Medicare Severity DRGs and Changes in IPPS for FFY 2008- 2007 Web Conference
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Medicare Severity DRGs and Changes in IPPS for FFY 2008- 2007 Web Conference



Medicare Severity DRGs: explore differences between the current CC list and the “revised CC” list, identify documentation improvement opportunities,interpret the role of Present on Admission ...

Medicare Severity DRGs: explore differences between the current CC list and the “revised CC” list, identify documentation improvement opportunities,interpret the role of Present on Admission (POA), apply POA guidelines to case studies.



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  • It was noted that is was not desirable to have a blank when submitting the data via the electronic claim form, so a 1 will be reported if the condition is exempt from POA guidelines. <br /> If applicable, other diagnoses or the letter “X” to indicate the end of POA indicators for principal and if applicable, other diagnoses in special data processing situations. <br /> EXAMPLE: POAYNUW1YZ This represents POA indicators for a claim with 1 principal and 5 secondary diagnoses. The principals dx was POA, the second was not, the next was is unknown, the next is clinically undetermined, the next one is exempt, while the last one is POA. <br />

Medicare Severity DRGs and Changes in IPPS for FFY 2008- 2007 Web Conference Medicare Severity DRGs and Changes in IPPS for FFY 2008- 2007 Web Conference Presentation Transcript

  • What you need to know! Medicare Severity DRGs: June Bronnert, RHIA, CCS, CCS-P Manager Professional Practice Resources – AHIMA 513.738.0157 Changes in IPPS for FFY 2008: Brad Bowman Director – PricewaterhouseCoopers LLP 317.860.2041
  • Objectives Medicare Severity DRGs • Explore differences between the current CC list and the “revised CC” list • Identify documentation improvement opportunities • Interpret the role of Present on Admission (POA) • Apply POA guidelines to case studies
  • MS-DRGs Similarities • Pre-Major Diagnostic Category – 13 (MS-DRG 001 – 013) – Examples: Heart, Liver, Pancreas transplant • Major Diagnostic Category (MDC) – 01 – 25 – Examples: 05 Circulatory System, 06 Digestive System • Three digit DRG number
  • What’s changed? • Revised CC list • Potential three levels of grouping – MCC – CC – Non CC • Three digit DRG numbers
  • Deleted CCs • COPD (496) • CHF (428.0) • Atrial fibrillation • Dehydration • Chronic Kidney Disease – Stage I – III and NOS • Uncontrolled Diabetes
  • Case Study • Physician documentation – Decompensated CHF • Additional documentation from cardiac tests – Ejection fraction is decreased at 20% and a moderate hypertrophic area is present along the left ventricle.
  • Other Payers? • Yes – Medicaid – Medicare Managed Care – Commercial Need to check with your payers • No – Medicaid – Medicare Managed Care – Commercial
  • Other issues to consider • Legacy data – How to compare FY 08 forward to prior fiscal years? • Multiple groupers – How to handle coded data that needs to be grouped different for various payers?
  • Present on Admission (POA) • Acute care IPPS hospitals are required to submit POA indicator effect 10/1/2007 – Information will not be used in claims processing until January 1 2008 • Instructions for selecting the correct POA indicator are part of the ICD-9-CM Official Guidelines for Coding and Reporting
  • Definition of POA • Present on admission is defined as present at the time the order for inpatient admission occurs—conditions that develop during an outpatient encounter, including emergency department, observation or outpatient surgery, are considered as present on admission.
  • POA Guidelines • Not intended to: – Replace any of the guidelines in the main body of the ICD-9-CM Official Guidelines for Coding and Reporting – Provide guidance on when a condition should be coded • Documentation by any provider involved in the care and treatment of the patient may be used to support POA indicator assignment – Provider means a physician or any qualified healthcare practitioner who is legally accountable for establishing the patient’s diagnosis.
