HI 225 Ch06 pp ts.ipfpps.ab202017

1. © 2018 American Health Information Management Association© 2018 American Health Information Management Association
Principles of Healthcare Reimbursement
Sixth Edition
Anne B. Casto, RHIA, CCS

2. © 2018 American Health Information Management Association
Chapter 6
Medicare-Medicaid Prospective Payment
Systems for Inpatients
• Learning Objectives
– Explain the elements of the inpatient psychiatric
prospective payment system
– Examine the facility level and patient level
adjustments of the inpatient psychiatric
prospective payment system
– Explain the provisions of the inpatient psychiatric
prospective payment systems
– Calculate inpatient psychiatric prospective
payment system reimbursement
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Inpatient Psychiatric Facility Prospective
Payment System (IPF PPS)
• Prospective system implemented in 2005
– Prior to implementation of PPS psychiatric hospitals
and units were IPPS (DRG) exempt
• Reimbursed under the TEFRA reasonable cost payment
scheme
• Inpatient psychiatric facility
– Psychiatric hospitals
– Psychiatric units in acute-care hospitals
• Effective period
– October 1 to September 30
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Per Diem Reimbursement
Methodology
• Per diem amount represents average daily
operational, ancillary and capital costs
– FY 2018 = $771.35
• Per diem rate is adjusted by facility- and
patient-level adjustments to ensure
adequate reimbursement
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Facility- and Patient-Level
Adjustments
Facility-Level Adjustments Patient-Level Adjustments
Wage index Length of stay
Cost-of-living MS-DRG with principal diagnosis of
mental disorder
Rural location Comorbid condition
Teaching status Patient age
Full-service emergency department Electroconvulsive therapy
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Patient-Level Adjustments
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Length of
Stay
As LOS increases, cost
decreases
Varying factors for first
day; higher for full-
service ED
Table 6.6
MS-DRG
17 MS-DRGS are
applicable for adjustment
Example: MS-DRG 056,
Degenerative nervous
system disorders with
MCC
Table 6.7
Comorbid
Conditions
17 categories are
applicable for
adjustment
Example:
Developmental
disabilities
Table 6.8

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Patient-Level Adjustments
Age
As patients get older,
cost increases
Table 6.9
ECT
Add-on payment
ICD-10-PCS codes
GZB0ZZZ
GZB2ZZZ
GZB4ZZZ
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Facility-Level Adjustments
Wage
Index
Account for wage
differences among
geographic areas
Figure 6.7
Cost of
Living
Alaska and Hawaii
Figure 6.8 and
Table 6.10
Rural
Location
Regression
analysis showed
costs are 17%
greater in rural
areas
Lack of economies
of scale
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Facility-Level Adjustments
Emergency
Facility
Patients that receive ED care prior to
admission cost more
Adjustment if facility has full service ED
(24/7)
Adjustment is provided by higher
adjustment factor for day 1. Adjustment
is applied to every patient
Caveat: Patient discharged from an
acute care hospital or critical access
hospital and is then admitted to the
psychiatric unit of the same facility, the
ED adjustment does not apply
Teaching
Hospital
Adjustment is similar to the medical
education adjustments made under IPPS
Adjustment is based on the number of
full-time residents
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IPF PPS Provisions
• High-cost outliers
– Calculated for each day of the admission
– Use CCRs to convert charges to cost
– High-cost outlier applies when unadjusted threshold is
met or exceeded
• $11,425 (2018)
– Add-on payment
• 80% of difference between the cost and threshold for
days 1 to 9
• 60% of difference between the cost and threshold for all days
thereafter
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IPF PPS Provisions
• Interrupted stay policy
– When patient is discharged from an IPF then
readmitted to:
• Another IPF
• Same IPF
within 3 days = continuous stay
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Interrupted Stay Example
Patient admitted to IPF A on March 1. The patient is
discharged on March 5 (LOS = 4). The patient is
then admitted to IPF B on March 7 and continues the
hospital stay until March 10 (LOS = 3).
The admission to IPF B is considered a continuation
of the initial stay at IPF A. Therefore, day 1 of the
readmission will be considered day five of the
combined stay for the purposes of the LOS
adjustment and outlier calculation.
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IPF PPS Payment
• Admission to a rural non-teaching facility
– Fairfield County, Ohio (0.9716)
• Patient LOS = 5 days
• MS-DRG 881
• Age 68
• Patient has an unspecified tracheostomy
complication and type 2 diabetes mellitus
with hyperglycemia
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Sample Calculation for Wage
Index Adjustment
• The facility is in Ohio, so only the wage
index adjustment is applied
($771.35 * 0.75 * 0.9716) + ($771.35 * 0.25)
$754.92
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Sample Calculation for
Adjustment Factors
• Rural = 1.17
• MS-DRG 881 = 0.99
• Age 68 = 1.10
• Comorbidity J95.00 = 1.06
– Unspecified tracheostomy complications
• Comorbidity E11.65 = 1.05
– Type 2 diabetes mellitus with hyperglycemia
1.17 * 0.99 * 1.10 * 1.06 * 1.05 = 1.4181
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Facility and
patient
adjustment
values
Multiply the adjustment factors together

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Sample Calculation for
Adjustment Factors
1.4181 * $754.92 = $1,070.55 (adjusted per
diem amount)
– Day 1 1.31 * $1,070.55 = $1,402.42
– Day 2 1.12 $1,199.02
– Day 3 1.08 $1,156.19
– Day 4 1.05 $1,124.08
– Day 5 1.04 $1,113.37
Total = $5,995.08
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