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Note from the instructor: Reimbursement for outpatient services provided to critical access hospital patient

This week’s note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.  

I recently taught an HCPro’s open registration Medicare Boot Camp® – Critical Access Hospital (MBC-CAH) class. As many of you are probably aware, CAHs are a special category of small, rural hospitals that provide both inpatient and outpatient services, primarily in what would otherwise be medically under served parts of the country. To ensure their ability to continue to do so, CAHs generally receive reimbursement for the facility component of both their inpatient and outpatient hospital services based on 101% of reasonable costs. While teaching the class, I was reminded of the complexity of the rules surrounding CAH reimbursement, particularly for services provided to CAH outpatients. We will focus on these complex rules in this Medicare Insider note and in subsequent issues, as necessary.

Payment for inpatient facility and professional services

Currently, CAHs bill for the facility/technical component of covered Part A inpatient services to the A/B Medicare Administrative Contractor (A/B MAC) on the UB-04, and are reimbursed on the basis of 101% of reasonable costs, less the applicable Part A deductible and coinsurance amounts. Most professional services provided to CAH inpatients are billed separately to the A/B MAC on the CMS 1500, with the place of service reported as hospital inpatient. With the exception of payment for certain anesthesia services, payment is made under Part B, based on a fee schedule (e.g., Medicare Physician Fee Schedule [MPFS]), charge or other fee basis, less the applicable Part B deductible and coinsurance amounts.

Payment for the facility services is made to the CAH, and payment for the professional services is generally made to the respective practitioners.

Payment for outpatient facility and professional services under Method I

When I first began teaching the MBC-CAH class a number of years ago, the majority of CAHs had elected to receive reimbursement for services provided to their outpatients under what Medicare refers to as Method I. Under Method I, reimbursement for both the facility and professional services provided to CAH outpatients is similar to reimbursement for the facility and professional services provided to CAH inpatients. That is:

  • CAHs bill for the facility component of covered Part B outpatient services to the A/B MAC on the UB-04, and are reimbursed on the basis of 101% of reasonable costs, less the applicable Part B deductible and coinsurance amounts.
  • Most professional services provided to CAH outpatients are billed separately to the A/B MAC on the CMS 1500, with the place of service reported as hospital outpatient department. With the exception of certain anesthesia services, payment is also made under Part B, based on a fee schedule (e.g., MPFS), charge or other fee basis, less the applicable Part B deductible and coinsurance amounts.

Under Method I, payment for the facility services is made to the CAH, and payment for the professional services is generally made to the respective practitioners.

Method I payment example: A CAH charges $1,000 for an outpatient procedure. The cost of the procedure has been determined to be $500, based on its outpatient cost-to-charge ratio of .50.  Assuming that the deductible has already been met, under Method I billing, what will be the total payment to the CAH for CAH facility services, including the patient’s coinsurance amount?  (Beneficiary coinsurance for CAH outpatient facility services under Part B is equal to 20% of charges.) How much will be payable by the patient? How much will be payable by Medicare?

The CAH would be paid $200 from the patient and $305 from the A/BMAC for a total payment of $505:

–     Total payment = (101% of reasonable costs) = (1.01 X $500) = $505

–     Coinsurance = (20% of billed charges) = (.20 X $1000) = $200

–     Medicare payment = (101% of reasonable costs – coinsurance) = ($505 – 200) = $305

Payment for outpatient facility and professional services under Method II

Over time, more and more CAHs have elected to receive reimbursement for both the facility and professional services provided to their outpatients under Method II. The CAH’s right to receive reimbursement for professional services, however, only applies to the professional services performed by practitioners who have elected to assign their right to payment to the CAH for services they provide to its outpatients during that cost report period (CRP). Each practitioner has the right to choose whether to assign his or her right to payment for a particular CRP. Once elected, the election will apply throughout that CRP, and the practitioner must attest that he or she will not bill Medicare directly during that CRP.

Under Method II, with respect to those outpatient services whose professional component is provided by a practioner who has assigned his or her right to payment to the CAH for that CRP:

  • The CAH bills for both the respective facility and professional services to the A/B MAC on the same UB-04, reporting appropriate revenue and HCPCS codes for all services
    • Payment for the CAH facility services will be 101% of the reasonable cost for those services, less the applicable Part B deductible and coinsurance amounts
    • Payment for professional services will be paid at 115% of whatever amount the A/B MAC would pay under the MPFS, etc., based upon the type of service provided and the modifier applied to the HCPCS code

MPFS – (deductibles and coinsurance) X 115%

  • Payment for both the facility and professional services is made to the CAH

Under Method II, with respect to those outpatient services whose professional component is provided by a practioner who has not assigned his or her right to payment to the CAH for that CRP:

  • The CAH bills for the facility component of covered Part B outpatient services to the A/B MAC on the UB-04, and is reimbursed on the basis of 101% of reasonable costs, less the applicable Part B deductible and coinsurance amounts
  • Most professional services provided to its outpatients are billed separately to the A/B MAC on the CMS 1500, with the place of service reported as hospital outpatient department. With the exception of certain anesthesia services, payment is also made under Part B, based on a fee schedule (e.g., MPFS), charge or other fee basis, less the applicable Part B deductible and coinsurance amounts
  • Payment for the facility services is made to the CAH, and payment for the professional services is generally made to the respective practitioners

Method II payment example: In the same scenario as the Method I example, except the CAH has elected Method II billing, the participating physician’s charges for the procedure are $400 and the MPFS amount is $200. Under Method II, the patient is also responsible for applicable cost sharing amounts (Part B deductible and coinsurance) for the related professional services, including coinsurance equal to 20% of the MPFS amount for the professional service. Assuming that the deductible has already been met, what is the total payment to the CAH under Method II billing, including the patient’s total coinsurance, facility (FAC) reimbursement, and professional (PRO) fee reimbursement?

