NCCI updates

An updated version of the National Correct Coding Initiative (NCCI) manual was recently posted to the CMS NCCI website which included changes identified in red text and will be effective with dates of service January 1, 2013. In addition to two new modifiers, CMS will also be implementing a third edit for add-on codes and has provided some perplexing language regarding reporting unbundled codes.

Reporting services

One of the interesting changes noted in red in chapter one is the following statement:

“Providers reporting services under Medicare’s outpatient hospital prospective payment system (OPPS) must report all services performed including those that are not separately payable. This requirement applies to services not payable due to NCCI edits. Providers should be careful to avoid inappropriately appending NCCI-associated modifiers to codes to improperly bypass an NCCI edit.”

This is rather confusing and could be interpreted in a few different ways. If the NCCI manual instruction states to report the “bundled” code in addition to the separately payable code, providers will hit an NCCI edit and that specific line will be rejected. The question is why CMS would want this information – it would most likely not be appropriate to use the charges attached to the bundled code for rate setting because providers should not be reporting an unbundled procedure code anyway. In the past, CMS has instructed providers to report the costs of care (i.e. charges) by not reporting the CPT code – in instances where a CPT code was not required with a specific revenue code. However, the statement above does not specifically state that. Providers will want to ask for clarification from their MACs and consider asking this question on the next CMS Hospital Open Door Forum call.

Modifiers

According to the NCCI manual, a modifier should not be appended to a HCPCS/CPT code solely to bypass an NCCI edit if the clinical circumstances do not justify its use. There are two modifiers that will be added to the anatomical modifiers that may be used under appropriate clinical circumstances to bypass an NCCI edit:

• LM – Left main coronary artery;
• RI – Ramus intermedius coronary artery.

A variety of staff should be aware of the addition of these two modifiers – coders, department managers, auditors, billers, chargemaster coordinators to name a few – so that when appropriate, an NCCI edit can be bypassed and the hospital appropriately reimbursed for the second procedure.

Add-on codes

Some codes in the CPT Manual are identified as “add-on” codes which describe a service that can only be reported in addition to a primary procedure. The CPT Manual instructions specify the primary procedure code for most add-on codes; however, for others, the primary procedure is not specified.

Add-on codes allow reporting of significant supplemental services commonly performed in addition to the primary procedure. They should not be confused with incidental services that are necessary to accomplish the primary procedure (e.g., lysis of adhesions in the course of an open cholecystectomy) or complications that occur during the procedure that are inherent in an invasive procedure (e.g. control of bleeding during an invasive procedure is considered part of the procedure), both which are not separately reportable with an add-on code.

In general, NCCI procedure to procedure edits do not include edits with most add-on codes because CMS considers edits related to the primary procedure to be adequate to prevent inappropriate payment for an add-on coded procedure. However, NCCI does include edits for some add-on codes when coding edits related to the primary procedure must be supplemented.

There are three “types” of add-on codes with the associated edit table. Each table lists the add-on code which is eligible for payment when reported with the primary code, the exception being 99291 critical care evaluation and management, first 3-74 minutes and 99292 each additional 30 minutes critical care. Transmittal 2607 goes into detail regarding the three different edit tables:

• “Type I Add-on Code Edit Table” lists add-on codes for which the CPT Manual or HCPCS tables define all acceptable primary codes.
• “Type II Add-on Code Edit Table” lists add-on codes for which the CPT Manual and HCPCS tables do not define any primary codes.
• “Type III Add-on Code Edit Table” lists add-on codes for which the CPT Manual or HCPCS tables define some, but not all, acceptable primary codes.

Although the add-on code and primary code are normally reported for the same date of service, there are unusual circumstances where the two services may be reported for different dates of service. For example, when critical care (99291) begins on one date of service and rolls over into the following day and the additional critical care time (99292) is provided on that following day.

