All Entries in the "IPPS" Category

CMS releases the IPPS Proposed Rule

It’s that time of the year again when some things are for certain – trees and flowers are in bloom creating havoc with allergies, the weather can’t make up its mind if its spring or winter and CMS announces its plans for the coming fiscal year regarding IPPS hospital payments.

Last week CMS released the inpatient prospective payment (IPPS) proposed rule for FY 2013, effective for discharges October 1, 2012.  Overall, CMS is projecting that payment rates to general acute care hospitals will increase by 2.3 percent – a net update after inflation, improvements in productivity, a statutory adjustment factor and adjustments for hospital documentation and coding changes.

Here is a summary of some of the CMS proposals:

• Documentation and coding adjustment (DCA): Proposing to complete the remaining -1.9% prospective adjustment while also making a +2.9%to remove the effect of the FY 2012 one-time recoupment adjustment; the adjustment of -0.8 to the standardized amount and a -0.8% adjustment to the hospital-specific rate would result in a total DCA of +0.2% (-1.9 plus +2.9 plus -0.8) to the standardized amount and a -1.3% (-0.5 plus -0.8) adjustment to the hospital-specific rate.
• Hospital-acquired conditions (HACs–): Proposing two new conditions which include surgical site infection (SSI) following cardiac implantable electronic device (CIED) procedures and pneumothorax with venous  catheterization.
• Graduate medical education (GME) and indirect medical education (IME): Proposing changes related to determining a hospital’s full-time equivalent (FTE) resident cap for GME and IME payments, applications of new teaching hospitals and FTE slots currently held by closed hospitals.
• Hospital inpatient quality reporting (IQR) program: Proposing that starting with the FY 2015 payment determination, an increase to the current validation sample of 18 cases per quarter to 27 cases per quarter to capture data for additional measures; proposing to reduce the total sample size of hospitals included in the annual validation sample from 800 eligible hospitals to 600 eligible hospitals;  proposing several quality measures to be suspended, removed and expanded during the coming fiscal years.
• Hospital inpatient value based purchasing (VBP) program: Several proposals including defining the term “base operating DRG payment amount” as the wage-adjusted DRG operating payment plus any applicable new technology add-on payments and excluding IME, DSH; proposing that in order to fund the VBP program, every eligible hospital would receive a 1% reduction to its base operating DRG payment amount for each discharge in a fiscal year, regardless if that hospital had been determined by CMS to have earned a value-based incentive payment for that fiscal year.
• Hospital readmissions reduction program: Since this program is not budget neutral, CMS is proposing that an applicable hospital’s base operating DRG payment amount be adjusted for each discharge by subtracting the product of the base operating DRG payment amount for such discharge by the hospital’s admission payment adjustment factor for the fiscal year from the base operating DRG payment amount for such discharge; proposing a process that would allow hospitals to review and submit corrections for their readmissions information prior to the information being posted on the Hospital Compare website.
• Other proposals also include various MS-DRG recalibrations, additions and deletions to the complications and comorbidities (CCs) and major complications and comorbidities (MCCs) list and four applications for consideration of new technology add-on payments.

This summary barely unearths the many nuggets that can be found in the display copy  as well as several fact sheets. IPPS hospitals should begin reviewing this document to assess the potential financial impacts and organizational implementation issues and submit comments by June 25. The proposed rule will be published in the Federal Register on May 11.

HHS confirms ICD-10 delay: What does it mean for you?

by Andrea Kraynak, CPC

It’s no longer a mere possibility; HHS has confirmed its intent to delay the ICD-10 compliance deadline, according to its latest press release.

“We have heard from many in the provider community who have concerns about the administrative burdens they face in the years ahead,” HHS Secretary Kathleen G. Sebelius said in the press release. “We are committing to work with the provider community to reexamine the pace at which HHS and the nation implement these important improvements to our healthcare system.”

It is “premature” to speculate on the rulemaking process or the eventual ICD-10 implementation deadline, a CMS spokesman told HCPro earlier today.

The American Medical Association (AMA) supports the delay. “The timing of the ICD-10 transition could not be worse for physicians as they are spending significant financial and administrative resources implementing electronic health records in their practices and trying to comply with multiple quality and health information technology programs that include penalties for noncompliance,” Peter W. Carmel, MD, president of the AMA, said in a February 16 press release.