FAC reimbursement

–     Same as in prior example—$505 ($200 coinsurance and $305 from Medicare)

PRO reimbursement

–     Coinsurance = (20% of MPFS) = (.20 X $200) = $40

–     Medicare payment = ((MPFS minus coinsurance)  X 115%) = (($200 – $40) X 1.15) = ($160 X 1.15) = $184

Total payment

–     Coinsurance = ($200 FAC + $40 PRO) = $240

–     Medicare payment = ($305 FAC + $184 PRO) = $489

–     Total payment = $240 + $489 = $729

Ongoing discussion and related resources

We will continue our discussion on CAH reimbursement issues, particularly relating to specific anesthesia services (both inpatient and outpatient), in a subsequent issue of Medicare Insider. For additional information, please see the following source authorities:

42 CFR 413.70

Medicare Claims Processing Manual, Chapter 4, Section 250ff

Medicare Claims Processing Manual, Chapter 12

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2015 OPPS Proposed Rule CMS reintroduces Comprehensive APCs, proposes expanded packaging

by Steven Andrews

The 2015 OPPS proposed rule, released July 3 by CMS, is relatively short at less than 700 pages, but contains refinements to the previously introduced Comprehensive APC policy, significant packaging of ancillary services, and a change for inpatient certification requirements.

“In terms of the volume of changes, it’s less than we normally see, but in terms of impact, it’s on par with last year’s big changes,” says Kimberly Anderwood Hoy Baker, JD, director of Medicare and Compliance for HCPro, a division of BLR, in Danvers, Massachusetts.

Jugna Shah, MPH, president of Nimitt Consulting, agrees and encourages hospitals to begin assessing financial impact now in light of CMS’ packaging proposals.

Comprehensive APCs

CMS has proposed implementing a concept it finalized in the 2014 OPPS final rule by introducing Comprehensive APCs for device-dependent APCs. With Comprehensive APCs, a single payment will be made rather than separate, individual APC payments, Shah says.

The 2015 OPPS proposed rule includes some lower-cost device-dependent APCs and two new APCs for other procedures and technologies that are either largely device dependent or represent single session services with multiple components. After additional consolidation and restructuring, CMS is now proposing 28 Comprehensive APCs for 2015.

The most significant change to the policy is a proposed “complexity adjustment.” The adjustment is applied when a primary procedure assigned to a Comprehensive APC is reported with other specified procedures also assigned to Comprehensive APCs or with a specified packaged add-on code. When the facility reports one of these combinations, CMS will increase the payable APC to the next higher APC in the clinical group, similar to DRGs on the inpatient side.

“This is the first time in OPPS history where we have something like severity adjustment,” says Baker.

Device-dependent edits

Instead of eliminating all device-dependent edits, beginning in CY 2015, CMS proposes to require that facilities report a device code for procedures currently assigned to a device-dependent APC.

Under CMS’ proposal, the device claims edit would be met by reporting any medical device C code currently listed among the device edits for the CY 2014 device-dependent APCs, rather than reporting a particular device C code(s).

“It’s nice that CMS heard commenters’ concerns about the elimination of all device-to-procedure edits altogether and has instead proposed to retain some level of editing,” says Shah. “This is critical to ensure that the agency receives completely coded claims for future rate-setting.”

Packaging increases

The rule includes four proposals to continue expanding packaging, a common theme for the OPPS in recent years.

“CMS continues full steam ahead with packaging, and has added an interesting twist to how it’s looking at packaging additional services, using a dollar threshold,” Shah says.

CMS proposes to package add-on codes assigned to device-dependent APCs (paid separately in CY 2014) starting in CY 2015, since these device-dependent add-on codes will be paid under the Comprehensive APC policy. These codes are listed in Table 9 of the proposed rule.

CMS also proposes to conditionally package ancillary services that have a geometric mean cost of less than or equal to $100 (with some exceptions, including preventive service, counseling/psychiatry, and drug administration services).

Additionally, CMS proposes to eliminate status indicator X (ancillary services). This means that all CPT® codes currently assigned to status indicator X will either be reassigned to status indicator Q1 (conditionally packaged) or S (significant procedure, not discounted).

If finalized, ancillary services with status indicator Q1 will not generate separate payment when provided on the same date of service as another separately payable procedure with a status indicator of S, T (significant procedure, multiple reduction applies), or V (clinic or ED visit), but will generate separate payment if provided on their own.

Providers will need to carefully examine the proposed changes and assess the financial impact of the proposed packaging changes, which will require an examination of claims rather than individual CPT codes or line items, Shah says.

Finally, CMS proposes to package and change the status indicator from A (services furnished to a hospital outpatient paid under a fee schedule or payment system other than OPPS) to N (items and services packaged into APC rates) for all DMEPOS prosthetic supplies.

CMS says this is consistent with the change it finalized for CY 2014 for all non-prosthetic DMEPOS supplies (with the status indicator changed from A to N). If this proposed change is finalized for CY 2015, then all medical and surgical supplies would be packaged in the OPPS.

Physician certification of inpatient services

CMS is proposing several changes to requirements related to inpatient physician certification, according to Baker.

Although CMS will continue to require a physician order for inpatient services, it will no longer require certification that the stay was medically necessary in most cases. CMS believes that in most cases the admission order, medical record, and progress notes contain sufficient information to support the medical necessity of an inpatient admission without a separate requirement of an additional, formal, physician certification, with two exceptions.

For stays of 20 days or longer and outlier cases, CMS believes physician certification is needed and therefore proposes to require formal physician certification beyond the admission order to substantiate the medical necessity for these cases.