  • Steps in POA Assignment • Assign ICD-9-CM diagnosis codes according to Sections, I, II, and III of the official coding guidelines • POA indicator is then assigned to those conditions that have been coded • Joint effort
  • Documentation • Consistent and complete – Inconsistent, missing, conflicting or unclear documentation must be resolved by the provider • Not necessary for provider to explicitly document the condition as present on admission or not
  • Documentation • Documentation from any provider involved in the care and treatment of the patient may be used to support POA indicator assignment
  • General Requirements • Acute care inpatient admissions or other facilities that are subject to a law or regulation • Assigned to principal and secondary diagnosis codes – Including External cause of injury codes – UHDDS coding guidelines
  • Reporting Options • Y= Yes (present at the time of IP admission) • N= No (not present at the time of IP admission) • U= Unknown (insufficient documentation to determine present on admission) • W= Clinically undetermined (provider is unable to clinically determine) • Unreported/Not used (exempt from POA reporting)
  • Claims Reporting • New data element UB-04 – Approved by NUBC – Effective 3/1/2007 with conversion by 5/23/07 • Data element not approved for Electronic Claims – Work around
  • Reporting Time Frames • Discharges on or after October 1, 2007 – Facilities may choose to report • Discharges on or after January 1, 2008 – Used by claims processing system • Discharges on or after April 1, 2008 – Returned to the facility if not reported
  • Transmittal 1240 • Use UB-04 Data Specification Manual – POA is the eighth digit of FL 67 (principal) and FL 67 A-Q (other) – • Direct data entry screens cannot be updated for POA until January 1, 2008
  • Electronic Submissions • Use segment K3 in the 2300 loop, data element K301 • Data elements contains letters “POA” followed by a single POA indicator for every diagnosis reported on the claim – The last POA indicator the principal and if applicable, other diagnoses shall be followed by letter “Z” to indicate the end of POA – Unreported/Not used are reported as 1
  • Exempt from Reporting • List of ICD-9-CM codes that are identified as being exempt • Examples – 650 Normal delivery – 438 Late effects of cerebrovascular disease – V16 Family history of malignant neoplasm – V72, Special investigations and examinations
  • Explicitly Documented • If the condition is explicitly documented as either present on admission or not the indicator is assigned as follows: – Y for documented as present on admission – N for documented as not present on admission
  • Diagnosed Prior to Admission • Assign Y for conditions that were diagnosed prior to admission • Examples – Asthma – Diabetes mellitus – Hypertension
  • Diagnosed During Admission But Present Before Admission • Assign Y for conditions diagnosed during the admission that were clearly present but not diagnosed until after admission occurred. • Example: Patient is admitted with abdominal pain—final diagnosis is malignant neoplasm of ovary.
  • Possible, Probable Diagnoses • If the final diagnosis contains a possible, probable, suspected, or rule out diagnosis, and this diagnosis was suspected at the time of admission, assign Y • If the inconclusive diagnosis was based upon symptoms or clinical findings that were not present on admission, assign N
  • Develops During OP Encounter • Assign Y for any condition that develops during an outpatient encounter prior to a written order for inpatient admission • Example – After an outpatient surgery a patient develops uncontrolled vomiting and is admitted as an inpatient.
  • Unclear • The U indicator is assigned when the documentation is unclear • Limited use • A query to the provider is encouraged
  • Clinically Undetermined • W indicator is assigned when the documentation indicates that it cannot be clinically determined if the condition was present on admission or not. – Example: A provider may not be able to determine if sepsis developed after admission or was present on admission
  • Threatened or Impending Conditions • Assign Y if the diagnosis is based on symptoms or clinical findings that were present on admission • If the diagnosis is based on symptoms or clinical findings that were not present on admission, the indicator would be N
  • Acute and Chronic • Acute conditions that are present at time of admission – Assign Y • Acute conditions that are not present at the time of admission – Assign N • Assign Y for chronic conditions, even though the condition may not be diagnosed until after admission • If a single code identifies both acute & chronic, see combination code POA guidelines
  • Combination Codes • Assign N if any part of the combination code was not present on admission – Example: Obstructive chronic bronchitis with acute exacerbation. If the acute exacerbation was not present on admission • Assign Y if all parts of the combination code were present on admission – Example: Gastric ulcer that is bleeding upon admission
  • Combination Codes • If the final diagnosis includes comparative or contrasting diagnoses, and both were present or suspected at the time of admission, the POA indicator is Y • For infection codes that include the causal organism, the POA indicator is Y if the infection or signs of the infection was present on admission
  • Acute Exacerbation of Chronic Conditions During Admission • If the code is a combination code that identifies both the chronic condition and the acute exacerbation – See POA guidelines for combination codes • If the combination code only identifies the chronic condition and not the acute condition – Assign Y
  • Obstetrical Conditions • Delivery does not affect assignment of the POA indicator – Whether the pregnancy complication or obstetrical condition was present at the time of admission • If the pregnancy complication or obstetrical condition was present on admission, assign Y – If not assign N indicator
  • Obstetrical Conditions • If the pregnancy complication or obstetrical condition includes more than one diagnosis: – Assign Y if all diagnoses identified by code were POA – Assign N if all diagnoses were not POA • If the obstetrical code includes information that is not a diagnosis, do not consider that information in the POA assignment.
