AM. SUB. H.B. 49 AS ENACTED SELECTED HOSPITAL-RELATED PROVISIONS POST-HOUSE AND SENATE VETOES (8/22/17)

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1 AM. SUB. H.B. 49 AS ENACTED SELECTED HOSPITAL-RELATED PROVISIONS POST-HOUSE AND SENATE VETOES (8/22/17) CONTENTS SUMMARY... 1 PROVISIONS REMOVED FROM THE BUDGET BILL... 2 PROVISIONS THAT REMAIN IN THE BUDGET BILL... 4 VETOES... 5 VETOES OVERRIDDEN BY THE HOUSE ONLY... 6 VETOES OVERRIDDEN BY THE HOUSE AND SENATE... 8 ADMINISTRATION OUTLINES PLAN FOR MEDICAID CUTS SUMMARY The enacted version of Amended Substitute House Bill 49, the state operating budget, includes several provisions related to health care and hospitals, including guardrails on the Medicaid program. Following its passage by the Ohio General Assembly, Am. Sub. HB 49 was sent to the Governor s desk June 30 for signature. Gov. John Kasich vetoed 47 items, of which several directly or indirectly impact the hospital community. In a rare move, the Ohio House (July 6) and Ohio Senate (Aug. 22) reconvened to override several of the Governor s vetoes. This document provides information related to budget provisions included in the as enacted version, as well as the vetoes overridden by both chambers. OVERRIDE NOTE: The Ohio House is the originating body for the state operating budget and therefore must be the originating body for overriding vetoes. No override action can be taken on any veto items by the Ohio Senate in the absence of an override by the Ohio House. Therefore, when the Ohio Senate reconvened on Aug. 22, the vetoes overridden by the House on July 6 were taken under consideration for override by the Senate. On Aug. 22, the Senate acted on six of the 11 items overridden by the House. Additionally, the House voted to leave all other veto items as pending, meaning action to override those items that were not taken up on July 6 can take place at any time prior to the conclusion of the current legislative session, Dec. 31, The Senate took similar action to leave the five remaining veto override items sent over from the House as pending. As with any budget process, some provisions were included in certain iterations and removed in others. This document highlights key provisions of interest to the hospital community. For further information on timeline or language that may have been included at any point during the budget process, please contact a member of the Advocacy Team.

2 Page 2 PROVIDER CUTS: An ongoing component of the budget is significant Medicaid provider cuts announced by the administration on July 1. After the budget bill was signed into law, the Office of Health Transformation sent out a press release announcing an appropriation gap in the Medicaid program. The administration s plan to address this shortfall includes one billion dollars in payment adjustments affecting hospitals. Throughout the budget process, OHA engaged with the administration to advocate against further cuts to the hospital community and to share the substantial impact of any funding reductions. The OHA Board has been vocal in questioning the need for additional cuts and has requested additional meetings and more information before any such plan moves forward. PROVISIONS REMOVED FROM THE BUDGET BILL The following provisions were NOT included in the as enacted version of Am. Sub. HB 49 nor addressed by the Governor s veto message. COVERAGE OF TELEMEDICINE SERVICES (P. 616) INSCD6 NO PROVISION: This language would have required a health benefit plan to cover telemedicine services on the same basis and to the same extent it covers in-person health services. Conclusion: The provision was not part of the final bill. Therefore, health benefit plans are not required to cover telemedicine services the same as in-person services. Next steps: OHA supported this language and is disappointed it was not included in the final version of the budget. We will continue to facilitate discussion on the topic via the Telehealth Workgroup and engaging additional stakeholders and HGRO members in working toward coverage of telemedicine services. MANAGED CARE PAYMENT RATES FOR NON-CONTRACTING HOSPITALS (P.729) MCDCD37 NO PROVISION: This language would have modified a continuing law requirement that a hospital not under contract with a Medicaid MCO provide nonemergency services to a Medicaid recipient enrolled in the MCO and accept from the MCO, as payment in full, the amount that would have been paid under the Medicaid fee-for-service reimbursement. Conclusion: The provision was not part of the final bill. Retains current law. OHA supported the removal of the non-contracting language and is pleased it was not part of the final version of the budget. HEALTH SERVICES COST ESTIMATES (P.754) MCDCD35 NO PROVISION: This language would have repealed current law that requires a medical services provider to provide in writing, before any nonemergency product, service or procedure is provided, a reasonable, good faith estimate. Conclusion: OHA legal and advocacy teams worked diligently to resolve the price transparency issue during the state budget process, however the existing price transparency law that is the subject of OHA s lawsuit remains in place. The court order preventing the law from going into effect still stands.