E/M visits

CMS proposed no changes to E/M visit configuration or payment policy methodology in 2015, a year after CMS proposed replacing all E/M visit levels with three HCPCS Level II G-codes. CMS proposes to continue using the single visit G code and existing coding convention for Type A and Type B ED visits, though the agency says it plans on looking at different payment methodologies for the most costly ED trauma-type cases.

Additional proposals

CMS proposed the packaging threshold to remain at $90, the same as CY 2014, and for the average sales price plus 6% remains in effect for all separately payable drugs, biologicals, and radiopharmaceuticals. CMS proposed no changes to packaging of diagnostic radiopharmaceuticals and contrast agents, or the payment methodology of therapeutic radiopharmaceuticals or brachytherapy for 2015.

To better understand the frequency and type of services furnished in provider-based departments in off-campus locations, CMS proposes a new data collection requirement that, if finalized, would impact both physician and hospital reporting, according to Shah.

Specifically, CMS is proposing to collect this information beginning January 1, 2015, by requiring the use of a new HCPCS modifier that would be reported with every code for physician and outpatient hospital services furnished in an off-campus provider-based department of a hospital.

The modifier would be reported on both the CMS-1500 claim form for physician services and the UB-04 form (CMS Form 1450) for hospital outpatient services. CMS is asking for additional public comment on whether the use of a modifier is the best mechanism for collecting this service-level data.

“If providers do not like or support this option, they need to comment now, because this is the second time CMS has asked for comments and alternatives,” Shah says. “If they are not provided, it seems very likely that CMS will finalize this.”

CMS will accept comments on the proposed rule until September 2, 2014, and will respond to comments in a final rule to be issued on or around November 1, 2014. The proposed rule will appear in the July 14 issue of the Federal Register.

Note from the instructor: CMS Releases Guidance on Modifier L1 and Clarifies Lab Payment for TOB 12X

A few weeks ago, CMS released the recurring OPPS update Transmittal 2971, as well as the recurring Integrated Outpatient Code Editor (I/OCE) specifications Transmittal 2957 for dates of service beginning July 1. In these transmittals, CMS officially announces the new modifier L1 for use by PPS hospitals when submitting claims for separate payment of outpatient lab tests that are paid under the Clinical Laboratory Fee Schedule (CLFS). In previous issues of the Medicare Insider, I wrote about the concerns surrounding billing for unrelated lab on Type of Bill (TOB) 14X and the lack of additional reimbursement for sole community hospitals (SCH).

As of January 1 date of service, hospitals have been reporting separately payable labs on TOB 14X which created confusion and controversy for facilities and the National Uniform Billing Committee (NUBC). Historically and by definition, TOB 14X was for non-patient (specimen only) lab services where the patient did not receive outpatient services on the same date of service. These types of labs were easy for hospitals to identify and systematically direct the claim to process under TOB 141X. In order to comply with the new billing guidance, hospitals have had to create back-end processes and, in some cases, separate review by staff to identify if the outpatient lab should be billed on TOB 14X to receive separate reimbursement under the “exceptions” guidance provided by CMS.

Transmittal 2971 announces that beginning July 1 date of service, separately payable labs should be billed on TOB 13X and with modifier L1. This guidance directs all hospitals to revert back to billing non-patient lab tests on TOB 14X which is consistent with the NUBC’s definition of this bill type—just when hospitals finally have their registration and billing staff re-trained one way.

According to Transmittal 2971, modifier L1 will be used with lab services only in either of these two circumstances:

  1. When the hospital collects the specimen and only provides lab services on that date of service; or,
  2. When the hospital provides outpatient lab services and they are clinically unrelated to other hospital outpatient services furnished on the same day.

In order to apply the second circumstance correctly, hospitals need to understand that “unrelated means the laboratory test is ordered by a different practitioner than the practitioner who ordered the other hospital outpatient services, for a different diagnosis.” If the definition is met, the lab test would be eligible to be reported with modifier L1 to trigger separate payment. If the definition is not met, modifier L1 would not be reported and the lab payment would be packaged into another separately payable service. PPS hospitals do not have to resubmit claims for lab tests that had previously been billed using TOB 14X prior to July 1 date of service.

But what about those SCHs that have not been receiving their add-on payment since January 1 for separately payable lab billed on TOB 14X? SCHs have to go back to MLN Matters Article SE1412 that was published March 5 for additional guidance as Transmittal 2971 does not provide this information.

MLN Matters Article SE1412 explains that TOB 14X does not trigger the differential payment rates (CLFS amount/0.6 X 0.62) for SCHs with qualified laboratories. Unfortunately, MACs will not reprocess claims for SCHs because the MACs have no way of knowing which labs should have been paid the add-on payment vs. which labs should have been paid as true non-patient labs. These providers may need to cancel or adjust claims that were submitted without the modifier L1 prior to July 1 and then submit a new TOB 13X with the appended modifier after July 1 in order to receive the corrected reimbursement.

Also in Transmittal 2971, CMS expounds and clarifies its current payment policy regarding the limited set of Part B inpatient services that a hospital may bill for when a beneficiary is either not eligible for or not entitled to Part A coverage or when a beneficiary has exhausted their Part A benefits. Included in that short list of services is lab service paid under the CLFS.

CMS clarifies that in these scenarios, lab testing is excluded from OPPS packaging rules if the primary service with which the lab would have been bundled into is not a payable Part B inpatient service. CMS has adjusted its claims processing logic to make separate payment for laboratory services paid under the CLFS that would otherwise be packaged under OPPS beginning in 2014.

For those hospitals that billed under TOB 12X and were denied payment for lab services, they have to read the fine print in the transmittal to identify the next step:

“Medicare contractors shall adjust 12X claims for beneficiaries who are either not entitled to Part A at all, or are entitled to Part A but have exhausted their Part A benefits where the laboratory services were packaged for 2014 dates of service that are brought to their attention.”

