Unit 4 Task Unit 4 What do you have to do in this unit? Review Key Terms On the Reading page Read Chapter 7 of Principles of Healthcare Reimbursement Attend the Weekly Seminar or complete Option 2 15 Points Respond to the Discussion Board 10 Points Complete the Assignment/Chapter 7 Workbook “Questions and Review Quiz” 40 Points Complete the Quiz 50 Points

Assignment 1. What factors other than financial performance can leaders of healthcare organizations consider as they evaluate organizational programs? 2. What reasons could account for the gap between the reimbursement for multidisciplinary care and the expenses of delivery of multidisciplinary care? 3. In evaluating the RBRVS reimbursements for the physician practice, what other data should the intern consider? The intern notes that code 99205 has the highest RVU. Explain whether the intern should advise the practice to recruit more very sick new patients (Office visit, new patient, high complexity).

Review Questions Workbook Chapter 7 1. How can physician payments be adjusted for the price differences among various parts of the country? 2. What is the control mechanism the government uses on Medicare payments to physicians and how is it applied? 3. Describe at least two issues that delayed implementation of the APC system for ambulatory surgical centers. 4. What is the current status of the ASC PPS? 5. How is the “two-times rule” applied to APC groups? 6. When a patient is pronounced dead during ambulance transport, Medicare payment rules are followed as if the patient were alive. True or false? 7. CMS, not the APC Advisory Panel or MedPAC, makes the final ruling for updates and changes to HOPPS. True or false? 8. The number of APCs per encounter for a single patient is limited to 10. True or false? 9. Describe how observation services are currently reimbursed under HOPPS. 10. What adjustments if any are used under HOPPS to account for cost differences among facilities under HOPPS?

Principles of Healthcare Reimbursement Third Edition Chapter 7 Resource-Based Relative Value Scale for Physician Payments

Objectives Outline the history and development of the Resource-Based Relative Value Scale (RBRVS) for Physician Payments Define key terms Describe the structure of the payment system Calculate a payment under the RBRVS

Resource-Based Relative Value Scale (RBRVS) Federal Payment System for Physicians across Continuum of Care System of Classifying Health Services Based on: Cost of Furnishing Physician Services in Different Settings, Skills and Training Levels Required to Perform the Services, and Time and Risk Involved

History of RBRVS Concept of Relative Value Scale (RVS) Dates from 1940s RVS Represents Worth of Healthcare Services Multiple Views of “Worth” Historical Charges Amt. Patients Will Pay Physicians’ Assessments of Worth Monetized Societal Good Micro-costing from Time & Motion Studies Etc.

History of RBRVS (cont.) Consolidated Omnibus Reconciliation Act (COBRA) of 1985: HHS Directed to Develop RVS Purpose Decrease Medicare Part B Payments Eliminate Inequities in Payments Specialty Type of Procedure Geographic Locality Service Site Carrier Policies

History of RBRVS (cont.) 1985 CMS Awarded Grant to Harvard, William Hsaio RVS Research 4,000 Services (85% of Medicare Payments) Omnibus Budget Reconciliation Act (OBRA) of 1989 CMS to Set Up System of Payment Reform RBRVS Adopted

History of RBRVS (cont.) Jan. 1, 1992 RBRVS Effective (Phase-In Through 1996) Controlled Fee-for-Service System Based on CMS’s Estimation of Value of Physician Services (Not PPS) Services Physician Medical/Surgical Diagnostic Radiologic Physical & Occupational Therapy Physician Assistant Nurse Practitioner Nurse Midwife

Structure of Relative Value Units (RVUs) HCPCS/CPT Codes Assigned Relative Value Units RVUs Permit Comparison of Resources by Assigning Weights to Personnel Time, Level of Skill, and Technology National Averages RVU Elements Time & Intensity of Work (Physician Work, WORK) Cost of Practice (Physician Practice Expense, PE) Risk of Malpractice (MP)

Structure of RVUs (cont.) WORK Covers Physician’s Salary Time Intensity Mental Effort & Judgment Technical Skill Physical Effort Psychological Stress

Structure of RVUs (cont.) PE Overhead Costs of Practice Office Rent Wages of Nonphysician Personnel Supplies & Equipment Two Rates Facility (Hospital, etc.) Lower Nonfacility (Physician Office) Higher MP Cost of Premiums for Professional Liability (Malpractice) Insurance

Payment Structure: GPCIs Geographic Practice Cost Index (GPCI) Adjustment for Geographic Differences in Costs Each Element of RVU Has Unique GPCI WORK PE MP