3 Page 3 Next steps: The preliminary injunction hearing regarding OHA s challenge to the price transparency statute has been postponed from Aug. 14 to Sept. 26 and 27. OHA is preparing for the hearing and remains confident in our legal position. At the same time, OHA continues to talk to legislators about a workable legislative solution to this difficult issue. NOTE: The portion of the law establishing the Health Services Price Disclosure Study Committee WAS repealed as part of the enacted version of Am. Sub. HB 49 and therefore no longer exists. PROHIBITION ON NEW INSURANCE MANDATES PROVISION: Prohibits any new health care mandates impacting individual and group health insurance plans not subject to the federal Employee Retirement Income Security Act of 1974 (ERISA) during the remainder of the 132nd General Assembly. Conclusion: The General Assembly is not prohibited from placing mandates on insurers. OHA was supportive of the removal of this language. THE LEGISLATIVE COMMITTEE ON PUBLIC HEALTH FUTURES (P. 495) DOHCD9 NO PROVISION: The language would have re-established the Legislative Committee on Public Health Futures. Conclusion: The Legislative Committee on Public Health Futures ceases to exist. ELIMINATION OF PATIENT-CENTERED MEDICAL HOME PROGRAM (P. 491) MCDCD60 NO PROVISION: Language included in previous versions of the budget would have eliminated the authority of the ODM Director to implement, as part of the Medicaid program, a system under which individuals with chronic conditions receive health home services and the Director's authority to implement a similar system for individuals with developmental disabilities. The language would have abolished ODM's patient-centered medical home program. (The program is often called the Comprehensive Primary Care Program). Conclusion: OHA supported removing the language that abolished the CPC program. We were pleased to see that the Administration retained the authority to implement the program in the as enacted version of the bill. TRANSFER OF CERTAIN ODH PROGRAM ENROLLEES TO MEDICAID AND NEW NON-MEDICAID PROGRAM (P. 708) MCDCD45 PROVISION: Requires ODM to establish a new program to begin Jan. 1, 2018, for non-medicaid-eligible individuals under age 21 with special medical needs who had not enrolled in, or applied for, a Department of Health special needs medical program (Program for Medically Handicapped Children, Cystic Fibrosis Program, and Hemophilia Program, otherwise known as BCMH ) before July 1, 2017, when those programs begin to be phased out. Conclusion: OHA did not support the proposed changes to the BCMH program and were pleased to see this provision was not part of the as enacted version of the bill.

4 Page 4 PROVISIONS THAT REMAIN IN THE BUDGET BILL BIENNIAL REVIEW AND SUBMISSION OF HOSPITAL NURSE STAFFING PLAN (P. 473) DOHCD32 PROVISION: Requires each hospital s nursing care committee to review its nursing services staffing plan at least once every two years rather than annually. Specifies that a proposed requirement that a hospital submit copies of its nursing services staffing plan to the Department of Health every even-numbered year is intended to maintain a repository for public access to those plans. States that a copy of a nursing services staffing plan submitted to the Department is a public record. Conclusion: A hospital s nursing care committee must review the hospital s nursing services staffing plan at least once every two years and must submit their nursing services staffing plans to ODH every evennumbered year beginning March 1, This provision takes the review period from annual to biennial and requires plans to be submitted to ODH. OHA opposed this language and will continue to work with the Ohio Nurses Association in addressing nurse staffing issues. HOSPITAL DATA COLLECTION AND DISCLOSURE (P. 473) DOHCD3 PROVISION: Repeals provisions requiring hospitals to submit the following to the ODH Director: (1) for inpatient services, information pertaining to admission, length of stay, discharge, and hospital charges, (2) for outpatient services, information pertaining to the number of patients receiving those services and hospital charges, and (3) for both inpatient and outpatient services, certain performance measure information. Conclusion: OHA supported this provision and is pleased it is included in the final version of the budget bill. CARE INNOVATION AND COMMUNITY IMPROVEMENT PROGRAM (P.750) MCDCD79 PROVISION: Requires the ODM Director to establish the Care Innovation and Community Improvement Program for the fiscal biennium. Permits a nonprofit hospital agency affiliated with a state university and a public hospital agency to participate in the program if the agency operates a hospital that has a Medicaid provider agreement. Provides that nonprofit and public hospital agencies participating in the program are responsible for the state share of the program's costs. Specifies the duties of nonprofit and public hospital agencies participating in the program. Provides for each nonprofit and public hospital agency participating in the program to receive supplemental payments under the Medicaid program for physician and other professional services. Provides that the amount of the supplemental payments is to equal the difference between the Medicaid rates for the services and the average commercial rates for the services.