Though the new deadline remains unclear, CMS previously confirmed CMS Acting Administrator Marilyn Tavenner’s statement that the agency will use the rulemaking process when revisiting the ICD-10 implementation timeline. The rulemaking process can be lengthy, so it may well be awhile before a firm date is established.

For those who may not agree that a long delay—or any at all—may be the best course of action, continue to monitor the rulemaking and take advantage of any comment period.

“Make CMS well aware of the facts regarding your current ICD-10 progress and the overwhelming burdens that any delay would create,” said Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro, Inc., in Danvers, MA.

In the meantime, providers are left scratching their heads regarding their own next steps.

The advice from the American Health Information Management Association (AHIMA) is clear: Keep moving forward. Per AHIMA’s February 14 press release, the organization “encouraged the healthcare community to continue to prepare for the ICD-10 transition and not delay or suspend efforts to meet the ICD-10 current compliance deadline.”

AHIMA’s press release came out prior to today’s official confirmation that it is definitely HHS’ intention to delay the ICD-10 deadline. With this latest development, does AHIMA maintain that continued preparation is the best course of action in light of the delay?

The answer is yes, according to Dan Rode, MBA, CHPS, FHFMA, vice president for advocacy and policy at AHIMA. “It is still important for organizations to move forward,” Rode told HCPro. “This delay should not stop implementation…”

Rode also indicates that, even with a delay, providers should continue to consider ICD-10 when it comes to matters such as purchasing new systems. If they don’t have the capability to handle ICD-10, the costs of implementation will continue to mount, he said.

Others agree that forward progress is essential.

“I agree with the position to continue efforts until which time we get an actual date change,” said Gloryanne Bryant, RHIA, CCS, CCDS, regional managing director of HIM, NCAL revenue cycle, at Kaiser Foundation Health Plan, Inc. & Hospitals in Oakland, CA. “There is much to keep us busy with ICD-10 readiness, thus staying with your plan is the best approach for now.”

Specifically, hospitals should continue to ensure they will be able to handle all documentation collection and use associated with ICD-10, Rode said. “The real question is should those who are trained to train others and our many academic programs stop their training and retain their knowledge during this time period,” he says. “In the end, this will greatly expand the cost of conversion.”

Some have suggested that perhaps there is wisdom in waiting until the rest of the world implements ICD-11, simply skipping over ICD-10 entirely. Rode disagrees with this notion. “We are not close to ICD-11 and we can’t afford to wait until the end of the decade to have the data we need today to improve health and healthcare,” he said.

Nor is it possible to delay enforcement of the deadline, as CMS did with the HIPAA version 5010 implementation deadline that passed earlier this year. There can’t be two vocabularies in use at the same time, he said. “Allowances could be made for those who have to hold data until their system is in place, but there has to be a certain date.”

And that implementation date should be sooner rather than later, according to AHIMA.

“The longer [the delay,] the worse the problem becomes for many of HHS’ projects across the board,” Rode said.

Editor’s note: Visit www.hcpro.com for the latest information on the delay of the ICD-10 compliance deadline.

Timely filing and adjustment of hospital claims

During a recent MBC-H class, one of the participants raised several questions about timely filing requirements for hospitals, including requirements for filing adjustment claims.  Unfortunately, this is a complex area under Medicare law. Medicare goes into considerable detail on this issue in the Medicare Claims Processing Manual (MCPM), Chapter 1, beginning with discussion on timely filing of claims in Section 70 et. seq., and then on adjustment of claims in Section 130 et. seq.

Timely Filing and Adjustment of Hospital Claims, in General

In order to be timely, hospital claims generally must be initially filed within 12 months (or 1 calendar year) from the delivery of the services. For inpatient claims, the 12-month period runs from the “through “date, not the “from date”.  With respect to claim adjustments, Medicare generally does not permit providers to submit adjustment claims in order to add item(s) or service(s) not included on the initial claim after the expiration of the time limitation for filing of the initial claim.

There are, however, special timeliness requirements for filing adjustment requests for inpatient services subject to a prospective payment system, if the adjustment results in a change to a higher weighted DRG. These adjustments must be submitted within 60 days of the date of the remittance advice for the original claim, or the adjustment will be rejected.

In addition, to the extent that an adjustment bill otherwise corrects or supplements information previously submitted on a timely claim about specified services or items furnished to a specified individual, it is subject to the rules governing administrative finality, rather than the time limitation for filing (see the MCPM, Chapter 29 on Appeals and Chapter 34 on Reopenings).