In other words, if hospitals want to collect their separate reimbursement for lab services that were denied on TOB 12X, they must take the initiative to rebill for those services. Hospitals should contact their MACs for additional guidance on how to appropriately resubmit claims to prevent further delays in payment.

In addition to guidance for new modifier L1, both of these transmittals have other details that facilities should review regarding brachytherapy services, new HCPCS codes for drugs and biologicals, and payment updates for specific HCPCS codes that facilities should consider rebilling for the appropriate reimbursement.

Note from the instructor: CMS releases proposed FY 2015 Inpatient Prospective Payment System (IPPS) payment adjustments, Part II

This note is about FY 2015 IPPS proposed payment adjustments and is written by Judith Kares, JD, regulatory specialist for HCPro.  

This note is the second in a three-part series focusing on certain adjustments to reimbursement for short-term acute-care inpatient hospital stays covered under Part A. All three of these adjustments are part of CMS’ movement toward “pay for performance” as part of its overall Hospital Quality Improvement Program. Two of these adjustments were implemented under programs that became effective in FY 2013—the Hospital Readmission Reduction Program (HRRP) and the Hospital Value-based Purchasing Program (HVBPP). The third adjustment will become effective in FY 2015 under the yet to be finalized Hospital-acquired Condition Reduction Program (HACRP). All three of these adjustments are discussed in considerable detail in the recently published proposed IPPS rule for FY 2015. (See 79 Fed. Reg. 27978–28384 for more specific information.)

In last week’s note, we focused on proposed FY 2015 adjustments to the HRRP. This week, we will focus on proposed FY 2015 adjustments to the HVBPP. Next week, we will conclude this series with a discussion of adjustments under the proposed HACRP.

Application of HVBPP adjustments to “base operating portion of the DRG payment”

The HVBPP, which applies to most hospitals subject to inpatient reimbursement under the IPPS, became effective for inpatient discharges that occur on and after October 1, 2013. As with the HRRP adjustment, for hospitals subject to adjustments under the HVBPP, the adjustments are made to what CMS refers to as the “base operating portion of the DRG payment.” This refers to the wage-index and/or COLA-adjusted applicable standardized amount for that hospital, plus any applicable new technology add-on payments. In addition, if applicable, the base operating amount used is based on the acute or post-acute transfer amount.

The base operating amount does not include, however, disproportionate share hospital, indirect medical education, or low-volume hospital adjustments or any applicable inpatient operating outlier payment. In addition, for purposes of the HVBPP adjustment, the base operating amount does not include any otherwise applicable HRRP adjustment, and vice versa.

The Protecting Access to Medicare Act of 2014 extended the program for Medicare-dependent small rural hospitals (MDH) through March 31, 2015. For FY 2015 and subsequent years, CMS is proposing that the base-operating DRG payment amount for MDHs will include the difference between the hospital specific payment rate and the Federal payment rate (as applicable).

Hospitals subject to HVBPP adjustments

Most short-term, acute care hospitals are subject to HVBPP adjustments for covered inpatient discharges on and after October 1, 2012 (the beginning of FY 2013), with the following exceptions:

  • Hospitals that are subject to the reduced update (a 2% reduction to their standardized amount) for that FY for failing to meet CMS’ quality reporting requirements under the Hospital Inpatient Quality Reporting Program;
  • Hospitals for which, during the performance period for that FY, HHS has cited deficiencies that pose immediate jeopardy to the health or safety of patients; and
  • Hospitals for which there are not a minimum number of cases and/or measures that apply to that hospital for the applicable performance period for that FY. To be eligible for incentive payments for a FY, hospitals must meet the minimum requirements set out below:
    • With respect to the Clinical Process of Care Domain, hospitals must have at least 10 cases in each of four measures;
    • With respect to the Patient Experience of Care Domain, hospitals must have at least 100 Hospital Consumer Assessment of Healthcare Providers (HCAHPs) surveys returned;
    • With respect to the Outcomes Domain, hospitals must report at least 10 cases in each of two of the 30-day mortality measures for FY 2014. For FY 2015, hospitals must report at least 25 cases in each of two of the 30-day mortality measures.
    • For FY 2015, with respect to the Efficiency Domain, hospitals must report at least 25 cases.

In addition, CMS has exempted Maryland waiver hospitals from the HVBPP for FYs 2013 and 2014 and proposes to exempt these hospitals during the duration of CMS’ new Maryland All-Payer Model, a 5-year hospital payment model, pursuant to an agreement entered into effective January 1, 2014.

Determination and application of HVBPP adjustments

Under the HVBPP, value-based incentive payments are to be made in each FY (beginning with FY 2013) to otherwise qualified hospitals that meet or exceed certain performance standards established for the performance period for that FY. As noted above, these value-based incentive payments are to be made in the form of certain adjustments to the hospital’s “base operating portion of the DRG payment”. HHS is responsible for determining both the performance standards and the performance period for each FY. Each hospital’s value-based payment percentage, which is converted to a per-discharge value-based payment amount, is based on that hospital’s Total Performance Score (TPS) for the performance periods for the applicable FY.

For each applicable FY, these value-based incentive payments are to be funded by a prescribed percentage reduction (the “applicable percent”) to the total base-operating DRG payments of all participating hospitals for that FY, as determined by HHS. The total amount available for value-based incentive payments for a FY will be equal to the total amount of the payment reductions for all participating hospitals for that FY. For FY 2013, the available funding pool is equal to 1% of the base-operating DRG payments to all participating hospitals for FY 2013 discharges. For FY 2014, the applicable percentage is 1.25%. For subsequent years, CMS has proposed that the size of the applicable percentage will increase, as follows: 1.5% for FY 2015, 1.75% for FY 2016, and 2% percent for FY 2017 and successive FYs.