5 Page 5 Permits the ODM Director to terminate or adjust the amount of the supplemental payments if the funding for the program is inadequate. Creates the Care Innovation and Community Improvement Program Fund to be used to make supplemental payments under the program. Permits the ODM Director, if the amount appropriated from the fund and the corresponding federal financial participation appropriated from the existing Health Care-Federal Fund are inadequate to make the supplemental payments, to request that the OBM Director authorize additional expenditures from the funds as needed to make the payments. Conclusion: This provision appropriates $60 million to the program in FY18 and FY19 and increases the associated federal fund by $140 million in FY18 and FY19. VETOES VETO ITEM NUMBER 35: MEDICAID PAYMENT RATES FOR HOSPITAL SERVICES (P. 747) MCDCD55 PROVISION: Sets the Medicaid payment rate for a hospital service provided from July 1, 2017, through June 30, 2019, to an amount that is equal to the amount that was paid for the same service on January 1, 2017, except for any change resulting from the rebasing or recalibration of hospital rates on July 1, *NOT OVERRIDDEN* Conclusion: This provision was included in the as enacted version of the budget, but Gov. Kasich vetoed the provision. The House did not override his veto. Therefore, Medicaid payment rates for hospital services are not set in law. OHA was successful in securing the hospital rate freeze in the House and Senate and is disappointed by the Governor s veto. This veto item does remain as pending and can be acted upon by the Ohio House up until Dec. 31, 2018, though this is unlikely. ( ) VETO ITEM NUMBER 28 (PARTIALLY VETOED): MEDICAID ELIGIBILITY REQUIREMENTS FOR EXPANSION GROUP (P. 722) MCDCD59 PROVISION: Requires the ODM Director to establish a waiver program under which an individual included in the Medicaid expansion group (Group VIII) must satisfy at least one of the following requirements to be eligible for Medicaid: (1) Be at least 55 years of age; (2) Be employed; (3) Be enrolled in school or an occupational training program; (4) Be participating in an alcohol and drug addiction treatment group; or (5) Have intensive physical health care needs or serious mental illness. VETOED PROVISION: Prohibits the Medicaid program from newly enrolling individuals as part of the expansion eligibility (exempts individuals who have a mental illness or drug addiction from the freeze and requires the ODM Director to seek a federal Medicaid waiver to implement the freeze) group beginning July 1, 2018, freezing enrollment starting in FY *NOT OVERRIDDEN*

6 Page 6 Conclusion: The ODM Director is required to seek a waiver to implement the new Medicaid expansion eligibility requirements. There is no freeze on Medicaid Group VIII enrollment. ( ) VETO ITEM NUMBER 16: HEALTH CARE COMPACT (P. 455) DOHCD43 VETOED PROVISION: Adopts The Health Care Compact, which permits Ohio to become a member state, and, along with other member states, enact the Compact; provides the legislature of a member state with the primary responsibility to regulate health care; authorizes a member state to suspend the operation of any federal law, rule, regulation, or order regarding health care that is inconsistent with laws and regulations adopted under the Compact; Provides a member state with federal money up to an amount equal to the member state's current year funding level for that fiscal year; establishes the Interstate Advisory Health Care Commission, which consists of members appointed by each member state; specifies that the Compact is effective upon its adoption by at least two member states and consent of Congress. *NOT OVERRIDDEN* Conclusion: Ohio does not become a member state to the Compact. VETO ITEM 32: MANAGED CARE PREMIUM PAYMENT WITHHOLDINGS (P. 730) MCDCD7 PROVISION: Increases from 2% to 5% the maximum amount of MCO premium payments that may be withheld by ODM for purposes of the managed care performance payment program. VETOED PROVISION: The Governor vetoed the Senate-added requirement that 1% be withheld for FY19. *NOT OVERRIDDEN* Conclusion: The maximum amount ODM may withhold from MCO premium payments is increased. This change results in a decrease in expenditures in the Medicaid program. VETOES OVERRIDDEN BY THE HOUSE ONLY NOTE: As mentioned in the summary portion of this document, the House took up 11 of Governor Kasich s 47 vetoes, but voted to leave all other veto items as pending. Therefore, the House can take up the remaining 36 veto items at any time between now and Dec. 31, This distinction is noted for two reasons a) those vetoes appearing in the section titled Vetoes Not Overridden could, potentially be brought up at a later date, and b) those vetoes appearing in this section ( Vetoes Acted Upon the House Only could be taken up by the Ohio Senate at a later date. VETO ITEM NUMBER 36 (PARTIALLY VETOED): INTENT STATEMENT AND WAIVER REGARDING HEALTHY OHIO PROGRAM (P. 748) MCDCD62 PROVISION: States that it is the General Assembly's intent to use the Healthy Ohio Program as a model if the U.S. Congress transforms the Medicaid program into a federal block grant.