  • Perinatal Conditions • Newborns are not considered to be admitted until after birth. Therefore, any condition present at birth or that developed in utero is considered present on admission and assigned Y indicator – Includes conditions that occur during delivery
  • Congenital Conditions and Anomalies • Assign Y for congenital conditions and anomalies. • Congenital conditions are always considered present on admission. – Examples: Tetralogy of Fallot, congenital dislocation
  • External Cause of Injury • Assign Y for any E code representing an external cause of injury or poisoning that occurred prior to inpatient admission • Assign N for any E code representative an external cause of injury or poisoning that occurred during IP hospitalization
  • Clinical Example • Patient presents to the emergency room with shortness of breath and chest pain. He has a past medical history of coronary artery disease for 2 years. He is admitted for workup and found to have a MI. Day 2 progress note states: 2 episodes of non sustained ventricular tachycardia. Final diagnoses are: – Acute anterior wall myocardial infarction – Coronary artery disease – Non sustained ventricular tachycardia
  • Clinical Example • Patient has an outpatient colonoscopy due to rectal bleeding. The patient has a past medical history of hypertension. A polyp is removed and reveals adenocarcinoma. The patient is subsequently admitted to undergo a colon resection. Following the surgery the patient develops uncontrolled diarrhea, which is suspected to be c-difficile. The final diagnoses are listed as: – Adenocarcinoma of colon – Possible C-difficile – Hypertension
  • Steps to Prepare • Education, education, education – Physician – Coding Professional • Analyze current documentation practices • Review current query process – Response rate – Number and types of queries
  • Questions
  • Objectives Changes in IPPS for FFY 2008 • Changes impacting the Wage Index • MedPac proposal on BLS based Wage Index • Changes to IME/GME rules • Residents Training in Non-Hospital Settings • Other Items
  • Capital IPPS Payments • CMS is updating to the capital standard Federal rate for urban and rural hospitals will be 0.9 percent. CMS anticipate a full update to in FY 2009. • CMS has elected to discontinue the 3.0 percent additional payment that has been provided to hospitals located in large urban areas. • CMS has decided to phase out the capital IPPS teaching adjustment over a 3-year period, with a 50-percent reduction beginning in FY 2009.
  • Occupational Mix Adjustment • As was discussed the FY 2007 final IPPS rule the Occupational Mix Adjustment to the wage index will be based on the 6 months of survey data collect from 1st -2nd quarters of calendar 2006. • Hospital’s not submitting data will be calculated based occupational mix factor of 1.0000. • Hospital’s that submitted data for only 1 of the 2 quarters will be calculated based on the submitted quarter. • CMS is still considering 1-2% reduction for “nonresponsive hospital” for future years, no reduction for FY 2008.
  • Proposed 2007-2008 Occupational Mix Survey for the FY 2010 Wage Index • Based on public comment CMS will eliminate the RN subcategories. • 2007-2008 occupational mix survey will provide for the collection of hospital-specific wages and hours data for a 1-year prospective reporting period. • Time frame July 1, 2007, through June 30, 2008, • A final notice related to the Survey was expected to be published in the Federal Register by July 1, 2007. However at this time CMS is still in the process of developing a final notice for publication in the Federal Register.
  • Contract Labor for Indirect Patient Care Services - Calculation of Wage Index • Beginning October 1, 2003 (FY 2004), the cost report was modified to provide for the collection of cost and hours data for the four identified contract indirect patient care services. • CMS added 4 new line items to Worksheet S-3, Part II: – Line 9.03(Contract management and administrative services); – Line 22.01 (Contract A & G services); – Line 26.01 (Contract housekeeping services); – and Line 27.01 (Contract dietary services).
  • Contract Labor for Indirect Patient Care Services - Calculation of Wage Index • CMS has included these contract services in the wage index beginning with FY 2008. • The resulting average hourly wage would not affect 232 areas (53.3 percent), would decrease for 132 areas (30.3 percent), and would increase for 71 areas (16.3 percent). • 13 areas will incur a decrease of -1% to 5% with the largest urban decrease of -4.09% and largest rural decrease of -.63%. The largest increase was 0.69% in urban and 0.30% in rural. • CMS also noted and corrected an error in the formula for inclusion of these item in the wage index.