For hospitals subject to the HVBPP during a FY, CMS is required to make two distinct payment adjustments to the base operating DRG payment amounts for each inpatient discharge: the applicable percent reduction (based upon the applicable percent for that FY) and the value-based incentive payment adjustment for that hospital for that FY. These adjustments are made by applying that hospital’s “value-based incentive payment adjustment factor” for the FY to each inpatient discharge during the FY. The hospital’s value-based incentive payment adjustment factor is determined by subtracting the applicable percent for the FY from the value-based incentive payment percentage for that hospital (if any) for the FY, and then adding that difference to one.

Depending upon its TPS, a hospital may receive adjustments under the HVBPP that result in base operating DRG payments that are less than, equal to, or greater than it would otherwise have received. Even if a hospital that is subject to the HVBPP is not eligible for a value-based incentive payment, it will be subject to the applicable reduction for that FY, which will be applied to each discharge during the FY.

Determining an eligible hospital’s TPS during FY 2014  

As noted above, under the HVBPP, a hospital’s base operating DRG payment for each discharge may be adjusted to account for its TPS during the applicable “Performance Period.” For FY 2014, CMS established three quality domains that identify the measures/dimensions eligible for inclusion in a hospital’s TPS:

  • A Clinical Process of Care Domain, composed of 13 specific clinical measures, adding one new measure to the original 12 from FY 2013;
  • A Patient Experience of Care Domain, composed of 8 HCAHPS dimensions, which remain the same as for FY 2013; and
  • An Outcomes Domain, composed of three 30-day mortality measures. (See 78 Fed. Reg. 50678-50679 for a specific description of these measures/dimensions.)

For FY 2014, hospitals’ domain scores are weighted at 45% for Clinical Process of Care, 30% for Patient Experience of Care, and 25% for Outcomes.

For those hospitals eligible to participate in the HVBPP, CMS calculates both an achievement and an improvement score for each of the respective measures and dimensions. The domain score is generally determined based upon whichever is the higher for each measure and dimension. The achievement score is based upon the hospital’s performance during the Performance Period compared to all hospitals’ performance. The improvement score is based upon the hospital’s performance during the Performance Period compared to the hospital’s performance during the Baseline Period.

For FY 2014, CMS established the following Performance and Baseline Periods:

  • For the Clinical Process of Care and the Patient Experience of Care Domains, a 9-month Performance Period from April 1, 2012, through December 31, 2012, and a 9-month Baseline Period from April 1, 2010, through December 31, 2010.
  • For the Outcomes Domain, a 12-month Performance Period from July 1, 2011, through June 30, 2012, and a 12-month Baseline Period from July 1, 2009, through June 30, 2010.

Proposed changes for FY 2015

For FY 2015, there will be four quality domains:

  • A Clinical Process of Care Domain, composed of 12 specific clinical measures, deleting one measure (SCIP-VTE-1) from FY 2014;
  • A Patient Experience of Care Domain, composed of the same eight HCAHPS dimensions measured during FY 2014;
  • An Outcomes Domain, continuing the three 30-day mortality measures from FY 2014, and adding two additional measures (an AHRQ PSI composite [PSI-90] and CLABSI); and
  • An Efficiency Domain, composed of a single Medicare Spending per Beneficiary measure (MSBP-1). (See 78 Fed. Reg. 50679-50680 for a specific description of these measures/dimensions.)

For FY 2015, CMS will establish the following Performance and Baseline Periods:

  • For the Clinical Process of Care and the Patient Experience of Care Domains, a 12-month Performance Period from January 1, 2013 through December 31, 2013 and a 12-month Baseline Period from January 1, 2011 through December 31, 2011;
  • For the Outcomes Domain
    • For the three 30-day mortality measures, a nine-month Performance Period from October 1, 2012, through June 30, 2013, and a nine-month Baseline Period from October 1, 2010, through June 30, 2011;
    • For the AHRQ PSI composite measure, a Performance Period from October 15, 2012, through June 30, 2013, and a Baseline Period from October 15, 2010, through June 30, 2011;
    • For the CLABSI measure, a Performance Period from February 1, 2013, through December 31, 2013, and a Baseline Period from January 1, 2011, through December 31, 2011;
    • For the Efficiency Domain, an eight-month Performance Period from May 1, 2013, through December 31, 2013, and an eight-month Baseline Period from May 1, 2011, through December 31, 2011.

For FY 2015, hospitals’ domain scores will be weighted at 20% for Clinical Process of Care, 30% for Patient Experience of Care, 30% for Outcomes, and 20% for Efficiency.

Additional resources

As noted in last week’s note, hospitals are encouraged to review these changes in the FY 2015 IPPS proposed rule to determine the potential impact on their operations if CMS were to finalize them. Additional resources that provide more specific details on the proposed measures/dimensions for FY 2015 can be found at the following web sites:

FY 2014 IPPS Final Rule (78 Fed. Reg. 50676-50707)

FY 2013 IPPS Final Rule (77 Fed. Reg. 53567-53614)

In next week’s note, we will continue our review of adjustments to IPPS payment, focusing on the proposed HACRP.

Note from the instructor: CMS releases proposed FY 2015 IPPS payment adjustments, Part I

CMS published the proposed Inpatient Prospective Payment System (IPPS) rule for FY 2015 in the Federal Register.  For those of you who have not had an opportunity to review the previously released display copy, the proposed FY 2015 IPPS rule (the “Proposed Rule”) can be found at 79 Fed. Reg. 27978–28384. I encourage all of you to take advantage of the opportunity to review it carefully and provide your comments and concerns to CMS by June 30.

During this and the next two issues of the Medicare Insider, we are going to review certain proposed adjustments to hospital inpatient reimbursement for inpatient admissions covered under Part A. All three of the adjustments to be discussed are part of CMS’ movement toward “pay for performance,” as part of its overall Hospital Quality Improvement Program.