7 Page 7 VETOED PROVISION: Requires the Medicaid Director to resubmit a request for a federal Medicaid waiver needed to implement the Healthy Ohio Program not later than Jan. 31, * VETO OVERRIDDEN BY HOUSE* Conclusion: The Medicaid Director is NOT required to resubmit a request for a federal waiver. The Senate declined to take action and join the House in overriding this veto. Therefore, the Department of Medicaid will not be required to resubmit the Healthy Ohio waiver unless action is taken by the Senate prior to Dec. 31, ( ) VETO ITEM NUMBER 25: LEGISLATIVE OVERSIGHT OF RULES INCREASING MEDICAID RATES (P. 711) MCDCD68 VETOED PROVISIONS: Prohibits the implementation of a proposal to increase a Medicaid payment rate if any of the following occurs: (1) The Department of Medicaid or other responsible state agency fails to submit the proposal to JMOC. (2) JMOC votes, not later than 30 days after receiving the proposal, to prohibit the proposal's implementation. (3) The General Assembly, not later than ninety days after JMOC's deadline, adopts a concurrent resolution prohibiting the proposal's implementation. * VETO OVERRIDDEN BY HOUSE* Conclusion: Current law stands. There is no legislative oversight of increasing Medicaid rates. The Senate declined to take action and join the House in overriding this veto. Therefore, JMOC will NOT be required to vote to approve Medicaid rate increases unless action is taken by the Senate prior to Dec. 31, ( ) VETO ITEM NUMBER 33 (PARTIALLY VETOED): HEALTH INSURING CORPORATION FRANCHISE FEE (P. 731) MCDCD39 PROVISION: Levies a monthly franchise fee on health insuring corporation plans beginning July For each Ohio Medicaid member month, that is a month in which an Ohio Medicaid recipient is enrolled in the health insuring corporation, equal to: (1) $56 for the first 250,000 Medicaid member months; (2) $45 for the second 250,000 Medicaid member months; (3) $26 for each Medicaid member month above 500,000. Requires ODM to use those rates to determine the amount of the fee as part of the process of determining the annual capitated payment rates to be paid Medicaid MCOs. Sets the rate for each other Ohio member month, that is a month in which an Ohio resident who is not a Medicaid recipient is enrolled in the health insuring corporation, equal to: (1) $2 for the first 150,000 other member months; (2) $1 for all other member months above 150,000. Makes the portion of the fee based on Medicaid member months due not later than the fifth business day of the month immediately following the month for which it is imposed and (2) requires the total portion of the fee based on other member months to be paid in one payment due not later than the last day of each September.

8 Page 8 Permits ODM to request that a health insuring corporation provide ODM documentation needed to verify the amount of the fees imposed on the plans administered by the corporation and to ensure the corporation's compliance with state law governing the fees VETOED PROVISION: Requires the ODM Director to seek federal approval to increase the franchise fee in a manner that provides for the franchise fee to raise up to an additional $207 million each fiscal year beginning not sooner than FY 2019 and ending by the close of FY 2024 and specifies the additional funds raised be distributed to each county and transit authority that experiences reduced sales tax revenues due to the cessation of the sales tax on Medicaid health insuring corporations. Requires the ODM Director to seek federal approval to increase the franchise fee in conjunction with the fee for Medicaid member months as provided above. * VETO OVERRIDDEN BY HOUSE* Conclusion: Currently, the Administration is not required to seek any changes to the HIC franchise fee waiver. However, if the Senate had joined the House in overriding the veto, the Administration would have been required to inquire about changes to the waiver that was approved by the federal government last year or a new waiver that would generate additional dollars to be distributed to local governments. The Administration and members of Senate leadership are said to be working toward a compromise on this issue. It has been suggested that if a compromise is not reached, the Ohio Senate may take action to veto this provision. ( ) VETOES OVERRIDDEN BY THE HOUSE AND SENATE NOTE: All veto items appearing in this section have been overridden by the legislature and are no longer part of Ohio law. VETO ITEM NUMBER 3: CONTROLLING BOARD AUTHORITY (P.155) CEBCD7 PROVISION: Prohibits the Controlling Board from authorizing expenditure of unanticipated revenue received by the state if the revenue exceeds 0.5 percent of the GRF appropriations for that fiscal year. * VETO OVERRIDDEN BY HOUSE AND SENATE* Conclusion: The Controlling Board is no longer able to authorize certain expenditures of unanticipated revenue. This provision limits the power of the Controlling Board to determine amounts by which appropriations may be adjusted and to create new funds. ( ) VETO ITEM NUMBER 34 (PARTIALLY VETOED): CONTROLLING BOARD AUTHORIZATION REGARDING MEDICAID EXPENDITURES (P. 735) MCDCD73 PROVISION: Provides for the Health and Human Services Fund to continue to exist during the fiscal biennium and requires the OBM Director to transfer $41,840,600 in FY 2018 and $49,320,340 in FY 2019 from the GRF to the Health and Human Services Fund. VETOED PROVISIONS:

