’s data or calculations. However, we note that it is typical that most hospitals experience some change in their PAPE rates from one year to the next, and that for at least a few hospitals the increase or decrease is significant. A significant factor in rate changes is often the hospital’s increase or decrease in its case mix, which is the basis for the methodology; it does not necessarily indicate a flaw in the data.

4. Did MassHealth increase the outpatient conversion factor from RY13 to RY14?

RESPONSE: MassHealth did not increase the conversion factor from RY13 to RY14. The PAPE rates included in all hospitals’ RY13 and RY14 contracts incorporate the $136.12 conversion factor, and there is no change.

Inpatient:

5. What is the rationale for reducing the efficiency standard used in calculating the SPAD from 75% to 65%? Will MassHealth consider restoring it to 75% consistent with RY13, or eliminating it altogether?

RESPONSE: Not at this time. EOHHS believes operating cost efficiency is within the control of the hospital and that, by reducing the efficiency standard, the current methodology provides an incentive to hospitals to operate more efficiently. EOHHS believes such an incentive should remain a feature of the payment method to ensure the payments are efficient and economical, and to ensure access to quality care while continuing to meet reasonable financial requirements for providing care.

Case-mix adjustment requests to correct errors in SPAD and PAPE calculations:

6. Will MassHealth consider extending the deadline for submitting SPAD and PAPE casemix adjustment requests? Can MassHealth provide more detail on the components that go into the calculation of the SPAD?

RESPONSE: MassHealth believes four months (i.e., from the October 1, 2013 start date of the contract to January 31, 2014) is sufficient time for hospitals to review their data, identify and estimate the cost of data discrepancies if any, and submit a request for adjustment as provided in the RFA. Moreover, hospitals typically request and are provided with detailed backup data in September. In addition, receipt of the requests by January 31, 2014 will better inform MassHealth’s planning and rate development for the next rate year.

We refer Hospitals to the RFA, and their hospital-specific rate sheets for detail regarding the components that go into the calculation of the SPAD. In addition, Hospitals may request claims data utilized in the calculation of inpatient and outpatient case mix Disproportionate Share Hospitals (DSH):

7. Under RFA14, DSH Hospitals are receiving, as a supplemental payment, an amount equal to the sum of 10% of their total FFY13 SPAD payments and 5% of their total FFY13 PAPE payments, whereas in RY13 the increase (5% for inpatient, none for outpatient) was implemented as an add-on directly to the DSH Hospital’s SPAD.

a.

Does this conflict with the SFY2014 budget and legislative intent?

RESPONSE: No. The method selected meets the intent of the budget and legislation. The legislative language does not dictate how the increase must be implemented, and EOHHS has chosen to pay the additional amounts as a supplemental payment.

b.

MCO payments to hospitals typically mirror fee-for-service acute hospital rate payments, so we believe this change effectively offsets or reduces the increase by decreasing MCO payments to hospitals. How does EOHHS respond to this?

RESPONSE: There is no requirement that a hospital’s individual contract with an MCO mirror the RFA methodology. Whether or not the current RFA methodology differs in certain aspects from the prior year, hospitals and MCOs are free to negotiate their own contracted terms and rates.

c.

Won’t there be a delay resulting from a supplemental payment compared to inclusion in rate based payments that would start October 1, 2013? This is an unfair cash flow burden to the DSH Hospitals.

RESPONSE: MassHealth will issue the supplemental payments as quickly as is feasible based on federal approval and availability of appropriate data, as is the normal process for supplemental hospital payments. See also, the response to question 7.d. below.

d. Why won’t the supplemental payments be determined based on RY14 figures? We think RY14 will probably be higher in volume and rates and therefore payment.

RESPONSE: Federal Fiscal Year 2013 data will be available one year sooner than RY14, so its use provides for more timely payment rather than waiting for RY14 data.

8. Does MassHealth plan on including the $12.3M additional payment for inpatient and outpatient behavioral and mental health services by DSH Hospitals (included in the SFY14 budget) in the RFA? If so, how? Is MassHealth open to input from the hospitals?

RESPONSE: As noted at the Applicants’ Conference, MassHealth is working to clarify the intent of the legislative language and to develop a payment methodology that best meets the intent of enhanced payment for behavioral and mental health services provided by DSH Hospitals. MassHealth will carefully consider hospitals’ specific recommendations and will communicate with hospitals and other stakeholders as it develops a methodology.

Other Issues:

9. Will MassHealth consider restoring payment for medical education and coverage for adult outlier days?

RESPONSE: Not at this time.

RY14 Acute Hospital RFA – Responses to Applicants’ Questions