Two of these adjustments were initially introduced at the beginning of FY 2013 and continue in effect during the present FY. These adjustments arise under the Hospital Readmission Reduction Program (HRRP) and the Hospital Value-based Purchasing Program (HVBPP). CMS has proposed that these two programs continue for most IPPS hospital discharges during FY 2015, with certain changes.  The proposed changes to the HRRP will be the focus of this week’s Note, and the proposed changes to the HVBPP will be the focus of next week’s Note. The third adjustment will become effective for certain IPPS hospital discharges occurring on and after October 1, 2014 (the beginning of FY 2015) under the yet to be finalized Hospital-acquired Condition Reduction Program (HACRP). This new program will be the focus of the June 3 edition of the Medicare Insider.

On the way to pay for performance

Under its overall Hospital Quality Improvement Program, CMS has been moving toward pay for performance for several years, beginning with a (2%) reduction in payment for inpatient services when hospitals fail to meet certain quality indicator reporting requirements. This action was followed by CMS’ decision to deliberately ignore the presence of certain conditions that were not documented as being present at the time of admission for purposes of DRG assignment when these conditions have been identified by CMS as Hospital Acquired Conditions (HACs). CMS has determined HACs would not arise after admission if the hospital were providing an acceptable quality of care. CMS then introduced the HRRP and the HVBPP in FY 2013.

Application of HRRP and HVBPP adjustments to “base operating portion of the DRG payment”

For hospitals subject to adjustments under the HRRP and HVBPP, the adjustments are made to what CMS refers to as the “base operating portion of the DRG payment.” This refers to the wage-index and/or COLA-adjusted applicable standardized amount for that hospital, plus any applicable new technology add-on payment. In addition, if applicable, the base operating amount used is based on the acute or post-acute transfer amount.

The base operating amount does not include, however, disproportionate share hospital, indirect medical education, or low volume LV hospital adjustments or any applicable inpatient operating outlier payment. In addition, CMS clarified in the FY 2014 IPPS Final Rule that, for purposes of the HRRP adjustment, the base operating amount does not include any otherwise applicable HVBPP adjustment, and vice versa.

Basis of HRRP reductions for FYs 2013, 2014 and 2015

For discharges during FY 2013 and 2014, the HRRP requires a reduction to most hospitals’ base operating DRG payments to account for excess readmissions of selected applicable conditions—acute myocardial infarction, heart failure, and pneumonia. CMS has proposed the addition of two applicable conditions for FY 2015: chronic obstructive pulmonary disease and total hip arthroplasty and total knee arthroplasty. CMS does not propose to make any additions in FY 2016, but does plan to add coronary artery bypass graft surgery as a sixth condition for FY 2017. CMS has listed the ICD-9-CM Diagnosis Codes that identify the proposed conditions for FY 2015 in the Proposed Rule. (See 79 Fed. Reg. 28115-28116.)

For purposes of the HRRP, a “readmission” is a readmission occurring when a patient is discharged from an applicable hospital (initial index hospitalization) and then admitted to the same or another acute care hospital within 30 days from the date of discharge from the initial hospitalization. Only one readmission during the 30 days following the discharge from the initial hospitalization will count as a readmission for purposes of calculating the excess readmission ratio. In addition, certain readmissions, including planned readmissions, are not counted for these purposes. In the FY 2014 Final Rule, CMS also clarified that an unplanned readmission after a planned readmission within 30 days of an initial index discharge will not be counted as a readmission, nor will certain patients (e.g., those who leave against medical advice (AMA) and those under 65) be factored into the calculation.

Finally, although most short-term, acute care hospitals, particularly those paid under the IPPS, are subject to the HRRP, there are some exceptions. Puerto Rico hospitals are generally exempt, and Maryland waiver hospitals are exempt for services provided during FYs 2013, 2014 and during the duration of CMS’ new Maryland All-Payer Model, a 5-year hospital payment model, pursuant to an agreement entered into effective January 1, 2014.

Determining a hospital’s HRRP adjustment factor and impact on reimbursement to hospitals subject to an HRRP reduction

For FY 2014, an applicable hospital’s HRRP adjustment factor is the higher of a hospital-specific ratio or a floor adjustment factor of .98, resulting in a maximum reduction in base operating DRG payments of 2%. For FY 2015, CMS proposes that an applicable hospital’s HRRP adjustment factor will increase to the higher of a hospital-specific ratio or a floor adjustment factor of .97, resulting in a maximum reduction in base operating DRG payments of 3%.

For FY 2015, CMS is proposing that the ‘‘applicable period’’ for the HRRP be the 3-year period from July 1, 2010 to June 30, 2013. In other words, CMS is proposing that the excess readmissions ratios and the payment adjustment (including aggregate payments for excess readmissions and aggregate payments for all discharges) for FY 2015 would be calculated based on data from the 3-year time period of July 1, 2010 to June 30, 2013.

As noted above, hospitals are encouraged to review these changes in the proposed FY 2015 IPPS rule to determine the potential impact on their operations if CMS were to finalize them.

A Brave New World for UR Committees

Join us at 1 p.m. (Eastern) Thursday, June 19, for this special free webcast, A Brave New World for UR Committees: UR Conditions of Participation and an Effective UR Plan.

Our regulatory specialist and Medicare boot camp instructor Kimberly A. Hoy Baker, JD, will discuss requirements of UR Conditions of Participation (CoP) including composition, types of review, and requirements for a valid review.

You will learn necessary policies according to the State Operations Manual and will receive valuable guidance regarding the 2-midnight rule and Medicare Part B rebilling changes.

Register for free today!