9 Page 9 Permits the ODM Director, during the fiscal biennium, to request that the Controlling Board authorize expenditure from the Health and Human Services Fund in an amount necessary to pay for the costs of the Medicaid program. Permits the Controlling Board to authorize the expenditure if the U.S. Congress does not amend the law to lower the federal medical assistance percentage for the expansion eligibility group. Permits the OBM Director, if the Controlling Board authorizes the expenditures, to transfer up to $26,309,868 in FY 2018 and $34,667,668 in FY 2019 from Fund 5DL0 and up to $196,226,296 in FY 2018 and $226,841,369 in FY 2019 from Fund 5TN0 to the Health and Human Services Fund. * VETO OVERRIDDEN BY HOUSE AND SENATE* Conclusion: This provision requires the director of OBM to transfer monies from the GRF to the Health and Human Services Fund and requires the Medicaid director to request the Controlling Board to authorize expenditures from the Health and Human Services fund for the purposes of paying for the Medicaid program. The provision also restricts the Controlling Board from releasing funds if the US Congress amends the federal law governing the FMAP in a manner that reduces the percentage, even if that reduction has no impact in the current biennium. ( ) VETO ITEM NUMBER 23: MEDICAID COVERAGE OF OPTIONAL ELIGIBILITY GROUPS (P. 709) MCDCD66 VETOED PROVISION: Eliminates the Medicaid program s authority to cover an optional eligibility group if state statutes do not address whether the program may cover the group. Permits the Medicaid program to cover an optional eligibility group currently covered by the program. Prohibits the Medicaid program from covering an optional eligibility group that the program does not currently cover unless state statutes either require the group to be covered or expressly permit the group to be covered. * VETO OVERRIDDEN BY HOUSE AND SENATE * Conclusion: The Department of Medicaid is prohibited from covering any new, optional groups unless expressly permitted by statute. ( ) VETO ITEM NUMBER 26: MEDICAID RATES FOR NEONATAL AND NEWBORN SERVICES (P.713) MCDCD50 VETOED PROVISION: Requires that the Medicaid rates for certain neonatal and newborn services equal 75 percent of the Medicare rates for the services. Requires that the Medicaid rates for other services selected by the ODM Director be reduced to avoid an increase in Medicaid expenditures. *VETO OVERRIDDEN BY HOUSE AND SENATE* Conclusion: Rate changes will be made to make neonatal and newborn services reimbursements equal 75 percent of the Medicare rates for the services. ( )

10 Page 10 VETO ITEM NUMBER 31 (PARTIALLY VETOED): BEHAVIORAL HEALTH REDESIGN (P.713) MCDCD56 PROVISION: Prohibits the Behavioral Health Redesign from being implemented before Jan. 1, 2018, and specifies that a beta test requirement must be satisfied before implementation occurs. A successful beta test is defined as when at least half of participating providers can submit a clean claim that is properly adjudicated within 30 days. Requires the ODM and ODMHAS Directors, not later than Oct. 1, 2017, to adopt rules and make available to the public, provider manuals, claims instructions, information technology resources, and other educational and training documents as part of the implementation of the other elements of the Behavioral Health Redesign. VETOED PROVISION: Prohibits alcohol, drug addiction, and mental health services from being included in Medicaid managed care before July 1, *VETO OVERRIDDEN BY HOUSE AND SENATE* Conclusion: Behavioral Health Redesign is delayed for community mental health providers until January 1, ( ) The Ohio Department of Medicaid had planned to include alcohol, drug addiction and mental health services in managed care as of January 1, However, the Senate joined the House in overriding this veto. Therefore, alcohol, drug addiction and mental health services will be prohibited from being included in Medicaid managed care before July 1, ( ) VETO ITEM 27: MEDICAID RATES FOR NURSING FACILITY SERVICES (P. 720) MCDCD71 PROVISION: Revises the formula used to determine Medicaid payment rates for nursing facility services, including the following: Allows, instead of prohibits, the use of the index maximizer element of the grouper methodology used in determining nursing facilities' case-mix scores. Eliminates, for the purpose of qualifying as a critical access nursing facility, a requirement that a nursing facility have been awarded at least five points for meeting accountability measures. Eliminates the rate add on from the portions of a nursing facility's total rate that are used in determining a critical access nursing facility's incentive payment. Makes changes to the quality indicators used for the purpose of the quality portion of nursing facilities' rates, including removing an indicator on avoidable inpatient hospital admissions and adding one on unplanned weight loss. Provides for adjustments beginning in FY 2020 in an amount that equals the difference between the Medicare skilled nursing facility market basket index and a budget reduction adjustment factor. States the General Assembly's intent to enact laws that specify the budget reduction adjustment factor for each fiscal year.

