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

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

3. Fee Schedule Examples IPPS IPPS - LTC IPPS - Rehab IPPS - Psych SNF
OPPS

4. Inpatient Prospective Payment System (IPPS)
Diagnosis Related Groups (DRGs)
Reflect patient severity/resource consumption
Payment not equal among hospitals
Reduced payment for transfers and Post-Acute transfers for some DRGs
Outlier payments complex
Add-on payments for new technology (none in FY2008)

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

6. IPPS Rehabilitation
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)
DSH and Teaching adjustments make payment not equal among hospitals
Short Stay Outliers (<=3 days) = $2,809
High Cost Outliers – see attachment

7. IPPS Psych Adjusted Per Diem
Adjustments include DRG, co-morbidities, age and day of stay
UB claim has all data required
Teaching adjustment makes payment not equal among hospitals

8. Skilled Nursing Facility (SNF)
Per diem payment, each day is assigned a Resource Utilization Group
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)
Payments are equal among hospitals

9. Outpatient Prospective Payment System (OPPS)
Payment per service, not per day or per case
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

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

11. OPPS Continued 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

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

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

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

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

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

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