Payment Structure: CF Conversion Factor (CF) Converts RVU into Medicare Payment Conversion Factor is Across-the-Board Multiplier (Constant) CMS Determines Annually and Notifies in Federal Register Conversion Factor Most Direct Control on Medicare Payments Raising or Lowering CF Increases or Decreases Medicare Payments to Physicians

RBRVS Formula [(WORK RVU) (WORK GPCI) + (PE RVU) (PE GPCI) + (MP RVU) (MP GPCI)] = (SUM) X CF = Medicare Physician Fee Schedule (MPFS) Amount

Generic Example: RBRVS (99202)

Payment Structure Actual Payment 80% of National Allowance Medicare Beneficiaries Responsibility Part B Deductible 20% Coinsurance

Adjustments: Variation to RBRVS Formula Budget Neutrality (BN) Adjustor Clinician Type Participating v. Nonparticipating Anesthesiologists Nonphysician Providers Special Circumstance Underserved Area Incentive for Quality Technology

Operations: RBRVS & Poor CPT Coding* 43200 Esophagoscopy WORK 1.59 x 1.000 = 1.59 PE 4.13 x 0.925 = 3.82025 MP 0.13 x 0.64 = 0.832 Sum = 5.49345 x CF $37.8975 $208.19 43217 with Removal of Tumor, Polyp, or Lesion…. WORK 2.9, PE 6.95, MP 0.26 (GPCI Stays the Same) Sum = 9.49515 x CF $37.8975 $359.84 Lost $121.65 *Nonfacility, Generic Example

Future Issues Adoption of Electronic Health Record Correction of Overrides of Sustained Growth Rate

Summary Payment System Specific to Physician Services across the Continuum of Care Accurate Coding Necessary for Appropriate Reimbursement

Principles of Healthcare Reimbursement Third Edition Chapter 7 Medicare-Medicaid Prospective Payment Systems for Nonhospitalized Patients: Ambulance Fee Schedule

Medicare Part B provides beneficiary coverage for ambulance services Covered Services Medicare Part B provides beneficiary coverage for ambulance services Will provide transport service, only if other means are inadvisable based on the beneficiary’s medical condition Provided to the nearest facility that is able to provide services for that patient’s condition Transported From one hospital to another To home To an extended care facility

Two types of ambulance service entities History Two types of ambulance service entities Providers: Associated with a medical facility such as a hospital, CAH, SNF, or HHA Retrospective reasonable cost payment Previous year’s cost-to-charge ratio (CCR) Suppliers: Not associated with a medical facility Reasonable charge payment mechanism Fours ways to report ambulance services

Both types used HCPCS Code Set History (cont.) Both types used HCPCS Code Set Providers A0030–A0999, excluding A0888 (ambulance codes) And codes to report type of mileage Suppliers A0030-A0999, excluding A0888 Level I codes 93005 and 93041 Various other Level II codes

BBA of 1997 Legislation Added section 1834(1) to the SSA Required the creation of a fee schedule to establish prospective payment rates for ambulance services Devised through negotiated rulemaking (Negotiated Rulemaking Act of 1990) Negotiated Rulemaking Committee on Medicare Ambulance Services Fee Schedule

The committee was instructed to: Legislation (cont.) The committee was instructed to: Control Medicare expenditures through PPS Establish service definitions to link payment to the type of service Consider regional and operational differences Consider inflation Construct a phase-in period for implementation Require providers and supplier to accept Medicare assignment Reimburse providers and suppliers at the lower of FS or billed charges

BBA (cont.) BBRA of 1999 Legislation (cont.) Established the paramedic intercept service type (discussed under levels of service) BBRA of 1999 Modified the definition of rural for the paramedic intercept service type

Legislation (cont.) BIPA of 2000 Excluded CAH from the fee schedule payment methodology when the CAH is the only supplier or provider of ambulance services within a 35 mile drive. Reasonable cost basis Increased payment rates for rural ambulance mileage Modified inflation factor for 7/1/01 to 12/31/01 Increased 2% Eliminated blended payment rate for mileage phase-in provision for suppliers

Five year phase-in plan Ambulance FS Implemented April 1, 2002 Five year phase-in plan Reimbursement is based on the level of service provided to the beneficiary Seven levels of service

Immediate response payment Provisions Immediate response payment Emergency response involves responding immediately at the basic life support or advanced life support level 1 of service to a 911 or 911-type call Immediate response is one in which the ambulance begins as quickly as possible to take the steps necessary to respond to a call Additional payment is provided for the extra overhead expenses incurred to stay prepared at all times for emergency service