11 Page 11 Sets the budget reduction adjustment factor at zero for a fiscal year if the General Assembly fails to enact such a law for that year. Requires ODM to rebase nursing facilities' cost centers at least once every five fiscal years instead of not more than once every ten years and requires each cost center to be rebased for the same fiscal years. Provides for a new nursing facility's initial rate for tax costs to be an amount determined by dividing its projected tax costs for the calendar year in which it begins to participate in Medicaid by a 100% imputed occupancy rate if the nursing facility submits the projected tax costs to ODM. Provides that the total amount of payments for nursing facility services provided under Medicaid fee-forservice and the Integrated Care Delivery System (i.e., MyCare Ohio) cannot exceed $2,659,167,368 for fiscal year 2018 and $2,664,485,703 for fiscal year *VETO OVERRIDDREN BY HOUSE AND SENATE* Conclusion: The proposed changes to the formula used to determine Medicaid payment for nursing facilities will now go into effect. Because the Senate joined the House in overriding this veto, the fiscal effect is an increase in Medicaid expenditures of $60.5 million ($22.6 million state share) in FY18 and $40 million ($14.9 million state share) in FY19. Notably, this override had broad bipartisan support and was almost unanimous in the House and Senate. The Governor s office has been outspoken in claiming that the nursing facility rate structure is a factor in determining potential cuts to the hospital community for budgetary reasons. ADMINISTRATION OUTLINES PLAN FOR MEDICAID CUTS BACKGROUND: On July 1, the Office of Health Transformation sent out a press release announcing an appropriation gap in the Medicaid program. The administration claimed the General Assembly adopted policies in the state budget that prevent Ohio Medicaid from managing the program within the appropriation set by the legislature and that this shortfall will necessitate additional funding cuts. Throughout the budget process, OHA engaged with the administration to advocate against further cuts to the hospital community and to share the significant impact of any funding reductions. NEXT STEPS: Ohio Medicaid Director Barbara Sears and Office of Health Transformation Director Greg Moody at the August OHA Board Meeting officially presented the administration s plan to address a budget hole it believes exists in the Medicaid program for SFYs 2018 and The plan includes one billion dollars in adjustments affecting hospitals, though a significant portion of that is crediting hospitals for underspending Upper Payment Limit payments last year and the next two years. The plan the directors presented includes the following: An ICD-10 cut (effective July 6) that the state believes will save $150 million over the biennium; A July 2018 recalibration of inpatient and outpatient relative weights, totaling an estimated $122 million in the second year of the biennium; and

12 Page 12 A 5 percent inpatient and outpatient rate cut on Jan. 1 that is expected to save $418 million over the biennium, but is subject to semi-annual adjustment based on updated budget figures and real-time hospital spending in Medicaid. This $690 million in proposed hospital rate cuts compares to $587 million in hospital rate cuts first proposed in Gov. Kasich s as introduced budget. However, from the time the budget was introduced, the overall budget was reduced by $1.2 billion, or 2.6 percent, in state general revenue funds due to weakening revenues largely a result of disappointing tax receipts. The remaining $311 million of the hospital s billiondollar burden is the use of underspent UPLs in 2017 and for the remainder of the current biennium. In response to the Directors presentation, the OHA Board firmly held that hospitals cannot accept additional cuts in Medicaid, and that by doing so would threaten vulnerable hospitals and certain poorly-reimbursed areas of patient care, such as maternity and behavioral health. The Board continues to have questions about the need for implementing additional cuts, and specifically requested more information as to why the administration projected large increases in hospital spending the next two years (7.6 percent and 2.3 percent, respectively) without commensurate projected increases in caseload, utilization or payment rates to either MCOs or hospitals. The Directors extended an invitation for a small group of OHA Board members to meet with the state s actuaries to discuss the projections used by Medicaid in building the budget. OHA s goal is that in working through these missing details and monitoring ongoing Medicaid underspending, ODM will reduce the proposed package of cuts to hospital payment rates. OTHER RESOURCES: For more information, see the resources below. (1) The presentation used by Directors Sears and Moody at the Aug. OHA Board Meeting to outline the administration s plan to address the budget hole they believe exists in the Medicaid program. (2) A letter from OHA Board Chair Kevin Webb respectfully requesting detailed information relative to the Ohio Department of Medicaid s actuarial projections, Medicaid managed care capitation payment detail, and financial data.

