Implementing Medicare Hospital Payment Systems Wednesday September 12

Implementing Medicare Hospital Payment Systems Wednesday, September 12, 2007 Presented by: Will Fox, FSA, MAAA

Implementing Medicare Hospital Payment Systems n Fee Schedule Examples n Impact to Hospitals n Impact to Indian Health Services n Options and Recommendations

Fee Schedule Examples n IPPS - LTC n IPPS - Rehab n IPPS - Psych n SNF n OPPS

Inpatient Prospective Payment System (IPPS) n Diagnosis Related Groups (DRGs) ─Reflect patient severity/resource consumption n Payment not equal among hospitals n Reduced payment for transfers and Post -Acute transfers for some DRGs n Outlier payments complex n Add-on payments for new technology (none in FY 2008)

IPPS Long Term Care n Hospitals with a Medicare ALOS greater than 25 days n DRGs ─Reflect patient severity/resource consumption ─DRGs are the same as IPPS, the relative weights are not n Payment equal among hospitals n Adjustments for short stays and high cost outliers

IPPS Rehabilitation n Case Mix Groups (CMGs) ─Requires clinical assessment, not just a straight UB claim ─UB claim is populated with Revenue Code 0024 and Procedure Code equal to CMG (e. g. , 1602) n DSH and Teaching adjustments make payment not equal among hospitals n Short Stay Outliers (<=3 days) = $2, 809 n High Cost Outliers – see attachment

IPPS Psych n Adjusted Per Diem ─Adjustments include DRG, comorbidities, age and day of stay ─UB claim has all data required n Teaching adjustment makes payment not equal among hospitals

Skilled Nursing Facility (SNF) n Per diem payment, each day is assigned a Resource Utilization Group n Resource Utilization Groups (RUGs) ─Requires clinical assessment, not just a straight UB claim ─UB claim is populated with Revenue Code 0022 and Procedure Code equal to RUG (e. g. , RUX) n Payments are equal among hospitals

Outpatient Prospective Payment System (OPPS) n Payment per service, not per day or per case n Not all procedures are paid, some are “packaged” with a “significant” procedure ─For example, low cost drugs and supplies are included in the cost of a surgical or emergency room procedure

OPPS Continued n Combination of fee schedules ─APC – Ambulatory Payment Category ─Lab – Medicare clinical lab schedule ─RBRVS – mostly for physical therapy

OPPS Continued n Edits and Adjustments: ─Outpatient Code Editor (OCE) denies payment for invalid billing combinations (e. g. , female patient with male procedure) ─Multiple procedure reduction - “T” Status claims reduced for second service

Medicare Advantages n Known to hospitals n Reasonable level of patient severity precision n Cost based payment level n Reduces administrative contracting costs n Reduces claims administration costs ─ After initial setup ─ Less contracts to load, variances in provisions n Lower rates than you would likely be able to contract for

Medicare Disadvantages n Hospitals do not always have the information on a UB bill to use PPS ─Rehab CMGs ─SNF RUGs ─OPPS HCPCS n Fee Schedules set for age 65+ patients ─Average payment methodology may not be appropriate for other populations

Changes in 2008 1. MS-DRGs for IPPS n Move from 538 to 745 DRGs n Has an impact on outlier and short stay payments 2. No other significant changes n IPPS Relative Weights transitioning to cost based

Impact to Hospitals 1. Lower payments 2. Reduced administrative costs n No negotiations n Assume payment process set up reliably, less audit/checking cost 3. Fair and understandable payments n Familiar with Medicare

Impact to IHS Groups 1. Lower payments 2. Reduced administrative costs n No negotiations n Less table loading/updating (in theory) 3. Fair and understandable payments

Options and Recommendations 1. Fiscal intermediary n Historical relationship helps n Not available to all n Already have capability 2. Outside vendor n Many different components to mess up n No positive recommendations 3. Do it yourself n Not recommended