Note to current registrants:

Webcast instructions and links will be sent by email. Please add us to your safe sender list. If you do not receive an email by 10:00 a.m. (Eastern) Thursday, June 19, contact customer service at 800-650-6787.

Note from the instructor: Devices and Anesthesiologist/CRNA Payments – Clarification of Two CMS Transmittals

This week’s note from the instructor is written by Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro.

In the Medicare Claims Processing Transmittal 2903, April 2014 Update of the Hospital Outpatient Prospective Payment System (OPPS), CMS discusses the current policy regarding billing for certain devices that are received by facilities at no cost, full credit, or partial credit. As of January 1, 2014, the modifiers “FB” or “FC” that were previously used to identify these devices are no longer accepted by Medicare Administrative Contractors (MAC), and providers should now be reporting value code “FD” with the amount of the credit. This is not anything new, but I wanted to point out a percentage that was used in the transmittal that may be confusing to facilities.

In the transmittal, CMS states:

Also effective January 1, 2014, for claims with APCs that require implantable devices and have significant device offsets (greater than 40%), the amount of the device credit will be specified in the amount portion for value code “FD” (Credit Received from the Manufacturer for a Replaced Medical Device) and will be deducted from the APC payment from the applicable procedure. The OPPS payment deduction for the applicable APCs referenced above will be limited to the total amount of the device offset when the FD value code appears on a claim. The offset amounts for the above referenced APCs are available on the CMS Web site.

The “greater than 40%” referenced above is actually a threshold used to identify ambulatory payment classifications (APC) that will be affected by the policy. CMS uses this percentage to identify an APC where at least 40% of the payment rate is determined by the cost of the device itself. In theory, if the APC does not meet that device cost threshold, a facility would not have to report a credit regardless of the amount. A list of the affected APCs can be found in Table 30 of the 2014 OPPS Final Rule.

The actual reporting policy for facilities is still based on at least a 50% credit of the cost of the device. Specifically, page 75006 of the Federal Register states that hospitals are required to report the amount of the credit with value code ‘‘FD’’ (Credit Received from the Manufacturer for a Replaced Medical Device) when the hospital receives a credit for a replaced device listed in Table 31 that is 50% or greater than the cost of the device. Although MLN Matters article MM8653 somewhat clarifies the confusion that Transmittal 2903 created, hospitals will continue to use the 50% credit as their reporting threshold for complying with this CMS policy.

To further clarify the remainder of the device credit policy, the OPPS payment deduction for the APCs referenced above is limited to the total amount of the device “offset” when the FD value code appears on a claim. The offset amounts are available under the Annual Policy Files link on the on the CMS OPPS website and can help facilities identify the maximum amount by which the APC payment may be reduced.

In an unrelated transmittal, One Time Notification 1379, CMS published a clarification for certified registered nurse anesthetist (CRNA) and anesthesiologist payments made to a Method II Critical Access Hospital (CAH). For those readers that may not be familiar with this cost based reimbursement system, the following is a brief explanation.

  • Anesthesiologists and CRNAs may reassign their billing rights to a CAH.
  • The CAH may bill under Method II (optional method) by billing the facility outpatient service and the related professional fee on the same outpatient claim by reporting specific revenue codes.
  • In most instances, this allows the CAH to receive reimbursement at 115% of what the Medicare Physician Fee Schedule (MPFS) would have paid the physician or CRNA if they had billed independently on the 1500 claim form.
  • Under certain qualifying circumstances, a CAH can receive cost based reimbursement for its CRNA services rather be paid under the MPFS. This type of payment is called a pass-through payment.

On June 7, 2013 in previously released Transmittal 2719, CMS announced that effective January 1, 2013, qualifying CAHs and rural hospitals were eligible to receive pass-through payments for services that CRNAs are legally authorized to perform in the state in which the services are furnished (see amended 42 CFR 410.69(b)). The pass-through payments included those procedures outside of the anesthesia HCPCS codes (00100-01999) that were billed using revenue code 964 on the CAH’s outpatient claim (TOB 085X).

Although this information was first released in June 2013, CMS is now clarifying in One Time Notification Transmittal 1379 that the effective date for payment of CRNA service outside of the anesthesia code range is January 1, 2013, and includes payment made under pass-through and Method II reimbursement methodologies. Unfortunately, CAHs have to read the entire transmittal to understand that if they want the proper Method II reimbursement for procedures performed by CRNAs outside of the anesthesia code range, the CAH is responsible to resubmit claims to their MAC. CMS also instructs MACs to bypass timely filing so that facilities can rebill claims back to the January 1, 2013 date of service based on this more recent clarification. This transmittal goes on to announce that effective January 1, 2014, a Method II CAH can also receive reimbursement for anesthesiologist services identified by revenue code 963 on the CAH’s outpatient claim.

Unfortunately, in the current Medicare claims editing and processing systems, the only HCPCS codes 00100–01999 performed by an anesthesiologist (revenue code 963) or CRNA (revenue code 964) that can be reimbursed under Method II. The claims processing system will not be updated until October 6, 2014, as identified by the implementation date on this transmittal. Again, the CAH is responsible to resubmit claims to their MAC once this policy is implemented.

To prevent lost reimbursement, CAHs may want to consider reviewing claims data from January 1, 2013, to the current period that were billed with revenue code 964 and a HCPCS code outside of the anesthesiology code range. These claims may need to be resubmitted to receive proper Method II reimbursement and CAHs should consult their MACs for further guidance.

CAHs may also want to review claims data from January 1, 2014, to the current period that were billed with revenue code 963 and a HCPCS code outside of the anesthesiology code range. If the service was not paid appropriately under Method II reimbursement methodology, hold the claim and resubmit after October 6, 2014. For outpatient claims that have not been billed yet and for which the facility will report revenue code 963 with a HCPCS code outside of the anesthesiology code range, hold the claim and submit after October 6, 2014, keeping in mind that timely filing requirements must be met.