13 Ohio Medicaid Managing Risk and Uncertainty Federal expansion repeal $5 billion annually was at risk Ohio expansion freeze House/Senate passed, Governor vetoed Controlling Board $1 billion annually now at risk Veto overrides $2.1 billion annually potentially at risk Budget shortfall $1.4 billion two-year legislative funding gap

14 House Veto Overrides Now in the Senate #3 Controlling Board authority #23 Medicaid coverage of optional eligibility groups #25 Legislative oversight of rules increasing Medicaid rates #26 Medicaid rates for neonatal and newborn services #27 Medicaid rates for nursing facilities #30 Long-term services added to managed care #31 Behavioral health redesign #33 Health Insuring Corporation tax increase #34 Controlling Board authorization for Medicaid spending #36 Waiver regarding Healthy Ohio Program #37 Oil and Gas Leasing Commission appointments

15 Health Insuring Corporation (HIC) Tax Increase Governor Kasich vetoed a requirement that Ohio Medicaid seek federal permission to increase the current 5.8% HIC tax to 7.2% and give that money to county governments The likelihood of the Trump Administration approving this request is near zero no state has ever received permission to exceed the 6.0 percent federal cap on provider payments There is a real risk Ohio could lose everything if the 7.2 percent tax is denied, then funds from the current 5.8 percent tax could be eliminated, leaving a $2.1 billion ($615 million state share) annual Medicaid shortfall There is significant pressure in the Senate to show support for county governments our request is for the Senate to keep this item off the list of veto override votes

16 Ohio Medicaid Shortfall The budget as introduced proposed to reduce hospital spending $587 million over two years and protect high- Medicaid hospitals from rate reductions The House and Senate doubled the savings expected from hospitals to $1.1 billion over two years but then also prevented Ohio Medicaid from making those cuts Similarly, the House and Senate assumed nursing facility savings as-introduced $241 million over two years but then removed the authority for Ohio Medicaid to make those cuts The resulting shortfall is $1.4 billion over two years

17 Ohio Medicaid Shortfall Proposal Comparison SFY 2018 SFY 2019 Document All Funds ($ in millions) Nursing Facility Appropriations Removed Executive rate cut MCDCD26 (88.1) (117.5) Low acuity (PA1/PA2) MCDCD38 (10.5) (21.0) Recovery of overpayments MCDCD48 (1.5) (2.0) Nursing Facility Subtotal (100.1) (140.5) All Funds ($ in millions) Hospital Appropriations Removed Executive rate cut Spreadsheet -- (175.0) ICD-10 adjustment Spreadsheet (75.0) (75.0) Non-contracting MCDCD37 (87.5) (175.0) Spending cap at 1/2017 rate MCDCD55 (197.0) (100.0) Senate additional rate cut Spreadsheet (128.0) (128.0) Hospital Subtotal (487.5) (653.0) TOTAL LEGISLATIVE SHORTFALL (587.6) (793.5) Note: Amounts Appropriated Executive Budget As Introduced $587 million over 2 years General Assembly As Passed $1.1 billion over 2 years

18 Ohio Medicaid Shortfall Resolution SFY 2018 SFY 2019 Action All Funds ($ in millions) All Funds ($ in millions) TOTAL LEGISLATIVE SHORTFALL Veto #27 Remove House NF rate increase (60.5) (40.0) Veto #24 Restore recovery of overpayments (1.5) (2.0) Nursing Facility Subtotal (62.0) (42.0) Adjust hospital ICD-10 calculations 7/17 (75.0) (75.0) Recalibrate hospital inpatient weights -- (86.5) Recalibrate hospital outpatient weights -- (36.1) Reduce hospital UPL estimates FY18/FY19 (50.0) (100.0) Recover hospital UPL underspending FY17 (112.9) (48.4) Reduce hospital rates IP/OP rates 5% (134.0) (283.8) Hospital Subtotal* (371.9) (629.8) Veto #32 Increase MCP withhold to 2% (70.0) (150.0) Implement additional program integrity (15.8) (30.6) Synchronize FFS/MCP payment schedule (92.0) -- Restore Comprehensive Primary Care Pilot Other Subtotal (131.3) (120.6) TOTAL RESOLUTION (565.2) (792.4) Remaining Shortfall *Note: Hospital rate cuts made possible by Veto #35. $1.0 billion over 2 years