All providers should take the time to review each chapter of the new NCCI manual to identify any areas that may need clarification with CMS, your MAC and specific staff. Although the changes don’t appear to be that significant on first glance, providers have been stung by that in the past with clarifications that completely changed what we thought to have been true.

CMS releases the details for the outpatient therapy claims-based data collection requirement

Last week CMS released transmittal 2603 that explained how the new 42 non-payable functional G-codes and seven modifiers on selected claims for physical therapy (PT), occupational therapy (OT) and speech-language pathology (SLP) services will be implemented. Although the new codes and modifiers are required beginning with dates of service January 1, 2013, CMS has enacted a testing period in which hospitals and practitioners have until July 1, 2013 date of service to implement and prevent claims rejections.

This new required reporting was originally announced in the 2013 Medicare Physician Fee Schedule Final Rule; however the details were not known at that time. The purpose of the new reporting is to assist CMS reform the Medicare payment system for outpatient therapy services based on the patient’s condition and outcomes. This new requirement will affect hospitals, CAHs, CORFs, SNFs, home health agencies when the patient is not under a plan of care, as well as therapy services furnished personally by an incident to the service of a physician and non-physician practitioners (i.e. nurse practitioners, certified nurse specialists and physician assistants) and therapists in private practice.

The 42 new G-codes assess categories for mobility, body position; carrying, moving and handling objects, self-care, swallowing, motor speech, spoken language, attention, memory, and voice. The seven severity modifiers report percentage of impairment limitation restriction. According to this transmittal, it is the responsibility of the therapist, physician or non-physician practitioner who furnishes the services to track and document the G-codes and modifiers reported on the claim in the beneficiary’s medical record.

There are specific time frames for reporting that providers need to be aware of and create a tracking mechanism:

• At the start of the therapy care (onset);
• At least once on or before the 10^th treatment day when ongoing therapy is needed;
• When a re-evaluation is performed (identified by specific CPT codes); and,
• At discharge.

Two functional G-codes will be required on a particular claim when functional reporting is required for therapy services under one plan of care (POC). However, it is possible for a claim to contain four or more non-payable G-codes in cases where a beneficiary receives therapy services under multiple POCs – PT, OT, and/or SLP – from the same therapy provider. The therapy discipline modifiers – GN, -GP, -GO will also be required in addition to the functional severity modifier. For hospitals, a “nominal charge” such as $0.01 must be included on the claim as well as another billable and separately payable service. Professional claims may report a zero charge if their software allows.

Even though the reporting of the functional G-codes and severity modifiers is not required on the claim until July 1, 2013 date of service, hospitals and other providers should test their systems early to prevent claims rejections issues. More details will be forthcoming as CMS roles out this new strategy. Remember that this information will be used to revise the current payment system so accuracy of the data is critical going forward.

OIG weighs in on ALJ appeals

With the recent news that legislation has been introduced to reform Recovery Auditors (RA) and that the American Hospital Association (AHA) and four health systems are suing the U.S. Dept. of Health and Human Services (HHS) for unfair Medicare practices in regards to the RA program, I thought it would be of interest to our readers to take a look at the OIG’s report and recommendations on their administrative law judge (ALJ) appeals review from 2010.

Prior to 2005, the OIG had found that at different levels of appeal, standards were not consistently applied and that CMS’s ability to defend its initial decisions was limited. Regulatory changes were then implemented, including requiring ALJs to follow new regulations that addressed how Medicare policy must be applied, when new evidence may be accepted and how CMS can participate in appeals. In addition, oversight was transitioned from the Social Security Administration (SSA) to HHS.