  • Application of Rural Floor Budget Neutrality • A number of consultants have proposed group appeals related to this calculation in the last 6 months. • Through an example, CMS shows that (to the 4 decimal place) the use of an iterative process or simply applying a uniform adjustment to hospital wage indices produces the same result. • CMS believes that the statute supports either an adjustment to the standardized amount or the wage indices because under either methodology, the rural floor would not result in aggregate payments that were greater or less than those that would have been made in the absence of a rural floor. • A budget neutrality factor of 0.996744 wage applied to the wage index of all provides to account for the rural floor.
  • Reclassifications under Section 508 of Pub L. 108-173 • Section 508 expires 9/30/2007 and will not be further extended. Thus, it will not be applicable to FY 2008. • There are attempts to revive 508 via the legislative process.
  • CAHs Reverting Back to IPPS Hospitals - Raising the Rural Floor • In Massachusetts, two CAH are seeking to convert back to Acute IPPS provider even thought they appear to continue to qualify as CAH. • This would cause them to set the rural floor a a rate high the most, if not all, CBSAs in the state increasing payments by approximately $220 Million annually. • CMS is soliciting comments regarding whether it would be appropriate for CMS to establish a policy under this authority to preclude the arrangement described above and, if so, how such a policy would be applied. • The policy would only apply to a CAH that continues to meet the CAH certification requirements and should not apply if a CAH no longer met those requirements and converted to an IPPS provider.
  • CAHs Reverting Back to IPPS Hospitals Raising the Rural Floor • CMS proposed no policy pertaining to this issue at this time, they will consider public comments during the develop the FY 2009 IPPS proposed rule. One approach that CMS is considering in the context of wage index reform is to apply the rural floor budget neutrality adjustment at the State level. • Such an application would protect hospitals in other states from being harmed by potential gaming associated with the rural floor. Thus, if the CAHs convert to IPPS status and set a rural floor, it would raise the wage index for most or all urban hospitals within the State. • However, budget neutrality would be achieved by adjusting the wage index for all hospitals within the State, rather than all hospitals nationwide. • This appears to be in direct conflict with the Social Security Act as amended.
  • MedPac recommends based BLS wage index • In June 2007 MedPac made final recommendations to Congress on the wage index process. • Three recommendations were adopted with 15 votes in favor 0 votes opposed and 2 absent commissioners: 1) The Congress should repeal the existing hospital wage index statute, including reclassifications and exceptions, and give the Secretary authority to establish new wage index systems.
  • MedPac recommends based BLS wage index 2) The Secretary should establish a hospital compensation index that: – uses wage data from all employers and industry-specific occupational weights, – is adjusted for geographic differences in the ratio of benefits to wages, – is adjusted at the county level and smooths large differences between counties, and – is implemented so that large changes in wage index values are phased in over a transition period. 3) The Secretary should use the hospital compensation index described in recommendation 6B for the home health and skilled nursing facility prospective payment systems and evaluate its use in the other Medicare fee-for-service prospective payment systems.
  • How would the new wage index work? The first step, compute compensation index values for each market area the MSA (or divisions of MSAs) and the balance of state areas (rural). 1. Finding the relative wage for each occupation in each MSA. The relative wage for an occupation is the ratio of the mean wage for that occupation in the MSA to the mean wage for the same occupation nationally. 2. The wages are for all employers of the occupation. 3. In each market, the relative wages are then multiplied by the wage share weights for the set of top 30 healthcare organization occupations. 4. Benefit percentages are calculated using a share of wage using Worksheet A excluding outlier (>35% and <15%). MedPac believes this will eliminate the need for Worksheet S-3 in the future.
  • How would the new wage index work? 5. The 2005 BLS survey data are based on surveys of establishments in 2003, 2004, and 2005. 6. CMS would compute the mean level of benefits over the same three years by creating three-year averages of the benefit-towage ratios for hospitals, SNFs, and home health agencies in each market area. 7. BLS wage data come from all employers, CMS would create a weighted average of benefits to wages for each occupation in the region based on the national share of employment in that occupation across hospitals, SNFs, and home health agencies. 8. Next a weighted average benefit-to-wage ratio for the type of workers hospitals employ, the type of workers home health agencies employ, and the type of workers SNFs employ by multiplying the estimated benefit-to-wage ratio for each occupation by the national wage share of that occupation in each industry.
  • How would the new wage index work? The second step is the create county specific compensation indexes within MSA or within rural counties of a state. 1. For each county, the Census Bureau provided data on wages by occupation and place of employment. 2. Aggregated county-level employment and wages from census data would be used to create data for MSAs and statewide rural areas. 3. CMS would screen and clean the county-level data for low volume or erroneous data for an occupation in a county. CMS would replace the county data with the census MSA or statewide rural average wage for that occupation. 4. The county-level wages are then weighted based on the weights in top 30 occupations to create a weighted average wage for each county and for each MSA or statewide rural area.