19 Ohio Medicaid Shortfall Next Steps August develop a high-level plan to eliminate the shortfall September refine the plan with impacted provider groups October incorporate reductions into managed care rates November release managed care plan rates January 2018 implement cuts Monthly review status of 525 with hospitals Quarterly review everything impacting 525 to assess potential rate relief (state share is the key component)

20 August 23, 2017 Greg Moody, Director Barbara Sears, Director Ohio Department of Medicaid 50 West Town Street, Suite 400 Columbus, OH Dear Directors Moody and Sears: On behalf of the Board of Trustees of the Ohio Hospital Association (OHA), I thank you both sincerely for visiting with us last week at our annual retreat. The Board remains steadfast in its commitment to the goals you laid out in your presentation, including the preservation of Medicaid expansion and the sustainable financing of the Medicaid program. Our cooperative work with legislative leaders to avoid a veto override of the MCO tax speaks to that commitment. Further, the Board appreciated your invitation for follow-up, and has directed staff to convene a small group of Board and committee members to meet with you and the state s actuaries to better understand the assumptions underlying the SFY Ohio Medicaid budget. During our discussion, you highlighted the need to cut hospital payments by $1 billion over the next two years, and then detailed the methods by which you would accomplish this goal. This cut, we understand, would be in addition to the over $2.57 billion in hospital payment cuts already imposed by this administration since SFY While we appreciate the use of underspent franchise fee dollars towards the $1 billion goal and the measured approach you have proposed in implementing across-the-board rate cuts to hospitals, OHA simply cannot accept further cuts in hospital payments. We especially cannot do so without having been given a solid explanation of the need for such a massive cut. We acknowledge that you both have consistently pointed out that the legislature has under-appropriated the Medicaid budget and we understand the legislature did reduce Medicaid appropriations at the same time they proposed freezing hospital rates. However, according to analysis by the Legislative Service Commission, total Medicaid spending last year, SFY 2017, totaled $25.55 billion versus $27.11 billion that was budgeted for the program, meaning Medicaid enjoyed $1.56 billion in underspent appropriations. In its analysis of the enacted budget, the Office of Budget and Management states the Medicaid program received an appropriation of $27.20 billion in SFY 2018 and $28.31 billion in SFY 2019 a 6.5% and 10.8% increase from actual 2017 spending levels, respectively. With no further coverage expansions, rate increases for hospitals, and as stated in our meeting flat per member per month payments to managed care organizations anticipated, we simply do not understand the math that requires $1 billion in hospital payment cuts in such a budget environment.

21 Directors Moody and Sears August 23, 2017 Page 2 At this upcoming meeting, OHA respectfully requests that you provide: Confirmation of these budget figures; Actuarial analysis that led to the conclusion that Medicaid payments to hospitals would increase 7.6% in SFY 18 and a further 2.3% in 19, including the specific factors and impact of each factor used to construct these growth projections; Overall and plan-specific weighted-average per member per month capitation payments for SFYs , including analysis of the trends observed; Medicaid MCO medical loss ratio and profitability data, by plan, since SFY 2015, including the most current set available, and on a quarterly basis going forward. Based on our conversations, it seems clear the need to impose cuts on hospitals comes from an unreasonable assumption of growth in hospital payments. This requested information will help us better understand why, in a program that has routinely underspent its appropriated amount by a billion dollars annually, with a mature expansion program in place, and with no meaningful payment increases for hospitals or MCOs, Medicaid is proposing to massively cut payments to hospitals over the next two years. Again, we very much appreciate your time and willingness to work with OHA on these important fundamental concerns, and we look forward to your response. Please work with the staff at OHA to schedule this follow-up meeting. In closing, the partnership between OHT, ODM and OHA has been an unquestionably productive one these past several years, but hospitals cannot endure further cuts that are not absolutely necessary to prevent Ohio s Medicaid program from being insolvent. Hospitals have worked tirelessly in their communities to address chronic disease, infant mortality, hunger and the opioid crisis, among other issues. They have taken seriously the need to cut costs by reducing unnecessary readmissions and preventing avoidable disease like sepsis, saving the Medicaid program millions in expenditures along the way. There is no question to us that in this period of healthcare uncertainty at all levels of government, cuts of this magnitude will impact those efforts greatly, create disruptions in patient care, and threaten vulnerable hospitals in both urban and rural Ohio and the communities they serve each day. We sincerely hope that by working together, we can find a better alternative. Sincerely, Kevin Webb, Chair, OHA Board