Special Rules for Adjustment of IPPS Claims

As noted above, for hospitals subject to reimbursement under the inpatient prospective payment system (IPPS), adjustment requests are required from the hospital where errors occur in diagnosis and procedure coding that change the DRG, or where the deductible or utilization is affected. In that case, a hospital is allowed 60 days from the date of the remittance advice for adjustment requests.  On the other hand, adjustments reported by the quality improvement organization (QIO) have no corresponding time limit and are adjusted automatically by the fiscal intermediary (FI) or Medicare administrative contractor (MAC) without requiring the hospital to submit an adjustment request.  In addition, if diagnostic and procedure coding errors have no effect on the DRG, adjustment requests are not required.

Under PPS, for long-stay cases, hospitals may bill 60 days after an admission and every 60 days thereafter if they choose. The FI/MAC processes the initial bill through Grouper and PRICER. When the adjustment request is received, it is processed as an adjustment, but the 60-day requirement for correction does not apply.

Appeals and Reopenings

Under Medicare law, if a provider is dissatisfied with an initial determination (e.g., FI/MAC denial of provider services) or a revised determination (e.g., RAC reopening of an initial determination to change FI/MAC overpayment), the provider can appeal that decision by following the regular Medicare appeals process.  This is a five-level appeals process, involving various decision makers, timely filing requirements, etc.  There is a similar appeals process in place for Medicare Advantage (MA) plans.  In order to begin the formal Medicare appeals process, the provider must file the level 1 appeal within 120 days (60 days for MA plans) of the adverse initial or revised determination.

Not all adverse decisions are appealable, however.  For further discussion on which adverse decisions are appealable and which are not, see the MCPM, Chapter 29, Section 200 et. seq.   There may be even more restrictions for MA plans.

In addition to provider appeal rights, Medicare contractors (including FIs/MACs and RACs) have the authority to reopen prior initial determinations to reverse prior over- or under-payment determinations.  For more information on contractors’ rights to reopen initial determinations, see the MCPM, Chapter 34, Section 10 et. seq.

Looking Back at 2011

I hope you had a wonderful holiday and are getting ready to start the New Year running!  Things have been pretty quiet at CMS in the last few weeks so I thought this would be a good time to reflect on some of the major healthcare changes that occurred in 2011.

In the calendar year 2011 OPPS final rule, CMS gave us hope that it understood that hospitals should not fall under the same billing rules as physicians when it comes to billing critical care (99291) and ancillary services. Hospitals can now separately bill the services listed as inclusive in the CPT definition; however, payment would be packaged into the critical care composite and charges for the ancillary services would be considered for future rate setting. CMS also made more clarifications and changes to the physician supervision rules for coverage of hospital outpatient therapeutic services. CMS eliminated the boundaries for off-campus departments and made meeting the “immediately available” requirements became the responsibility of the hospital regardless of where the service was performed.  Critical access hospitals (CAHs) and small rural hospitals (100 beds or fewer) were given one more year of non-enforcement in regards to meeting physician supervision requirements for their outpatient services.

In February, CMS issued the Medicaid healthcare acquired conditions (HCAC) proposed rule. We learned that Medicaid programs could adopt an expanded version of the acute hospital acquired conditions (HACs) which would encompass HCACs and other provider preventable conditions (OPPCs) that reach beyond the hospital walls and into physicians’ offices and ambulatory surgery centers (ASC). This rule became final and was implemented on July 1 but CMS pushed the compliance date to July 1, 2012 to allow time for the Medicaid programs to create their systems and educate providers.

In March, we saw another three-month delay in the implementation of the requirement that lab requisitions must be signed by a physician or non-physician practitioner. The provider community was very vocal about the paperwork burden this would create in addition to the signed order or documentation in the ordering physician’s medical record that is already required. We all breathed a sigh of relief when this regulation was later rescinded.

April brought about the IPPS proposed rule where several clarifications were announced. CMS clarified that the three-day payment window applies to physicians’ clinics that are wholly owned and operated by a hospital. CMS also made the inpatient device replacement policy consistent with the outpatient policy; however, the process of payment reduction is very different. The IPPS replacement policy will apply where “the hospital received a credit equal to 50 percent or more of the cost of the replacement device.”  The final rule was published in August announcing a 1.1% increase in DRG payments.