The third level of appeal that is conducted by ALJs differs substantially from the first two levels when appeals are filed with the Medicare administrative contractor (MAC) or the qualified independent contractor (QIC). One of the major differences is that the appellant has the right to a hearing before an ALJ; however, under certain circumstances, the ALJ may not conduct a hearing and may instead make a decision after reviewing the evidence in the case file or on-the-record review. Prior to 2005, ALJs were bound by Medicare laws, regulations, and National Coverage Determinations when making decisions, but were not bound by Local Coverage Determinations or CMS program guidance. In 2005, new regulations were introduced that required ALJs to “give substantial deference” to these policies and to provide an explanation if they decline to follow one of these policies in an appeal. Another change in 2005 was that an appellant must explain in writing the reason for submitting new evidence and ALJs may accept the new evidence only if they determine that the appellant had “good cause” for waiting until the ALJ level to submit it. As a party to the ALJ hearing, CMS or their contractors may also submit evidence, call or cross-examine witnesses during the hearing, and appeal to the next level. The OIG was disappointed to find that CMS participated in only 10% of the appeals that ALJs decided in FY 2010 and when CMS participated, ALJs were less likely to decide fully in favor of appellants.

After review of the data and extensive interviews with various staff, the OIG identified that providers filed 85% of the 40,682 appeals that ALJs decided in FY 2010. Certain providers filed appeals much more frequently than others – referred to by the OIG as “frequent filers.” ALJs reversed prior-level decisions by QICs and decided fully in favor of appellants in 56% of appeals in FY 2010. In contrast, QICs decided fully in favor of appellants in 20A% of appeals in FY 2010. What the OIG found was that ALJs differed from QICs in their interpretation of Medicare policies, in their degree of specialization, and in their use of clinical experts which ultimately contributed to different decisions at the ALJ and QIC levels.

During the interview process, both ALJ and QIC staff indicated that ALJs tended to interpret Medicare policies less strictly than QICs. Most ALJ staff noted that ALJs often decided in favor of appellants when the intent but not the letter of a Medicare policy was met. In contrast, most QICs noted that they try to follow Medicare policy strictly. In addition, ALJ and QIC staff commonly noted that some Medicare policies are unclear and that leads to more fully favorable decisions and to more variation among ALJs.

The OIG also noted at least two other findings. The ALJ and CMS staff raised concerns that the acceptance of new evidence and the organization of case files reduced the efficiency of the appeals system and that ALJ staff handled suspicions of fraud inconsistently.

The OIG report provides very clear recommendations to CMS and/or the Office of Hearings and Appeals (OHMA) and here is a summary of those that providers should be aware of.

• Develop and provide coordinated training on Medicare policies to ALJs and QICs at least annually with the focus on Medicare policy for consistency at the second and third level appeals;
• Identify and clarify Medicare policies that are unclear and can be interpreted differently by soliciting input from MACs;
• Improve the efficiency of the appeals process by standardizing case files and accelerating OMHA’s Electronic Records Initiative to transition from paper to electronic files;
• Revise the current regulations to provide more clear guidance to ALJs regarding when to accept new evidence submitted by providers;
• Seek statutory authority to establish a “modest filing fee” for those providers who have been identified as “frequent filers” as a means to encourage them to assess the appeal before filing;
• Determine whether specialization among ALJs would improve efficiency; however, the current statutory requirement is that appeals are randomly assigned and further development of this recommendation would be necessary; and,
• Increase CMS participation in ALJ appeals making strategic decisions about which contractors are best suited to do this and which appeals most warrant CMS participation such as Part A hospitals and frequent filer appeals.

With the recent OIG report, legislation and lawsuit, it is apparent that changes are on the horizon and we can only hope it will be a win-win solution for all parties involved.

CMS publishes the 2013 OPPS and MPFS final rules

Right on cue, CMS released the 2013 OPPS Final Rule on November 1 and then followed up with the MPFS Final Rule. In a breaking news story, HCPro summarized the changes – the good, the bad and the ugly – that will impact hospitals across the country. I wanted to take this time to review several changes that will impact two high volume departments in the hospital outpatient setting – therapy services and laboratory.

