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Texas Health and Human Services Commission Texas Health and Human Services Commission Evaluation of Uncompensated Care and Medicaid Payments in Texas Hospitals and the Role of Texas’ Uncompensated Care Pool As prepared by Health Management Associates August 26, 2016 Evaluation of Uncompensated Care and Medicaid Payments in Texas Hospitals and the Role of Texas’ Uncompensated Care Pool Contents Executive Summary ...................................................................................................................... 1 Section I – Purpose of Report .................................................................................................... 14 Background ............................................................................................................................. 14 Waiver Renewal ...................................................................................................................... 17 Requirements – Special Terms and Conditions ...................................................................... 17 Other Analysis Requested by HHSC ...................................................................................... 18 Definitions............................................................................................................................... 18 Section II – Medicaid Reimbursement for Hospitals............................................................... 19 Overall Structure and Financing ............................................................................................. 19 Base Payments ........................................................................................................................ 19 Fee for Service Inpatient and Outpatient .......................................................................... 19 Managed Care ................................................................................................................... 21 Base Payment Summary ................................................................................................... 23 Supplemental Payments .......................................................................................................... 23 Graduate Medical Education............................................................................................. 23 Disproportionate Share Hospital Payments ...................................................................... 24 UC Pool Payments ............................................................................................................ 27 Delivery System Reform Incentive Payments .................................................................. 29 Reporting Waiver Payments to CMS ...................................................................................... 32 Trends in Hospital Utilization and Reimbursement................................................................ 33 Financing the Non-Federal Match .......................................................................................... 34 Section III – Measuring Uncompensated Care ........................................................................ 37 HHSC Approach ..................................................................................................................... 37 UC Protocol ...................................................................................................................... 37 Components - Payments and Cost .................................................................................... 38 Non-hospital Participants .................................................................................................. 40 Review of TXHUC Tool ................................................................................................... 41 Defining and Estimating Uncompensated Care ...................................................................... 42 Page | i Evaluation of Uncompensated Care and Medicaid Payments in Texas Hospitals and the Role of Texas’ Uncompensated Care Pool Section IV – Adequacy of Medicaid Reimbursement and Access for Low Income Populations .................................................................................................................................. 49 Trending to FY 2015 ............................................................................................................... 49 Payment to Cost Percentage.................................................................................................... 50 Using Base Payments Only ............................................................................................... 50 Base Payments and Supplemental Payments .................................................................... 51 All Payments Net of IGTs................................................................................................. 53 Payment to Cost, by Type of Hospital .................................................................................... 54 Payment to Cost based on Prevalence of Low-Income Patients ............................................. 55 Financial Impact of the UC Pool ............................................................................................ 57 Adequacy, Equity, Accountability and Sustainability ............................................................ 58 Access and Network Adequacy .............................................................................................. 59 A Spotlight on Harris Health System................................................................................ 60 Access and Adequacy Statewide ...................................................................................... 61 Summary Observations ..................................................................................................... 63 Section V – Comparison to Other States .................................................................................. 64 Section VI – Projections and Additional Considerations ........................................................ 65 Environmental Trends and Factors ......................................................................................... 65 Trending from FY 2015 to FY 2017 ....................................................................................... 72 Pro Forma Impact of a Medicaid Expansion .......................................................................... 72 Changes in Coverage ........................................................................................................ 73 Financial Impact of Coverage Changes ............................................................................ 75 Impact of DSH Reductions on Texas Hospitals ..................................................................... 76 What if Texas Reestablished UPL Payments? ........................................................................ 79 Impact of the State Fully-Funding Hospital Medicaid Costs.................................................. 79 Section VII – Conclusions .......................................................................................................... 82 Appendices ................................................................................................................................... 87 Appendix I – Excerpt from Special Terms and Conditions – New Reporting Requirement .. 87 Appendix II – Instructions in TXHUC Tool for Reporting Uninsured Charges .................... 90 Appendix III – Assessment of State of Texas Medicaid Hospital Payments and Distribution of Services ............................................................................................................................... 92 ii | Page Evaluation of Uncompensated Care and Medicaid Payments in Texas Hospitals and the Role of Texas’ Uncompensated Care Pool Appendix IV – Revenue and Cost Estimates, FY 2015 ........................................................ 114 Appendix V – Supplemental Pools (FY 2015) and DSRIP Payments (FY 2013) ................ 122 Appendix VI – Unreimbursed Medicaid and Uninsured Costs, FY 2015 ............................ 130 Appendix VII - Hospital Characteristics and Tiers ............................................................... 138 iii | Page Evaluation of Uncompensated Care and Medicaid Payments in Texas Hospitals and the Role of Texas’ Uncompensated Care Pool Executive Summary Background and Purpose of Study In December 2011, the Texas Health and Human Services Commission (HHSC) received federal approval of the Texas Healthcare Transformation and Quality Improvement Program Waiver. The plan extended managed care, addressed concerns related to preservation of Texas' hospital safety net, and facilitated a critical transformation of the health care safety net from one driven by volume to one driven by value. A focal point within the waiver was funding for both a Delivery System Reform Incentive Payment (DSRIP) program and an Uncompensated Care program (UC Pool). Five-year funding authorized for the two statewide pools includes $17.6 billion allocated for the UC Pool and $11.4 billion for DSRIP. Based on information published by the state, many key objectives of the demonstration waiver have been achieved. Medicaid managed care is now in place in all 254 Texas counties and many services previously carved out of managed care are now included. The DSRIP program has helped move the focus of health care to improved access, quality and outcomes. Over 1,450 DSRIP projects are operating and over $7 billion in incentive payments
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