In May, CMS published the Accountable Care Organization (ACO) final rule. ACOs are designed to help physicians, hospitals, and other healthcare providers coordinate care for Medicare patients. The ACO model creates incentives for providers to work together to treat an individual patient across the care settings. We were also introduced to hospital value-based purchasing, which will use quality standards, performance measures and specific scoring to create incentive payments in fiscal year 2013.  In a related August announcement, CMS published details on a new initiative to lower costs and help all healthcare providers coordinate care for the growing number of Medicare beneficiaries.  The new initiative, known as the Bundled Payments for Care Improvement Initiative (the “Bundled Payments Initiative”), was launched by the new Center for Medicare and Medicaid Innovation.

In July, CMS announced a provider friendly change that allows hospitals to use average times when determining the amount of time to subtract from observation time for other procedures. The Medicare manuals indicated that the beginning and end times of observation and procedures would have to be documented in order to calculate the total observation time; however, hospitals found it difficult to calculate the exact performance time for some bedside procedures. Hospitals who took advantage of this announcement saved time and money by creating a policy that included average times for common procedures without splitting hairs to get an exact minute calculation.  Unfortunately, CMS also announced mandatory OPPS and IPPS market basket update reductions of .25 percentage points made possible by the Affordable Care Act (ACA).

In August, CMS also published a very clear transmittal on how and when to bypass medically unlikely edits (MUEs), which could save hospitals time and money by avoiding unnecessary appeals. Another transmittal added MS-DRG 265 to a list of MS-DRGs where the DRG payment would be reduced when the hospital received a partial or full credit for discharges on or after October 1, 2008.. This DRG was inadvertently missed and went retro back to 2008 so facilities needed to audit those DRGs to prevent overpayments.

Several final rules were published in November and the Medicare physician fee schedule (MPFS) brought about the new PD modifier, which indicates services provided in a physician’s clinic that is wholly owned and operated by a hospital and fall within the three day payment window. This modifier will go into effect on July 1, 2012. The OPPS final rule announced a 1.9% payment increase as well as an extension of non-enforcement of physician supervision for CAH and small rural PPS hospitals.

If would like to read more about the items I have mentioned above, you can see the entire articles as well as others at the Medicare Mentor Blog. We are quickly heading into another busy year with many more changes and clarifications coming from Congress and CMS.  Thanks to our many readers over the past year. We look forward to providing you important information in 2012!

MS-DRG 265 added to IPPS replaced devices Policy

Last week, we included a transmittal (R922OTN) and MLN Matters article (MM7457) for a DRG that was inadvertently missed when the IPPS replaced devices list was created back in October 2008.  Because this may have compliance implications for facilities, I thought it was important to bring this transmittal to light.

First, let’s take a look at how we got here based on a two-step process.  In April 2006, CMS implemented conditions codes that allowed them to identify and track claims billed for replacement devices.

• 49 Product Replacement within Product Lifecycle — replacement of a product earlier than the anticipated lifecycle due to an indication that the product is not functioning properly; and
• 50 Product Replacement for Known Recall of a Product — manufacturer or FDA recall for a product which required replacement.

In May 2008, CMS issued a transmittal (R1509CP) that announced a list of MS-DRGs where the DRG payment would be reduced when the hospital received a partial or full credit for discharges on or after October 1, 2008. To trigger the payment reduction, hospitals had to report value code FD, “Credit Received from the Manufacturer for a Replaced Medical Device,” on the UB04 claim form and the amount of the device credit so that the total DRG payment could be reduced by this amount. This value code was only to be reported for these specific DRGs when the hospital received a credit for a replaced device that was 50% or greater than the cost of the replacement device. This original list contained 44 DRGs which has not changed since its implementation; however, with the transmittal that was issued last week, CMS announced that MS-DRG 265 was not included on that list.

So how did this happen?  Each fiscal year during the proposed and final IPPS rulemaking, CMS reviews claims data and makes adjustments to MS- DRGs, which includes deleting, creating and combining DRGs.  In FY 2008, both the Automatic Implantable Cardiac Defibrillator (AICD) Generator Procedures and the Lead Procedures were combined into MS-DRG 245. Then in FY 2009, the AICD Lead Procedures were separated from the generators and grouped to MS-DRG 265. With this creation, DRG 265 was inadvertently overlooked as one should be included in the IPPS replaced devices policy.