Note from the instructor: CMS reassigns packaged skin substitute products approved for payment in CY 2014 based upon updated payment information

 

This note from the instructor is written by Judith Kares, JD, regulatory specialist for HCPro.

One of the more complex aspects of coding, billing, and payment for covered drugs and biologicals relates to skin substitute products. Under the CY 2014 OPPS/ASC final rule (CY 2014 final rule), CMS is packaging most skin substitute products into the application procedures that utilize them. Per CMS policy, there is no separate payment for packaged items and services; the payment for packaged items and services is included in the payment for the separately payable procedures of which they are an integral part.

Special billing rules for packaged skin substitute products

For packaging purposes, CMS created two groups of application procedures: application procedures that use high-cost skin substitute products (billed using CPT codes 15271–15278) and application procedures that use low-cost skin substitute products (billed using HCPCS codes C5271–C5278).

In making its decision as to whether a skin substitute product will be assigned to the high cost or low cost group, CMS did a comparison of the July 2013 payment rate for the skin substitute product to $32, which is the weighted average payment per unit for all skin substitute products. In doing so, CMS used skin substitute utilization data from CY 2012 claims and the July 2013 payment rate for each product. For CY 2014, skin substitute products with a July 2013 payment rate that was more than $32 per square centimeter are packaged into the payment for the high-cost application procedures, and those with a July 2013 payment rate that was equal to or less than $32 per square centimeter are packaged into the low cost application procedures. 

A listing of the respective high- and low-cost skin substitute products, as well as the high- and low-cost skin application procedures into which they will be packaged, is set out in the CY 2014 Final Rule, Tables 13 and 14 respectively. A few skin substitute products (e.g., skin substitute products that are applied as either liquids or powders per milliliter or per milligram and are currently employed in procedures outside of the CPT code range of 15271–15278) are not designated as either high or low cost. They should be billed with the applicable surgical procedures that use them rather than the skin application procedures noted above (that is, they should not be reported with CPT codes15271–15278 or HCPCS codes C5271–C5278). Payment for these skin substitutes will be packaged into payment for the related surgical procedures.

Reassignment of new CY 2014 skin substitute products

Under the CY 2014 final rule, CMS also finalized a policy that for any new packaged skin substitute products approved for payment during CY 2014, CMS will use the $32 per square centimeter threshold to determine mapping to the high- or low-cost skin substitute group, as soon as sufficient pricing information becomes available. Any new packaged skin substitute products without pricing information were assigned originally to the low-cost category. There were nine new packaged skin substitute products that were covered as of January 1, 2014, and that were assigned to the low-cost payment group because pricing information was not available for these products at the time of the January 2014 update.

As reported in CMS’ April quarterly OPPS update (Transmittal R2903CP), there is now pricing information available for three of these nine products. Table 7 below shows the three new products and their updated low/high cost status based on the comparison of the price per square centimeter for each product to the $32 square centimeter threshold for CY 2014.

Table 7—Updated Payment Rates for Certain HCPCS Codes Effective April 1, 2014

HCPCS Code

Long Descriptor

Status Indicator

Low/High Cost Status

Q4143

Repriza, Per Square Centimeter

N

Low

Q4147

Architect Extracellular Matrix, Per Square Centimeter

N

High

Q4148

Neox 1k, Per Square Centimeter

N

High

Billing and payment for pass-through skin substitute products

Although most skin substitute products are packaged, for CY 2014 five skin substitute products have been granted pass-through status and are separately payable. Skin substitutes with pass-through status have a status indicator of “G,” as set out in Table 13. Pass-through skin substitutes should be reported with CPT codes 15271–15278. Payment for pass-through skin substitutes is subject to an offset based on the amount of packaged skin substitute that is already included in the payment for the related skin application procedure. During CY 2014, for those skin application procedures assigned to APC 0328, the offset amount is 56.77%, and for those skin application procedures assigned to APC 0329, the offset amount is 15.93%.

Practical implications

There are several practical implications for hospitals under these complex billing rules. First, for dates of service on and after January 1, the Integrated Outpatient Code Editor will return to provider (Edit 87) any claim with an appropriate skin application procedure that does not also include an appropriate skin substitute product. This applies to both packaged and pass-through skin substitute products. In order to receive payment for the skin application procedure (as well as any pass-through skin substitute product, if applicable), the hospital will need to add the appropriate skin substitute product to the claim.

Second, effective April 1, based upon the reassignment of two skin substitute products—Q4147 and Q4148—from the low to the high-cost group, hospitals will need to revise their billing policies to ensure  that these skin substitute products are billed with the applicable skin application procedures. Hospitals will also need to keep an eye out for potential reassignment of the remaining six new skin application procedures so that appropriate changes in billing policy can be implemented.

HDI posts one new issue in one category

HealthDataInsights (HDI) posted one new issue in one category to its CMS list for providers in Region D. (See link for individual state applicability.)

According to the HDI website, the new issues are:

For Inpatient Acute Care Hospitals:

  • Prospective Payment System (PPS) DRG Outliers – High Cost Implants – J5 and Legacy. Medicare pays for inpatient hospital services provided. Under PPS, hospitals are paid a predetermined rate per discharge for inpatient hospital services furnished to Medicare beneficiaries. Each type of Medicare discharge is classified according to a list of DRGs. These amounts, are, with certain exceptions, payment in full to the hospital for inpatient operating costs. In addition to the basic prospective payments, Medicare also makes payment for cases incurring extraordinarily high costs. This additional payment is known as an “Outlier”. Medical documentation will be reviewed to determine the correct units of service and charges were reported under Revenue Code 278. (Medical Necessity will be excluded at this time.)