1. 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

2. 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 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).

3. 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?

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

5. 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

6. 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

7. 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.

8. 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

9. 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

10. 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

11. 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)

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

13. 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

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

15. 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

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

17. Generic Example: RBRVS (99202)

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

19. 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

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

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

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

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

24. 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

25. 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

26. 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 and 93041
Various other Level II codes

27. 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

28. 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

29. 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

30. 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

31. 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

32. 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

33. 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

34. 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.

35. 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

36. 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)

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

38. 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

39. 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

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

41. 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

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

43. 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

44. 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

45. 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?

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

47. 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

48. 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

49. 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