So what should facilities do now?  In light of recent OIG audits and RAC reviews, hospitals should review their claims billed under DRG 265 for discharges October 1, 2009 forward to identify if any overpayments occurred.  If the medical record shows that the device was replaced due to a recall or a premature end-of-life cycle, further research needs to be done to determine if the replaced device was received at no cost or at least a 50% credit. A complete review may involve various departments, including Materials Management/Purchasing, Accounts Payable, Central Supply, and Surgery, as well as physicians’ office records.  If it is found that the discharge meets the CMS reporting requirements, the hospital needs to resubmit the claim with the appropriate condition code and the value code FD with the amount of the credit so that the DRG payment can be appropriately reduced.  If facilities fail to resubmit any claims that meet the IPPS Replaced Devices policy, they risk keeping overpayments that could add up to a substantial amount over time.

FIs/MACs have been directed to bypass the timely filing rules when the facility reports CR7457 in the remarks section of the claim. Although the effective date of transmittal R922OTN is 10/01/2008, the implementation date for Medicare contractors is 01/03/2012. When resubmitting any corrected claims, providers may get these rejected until their FI/MAC is able to accept them no later than January 3, 2012. If in doubt, providers should check with their contractors for further instructions on rebilling and processing these claims.

FY2012 IPPS final rule posted

The FY2012 IPPS final rule was put on display this week.   The rule contained some financial relief for hospitals, but no clarity on some outstanding issues.   There are three fact sheets that I encourage you to review.  One is on the payment and other provisions of the rule, one on the quality provisions of the rule, and one discussing the documentation and coding adjustment.  This should guide your reading of the actual rule to pertinent sections that apply to you, a strategy I use to approach these large rules.

CMS reduced the proposed “documentation and coding adjustment” that would have reduced payments by 3.15 percent to 2 percent.  This combined with other updates to factors used in payment calculations resulted in a 1% projected increase in payments to hospitals under IPPS in FY2012.   This is a relief after the proposed .5% reduction in payments in the proposed rule.

CMS also created several new DRGs.  Three new DRGs were created for excisional debridement and two new DRGs for autologous bone marrow transplant.  CMS did not approve any new technology applications for 2012, but did extend the new technology add-on for Auto-LITT, an MRI guided treatment for the removal of brain tumors.  CMS did not finalize new HACs for contrast induced acute kidney injury.  The delay is to allow new codes to be developed to ensure that code adequately distinguish kidney injury due to contrast.

CMS also did not finalize any new guidance on the three day rule.   I had hoped that we would get some clarification on applying the “clinically associated” criteria, but CMS did not provide any new guidance on this issue.  They also deferred any new information on how the three day rule applies to freestanding physician offices to the 2012 Medicare Physician Fee Schedule final rule.

The MPFS proposed rule had a discussion of how the rule applies to freestanding offices and proposed a new modifier to pay physicians in these hospital owned clinics for the professional component of their services that occur within the three day payment window.  Unfortunately, that leaves hospitals with questions of how much they should bill on the inpatient claim for the “overhead” portion of these freestanding office visits.  Hopefully this will be addressed in the MPFS, in addition to the modifier they are proposing.

A bit of a short note this week because I am in DC attending a Provider Round Table, sponsored in part by HCPro, as well as attending the CMS APC Advisory Panel Meeting in Baltimore.  It’s the first time I’ve attended.  I am excited to hear the discussion, particularly this year because of the proposal to have the Panel consider individual requests for supervision levels for hospital services.  I hope to have information to share with everyone in my next blog.

Special editions highlight inpatient coding vulnerabilities and admit date issues

CMS released two special edition MLN articles this week.  One article, SE1121, highlights some of the inpatient coding vulnerabilities identified through the RAC program, although coders shouldn’t find anything surprising in the guidance.  The other article, SE1117, explains the proper use of the admit date and “from/through” date fields on the UB04, per the NUBC guidelines.

In the coding article, CMS discusses a potential source for error if coders code without the complete medical record.  Specific examples discussed were missing discharge summaries and operative reports.  They also emphasized that all documentation in the medical record by licensed, treating physicians, not just the attending physician, must be considered when assigning the principal diagnosis. This, coupled with their emphasis on the entire record, gives the potential for conflict between the documentation of the attending physician and other consulting physicians.