  • How would the new wage index work? 5. The ratio of the county-level weighted average wage to the market-level (MSA, statewide rural area) weighted average wage is computed. 6. To compute the compensation index for a county, the county- specific wage is weighted by 50 percent and the original market- level compensation (MSA, statewide rural area) index by 50 percent. 7. In computing county-specific compensation indexes was limited the total adjustment to a maximum of 5 percent above or below the market-area value.
  • How would the new wage index work? On the home stretch The third step is to smooth the data between counties to eliminate large differences between adjoining counties. 1. Data set of county pairs of all adjoining counties is created. 2. The difference in compensation indexes for each county pair is then computed and the pair with the greatest difference for each county is chosen. If that difference is greater than 10 percent of the larger compensation index, the county with the lower compensation index value is assigned a compensation index equal to 90 percent of its highest neighbor. 3. This process is followed for each county pair, resulting in a new set of compensation indexes 4. Lather, rinse and repeat until there is no difference greater than 10%. 5. Apply budget neutrality factor to get within 0.1% of current system.
  • IME Adjustment • CMS proposed that vacation and sick time from the intern and resident FTE count for IME and GME. • “We acknowledge that removing vacation and sick leave time from the denominator of the FTE count for both IME and direct GME could have some impact on the FTE count, but the impact is fact-specific. In some cases, it would result in a lower FTE count, and in some cases, it would result in a higher FTE count.” • “Despite our continued belief that vacation, sick leave, and other approved leave is neither a patient care nor a non-patient care activity, we acknowledge Source: CMS 1588-P pg 504 the significant concerns raised by the commenters regarding the administrative burdens associated with the implementation of the proposed policy. Therefore, we will not be finalizing the proposed policy to remove vacation and sick leave from the FTE calculation at this time.”
  • Additional Changes to IME and GME • CMS will to continue to count time spent by residents in orientation activities for both IME and direct GME payment purposes. • CMS has amended the regulation to more clearly define “orientation activities” and “patient care activities”
  • Residents Training in Non-Hospital Settings – Final Rule Published May 11, 2007 as part of the LTCH PPS Final Rules – Effective for cost reports beginning on or after July 1, 2007 – Defines rules for counting resident time spent in non- hospital settings
  • Residents Training in Non-Hospital Settings – In order to claim the intern and resident time spent in non- hospital settings, the following conditions must be met: • Residents spend their time on patient care • The hospital must incur all or substantially all of the costs for the training program • The hospital must comply with one of the following: – Pay all or substantially all of the costs by the end of the third month following the training month. – Have a written agreement stating the total training costs and their components and that the hospital will incur 90% of the costs. » Must be in place before training begins » May revise by the end of the academic year • Hospital is subject to principles of community support and redistribution of costs
  • Residents Training in Non-Hospital Settings – All or substantially all of the costs include the portion of the following for the time spent at the non-hospital site: • Resident salary and fringe benefits, including travel and lodging • Teaching physician salary and fringe benefits – If the teaching physician is a solo-practitioner, only the resident salary and fringe benefits are considered – The final rule defines all or substantially all of the costs as 90% of the applicable costs. – Hospitals have the choice of two methodologies for determining the cost amounts: • Actual Costs • Proxy Calculation
  • Residents Training in Non-Hospital Settings • Proxy Calculation: National Average Physician Salary x (3 hours / Clinic hours of Operation) + Resident Salary and Benefits, including travel and lodging = Total Costs X 90% = Minimum costs hospital must incur to claim resident time National Average Physician Salary is the median physician salary for the required specialty as published by American Medical Group Association (AMGA) – 3 hours is the CMS’ estimate of the weekly number of hours physicians in non-hospital setting spend supervising residents – Clinic Hours of Operation is the posted hours of operation for the non- hospital location. – Ratio of Teaching Time to Hours of Operation is capped at 7.5%.
  • Other Items • CMS will require that patients be given written notice that a hospital is physician-owned and that the list of physician owners is available upon request. • CMS amended the EMTALA regulations as they relate to actions taken in an emergency area during either a national emergency declared by the president or a national public health emergency declared by the Secretary of HHS. • CMS will require ALL hospitals that do not have physicians available on the premises 24 hours per day, 7 days per week (24/7) to inform patients of that limitation prior to their receiving an inpatient or outpatient service • The final rule clarifies that Medicare Advantage (MA) days are to be included in the Medicare fraction of the DSH calculation.
  • Thank You Questions