Multiple-patient transport Provisions (cont.) Multiple-patient transport Example: traffic accident 2 passengers Each beneficiary is reimbursed at 75% of the base rate for the level of service provided 3 or more passengers Each beneficiary is reimbursed at 60% of the base rate for the level of service provided Single payment is made for the mileage Modifier GM is reported with level of service HCPCS code

Transport of deceased patients Provisions (cont.) Transport of deceased patients Specific rules Patient is pronounced dead prior to the ambulance being called, no payment is made to the ambulance provider/supplier Patient is pronounced dead after the ambulance has been called but prior to its arrival, BLS base rate for group transport or air ambulance base rate payment will be made. Mileage will not be reimbursed. Patient is pronounced dead during transport, payment rules are followed as if the patient were alive. Modifier QL should be reported with the level of service code.

Adjustments Regional variations Based on point of beneficiary pick-up (zip code) Geographic adjustment factor is applied Equal to the practice expense portion of the geographic practice cost index used in the Medicare physician fee schedule Ground transport 70% of payment rate is adjusted Air transport 50% of payment rate is adjusted Mileage is not adjusted

HCPCS Level II modifiers Origin and destination modifier must be reported for each trip Additional modifiers are used Provided under arrangement of a provider of services (QM) Furnished directly by a provider of services (QN)

Six step process Payment Steps Takes into consideration Patient service level Modifiers Zip codes Miles Add-on payments

Payment Steps (cont.) Identify the level of service code for the transportation provided Does the case meet emergency response criteria? Determine the number of patients transported If yes, append modifier and reduce payment Determine if the Medicare beneficiary was pronounced dead If yes, append modifier and adjust payment Apply the regional variation adjustment Identify zip code Identify the mileage code and number of miles Add together the level of service payment and mileage payment to determine total reimbursement

Compliance “Medicare Payments for Ambulance Transports” report 25% of the ambulance transport claims did not meet CMS program requirements deficient claims resulted in $402 million of improper payments

Compliance OIG recommendations: Prepayment edits Post-payment review guidelines Education, education, education

Condition Lists Numerous requests for medical condition lists to aid in determining level of service Do not use ICD-9-CM Broad categories of issues Do not use a HIPAA approved code set CMS implemented a Medical Conditions List February 2007 Condition list Transportation indicators Assist with determining the appropriate level of service

Principles of Healthcare Reimbursement Third Edition Chapter 7 Medicare-Medicaid Prospective Payment Systems for Nonhospitalized Patients: Hospital Outpatient Prospective Payment System

Describe the Hospital Outpatient Prospective Payment System Objectives Describe the Hospital Outpatient Prospective Payment System Identify the components, adjustments, and provisions of the APC system Recall the steps for APC assignment Recall the Payment determination steps for HOPPS payment

Hospital Outpatient Prospective Payment System Hospital outpatient services Clinic Emergency department Ambulatory surgery unit NOT free-standing ambulatory surgery centers (ASCs) Effective period January 1 – December 31 Calendar year (CY) Updated yearly

Legislation Legislative background Omnibus Reconciliation Act (OBRA) of 1986 Mandated that Medicare must move to a prospective payment system for hospital outpatient services The following requirements were provided: Hospitals must report procedures using the Healthcare Common Procedure Coding System (HCPCS) CPT HCPCS Level II The PPS must be developed by 1991 and should only include facility costs The system must exclude any professional charges for healthcare providers Physician charges What was the motivation to move to a prospective system?

Principles of Healthcare Reimbursement Third Edition Chapter 7 Medicare-Medicaid Prospective Payment Systems for Nonhospitalized Patients: Ambulatory Surgical Center Prospective Payment System

Objectives Describe the Ambulatory Surgical Center Prospective Payment System Identify the components, adjustments, and provisions of the ASC PPS Recall the payment determination steps for ASC payment

Ambulatory Surgical Centers Ambulatory surgical centers (ASCs) Provide designated surgical services to Medicare beneficiaries Under Medicare supplementary medical insurance program (Part B) Facility must be Medicare certified

Ambulatory Surgical Centers Medicare-certified criteria Separate entity Have own national identifier or supplier number Maintain own licensure, accreditation, governance, professional supervision, administrative functions, clinical services, record keeping, and financial accounting systems Sole purpose of delivering services in connection with surgical procedures not requiring inpatient admission Meet all requirement of applicable sections of SSA