In this article, CMS recommends that the coder query the attending physician to clarify the correct principal and secondary diagnoses if there is a conflict between the documentation of the attending and secondary physicians.  However, they remind coders that the simple failure of the attending physician to mention a consultant’s diagnosis does not create a conflict.  This confirms that if a consulting physician documents a secondary diagnosis and the attending fails to mention it in their notes, it is appropriate to code the secondary diagnosis without further querying the attending physician.

Their emphasis on this may stem from an early Special Edition MLN (SE1028) in which CMS originally stated the attending physician had to confirm secondary diagnoses, but later revised the language to simply quote from the official guidelines for reporting secondary diagnoses.  CMS may believe there is still lingering confusion over this issue that they themselves confused in that earlier MLN.

Switching gears to billing, SE1117 discusses proper reporting of the admit date and the “from/through” dates on a claim.  The article highlights a problem in the Fiscal Intermediary Shared System (FISS) that processes claims submitted by hospitals. Edits in the FISS required the admit date to match or be before the “from” date on the claim. The admit date being defined by the Nation Uniform Billing Committee (NUBC) as the date the patient was admitted as an inpatient.  The “from” date is simply the earliest date of service on the claim.  Additionally, the system checked for a match between the number of days billed in the “from/through” date field and the number of accommodation days charged in the line item section.

These two edits caused a problem with claims submitted with services under the three day payment window if their date of service was before the admit date.  For example, consider an ED visit on June 27 followed by a related inpatient admission on June 28.  The ED visit should be billed on the claim with the inpatient admission, with an admit date of June 28 and “from” date of June 27 according to the NUBC guidelines.  However, the FISS edits would not allow the claim to process because the “from” date is earlier than the admit date and the total number of days in the “from/through” field does not match the accommodation days billed for on the claim.

In this article, CMS is instructing providers to use the NUBC definitions as of October 1, 2011 and also to verify whether they or their “trading partners” (e.g. systems vendors, clearinghouses and edit vendors) have work arounds that should be removed to ensure these definitions are followed.  I believe this is especially important because the hospital may be aware of this change and entering the dates correctly through their computer systems, but it will slow the billing process if billing edits stop the claim and manual intervention or override of vendor or clearing house edits is necessary.

Critical access hospitals and ambulance services

This was another light week at CMS, so I wanted to return to the FY 2012 IPPS proposed rule to talk about something specific to critical access hospitals (CAH) that own and provide ambulance services to their communities.  Generally, ambulance services are paid for under the ambulance fee schedule; however, the Social Security Act (SSA) §1834(I)(8) amended the regulations, and CAHs that own and operate ambulance services can be paid reasonable cost if they are the only provider of that service located within a 35-mile drive of the CAH.

In the FY 2011 IPPS final rule, the Affordable Care Act amended the SSA and inserted “101 percent” before reasonable costs, which was actually effective for cost reporting periods beginning on or after January 1, 2004.  At that time, CMS stated that this was not a change in policy and that CAHs had been paid 101 percent of cost since that time, even though the language in the SSA did not state such. CMS then amended the regulations at 42 CFR § 413.70(b)(5)(i) to clearly state this payment methodology.

In doing so, CMS is now proposing to add a new paragraph to this regulation for cost reporting periods beginning on after October 1, 2011 to close a “gap” in the current regulation. The proposed change would impact CAHs where their ambulance service is either not the only provider of the service within the 35-mile perimeter of the CAH or another provider of the service is closer to the CAH even though both providers of the service are outside of the 35-mile perimeter.  Here is a summary of the current language and the proposed change:

1. The CAH-owned and operated entity would be paid at 101 percent of reasonable cost for its ambulance services when there is no other provider or supplier of ambulance services within a 35-mile drive of the CAH.
2. The CAH-owned and operated entity would be paid under the ambulance fee schedule for its ambulance services when it is not the only provider or supplier of ambulance services located within a 35-mile drive of the CAH.
3. The CAH-owned and operated entity would be paid at 101 percent of reasonable cost for its ambulance services when it is the closest provider or supplier of ambulance services to the CAH when it is more than a 35-mile drive from the CAH.
4. The CAH-owned and operated entity would be paid under the ambulance fee schedule for its ambulance service when there is another provider or  supplier of ambulance services that is closer to the CAH than its own service when both are more than a 35-mile drive from the CAH.

The IPPS proposed rule provides four figures that clarify the current and proposed payment changes. Ambulance services are a costly but crucial service in rural areas due to complex financial and social circumstances within the community, not to mention the terrain. Critical access hospitals should assess the financial impact this may have on their ambulance services both within and outside of the 35-mile perimeter and provide comments by June 20. This is another example that demonstrates why CAHs need to review the IPPS and OPPS proposed and final rules for issues affecting their bottom line for certain services.

Noridian tackles a tough billing question

My colleagues at the Case Management Mentor blog have a great post up about some recent Noridian guidance. The question: How should you bill for patients who are improperly referred for observation services when they actually met inpatient criteria?

Read on for Noridian’s answer.

CMS announces a “three-day payment window clarification” in the IPPS proposed rule

Last week, I addressed one of the clarifications that CMS had announced in the FY 2012 IPPS proposed rule regarding payment for devices that are replaced without cost or with a substantial credit. This week, I want to expound on another clarification that was made regarding the three-day payment window.

This regulation has been the source of much confusion over the years and the changes to the regulation that became effective on June 25, 2010, only added to that. CMS has continued to receive inquiries whether the payment window applies to preadmission services furnished in a hospital-owned or hospital-operated physician’s clinic or practice. The current statutory language is relatively clear that this rule does apply to both diagnostic and related non-diagnostic services furnished to patients at hospitals as well as those furnished by entities that are wholly owned or operated by the admitting hospital.  Unfortunately, CMS had responded to a question on a previous Open Door Forum call that only provider-based locations were included in the rule; thereby leaving hospitals to inadvertently assume that any preadmission services provided at their free-standing clinics were excluded.

In the proposed rule, hospitals are receiving a much needed, although not necessarily well received, clarification that the three-day payment (or, where applicable, the one-day payment) window does apply to any wholly-owned or operated physician clinic or practice. CMS states that the 1998 Federal Register originally confirmed that the technical portion of preadmission diagnostic services performed by the physician clinic or practice must be included on the inpatient bill and may not be billed separately and that the physician’s professional service is not subject to the window.  CMS is extending their clarification even further by stating that they had not issued guidelines regarding billing for preadmission non-diagnostic services provided by a hospital-owned or hospital-operated physician’s practice, once again leaving hospitals to assume that the payment window does not apply to such services.

Drum roll please…CMS is clarifying in this proposed rule that the three-day (or, where applicable, one-day) payment window policy applies to both preadmission diagnostic and non-diagnostic services furnished to a patient at physician’s practices that are wholly owned or wholly operated by the admitting hospital.  The moral of the story is that if the hospital is the sole owner or the sole operator of the physician’s office or clinic and has exclusive responsibility for conducting or overseeing the entity’s routine operations, regardless of whether the hospital also has policymaking authority over the entity, then the payment window rule will apply. Ta-dah!

What will this mean to hospitals and physicians both operationally and financially?  First, the hospital’s charge on the inpatient claim would include any overhead costs associated with physician fee schedule payment although it is unknown at this time how that would be calculated. Second, the Medicare’s physician fee schedule payment to the physician providing the service would be at the lower facility rate, which excludes overhead, staff, equipment, and supplies required to perform the service in the physician’s office because this is already being paid for in the hospital’s DRG payment. Basically, the physician will be paid the lesser amount, as if the service was provided in the hospital setting rather than the higher non-facility payment when performed in the clinic setting.

So with that said, because a hospital-owned and operated physician practice or clinic that is not provider-based is a non-facility setting, CMS will need to change the regulation to allow Medicare to pay for a service provided in a non-facility setting at the facility rate when the payment window applies. Huh? So much for clarification!

Like I have said many times in the past, it makes me a little nervous whenever CMS attempts to clarify something for us because it seems like they often confuse the complex issues even more and in this case, begin to change the rules even more.  Since the proposed rule posts a clarification of the current regulation, hospitals should review their current policies and procedures to make sure the language regarding the affect of the payment window on hospital owned and operated free-standing clinics for both the diagnostic and non-diagnostic preadmission services furnished in those clinics are consistent with CMS’s understanding of the rule.  In addition, hospitals and physicians should consider providing comments on the IPPS proposed rule regarding the financial and operational impact this clarification will have. The change to the current regulation for payment of the physician’s service will be discussed further in the Medicare physician fee schedule proposed rule which is usually published in August.