Many laboratory departments have been struggling with the complexity and the number of CPT codes for molecular pathology – now at 115 codes in two different tiers – and how to implement the new codes, even though CMS had allowed hospitals to bill the “stacked codes” instead for 2012. That will all change with dates of service on January 1, 2013 when the stacked codes will be invalid and the CPT codes for the actual molecular pathology services will need to be reported and will be paid under the clinical Laboratory Fee Schedule (CLFS).

In 2012 when these codes first came into play, CMS stated they were not valid of payment and hospitals should still report combinations of “regular” CPT codes for payment that described various steps to perform a specific test – referred to as stacking because different groups of codes are billed depending on the components of the actual test. CMS also clarified in a Hospital Open Door Forum call that hospitals should also report the new molecular pathology codes with the stacked codes so that CMS could use that information for setting rates for implementation in 2013.

Hospitals need to begin now to get ready to implement the new codes as this has the potential to be a major project. This includes updating chargemasters, order entry and charge tickets so there will not be a delay in billing and reimbursement. Physicians, laboratory staff and coders may want to review the AMA CPT Assistant May 2012 and June 2012 for guidance on how to select the appropriate code. Keep in mind that hospitals will be responsible for creating their own pricing based on their current methodology and the CLFS as there is not a one-to-one crosswalk from the current CPT codes over to the molecular pathology codes.

Another major change for hospitals will be reporting functional limitation indicators and outcomes for outpatient rehabilitation therapy. This information will be found in the MPFS Final Rule and not under OPPS because therapy services are paid under the MPFS.

The MCTRJCA, the same Act that implemented the therapy caps and manual medical review for hospital outpatient services from October through December 2012, also required a claims-based data collection process to help reform the Medicare payment system. Of concern to Congress and CMS is that between 1998–2008, Medicare expenditures for outpatient therapy services increased at a rate of 10.1% per year while the number of Medicare beneficiaries receiving therapy services only increased by 2.9% per year. Beginning on page 221 of the display copy of the MPFS Final Rule, a thorough explanation is provided regarding what data CMS will be looking for under the five-year CMS project titled “Development of Outpatient Therapy Payment Alternatives” (DOTPA).

In summary, because current ICD-9 diagnosis codes cannot provide the data needed, specific G-codes will be used to identify what type of functional limitation is being reported and whether the report is on the current status, projected goal status or discharge status. Modifiers will also be used to indicate the severity/complexity of the functional limitation being tracked. The difference between the reported functional status at the start of therapy and projected goal status will represent any progress the therapist anticipates the beneficiary would make during the course of treatment. This reporting will apply to all therapy claims, including those for services above the therapy caps and those that include the -KX modifier.

Again, this will be a major undertaking to update the charge master, order entry systems and charge tickets with new G-codes for services that occur on January 1, 2013. Although this is not a change in the current reimbursement structure and hospitals will be given a six-month testing period to implement no later than July 1, 2013, therapists and billers, as well as other involved in coding and billing of therapy services should become familiar with the new data reporting requirement prior to January 1.

Clarification regarding $716 billion in cost savings to Medicare Program under the Affordable Care Act

Ever since the creation of the Medicare Program—designed to provide health coverage for certain vulnerable portions of the population (the aged, disabled and those with end-stage renal disease [ESRD]) —Medicare, at the direction of Congress, has been attempting to assure that its beneficiaries have access to high quality care, while at the same time containing the costs of that care to assure the economic viability of the program itself. Several important steps in that direction were incorporated into the Affordable Care Act (ACA), some of which have already been implemented, and several of which are being implemented as of the beginning of FY 2013.

Early cost containment efforts

These efforts have led to the development of prospective payment methodologies (e.g., the Inpatient Prospective Payment System [IPPS] and Outpatient Prospective Payment System, [OPPS], etc.) that encourage providers to be more cost effective. They have also led to a number of demonstration projects designed to provide alternative delivery mechanisms to improve the coordination and efficiency of care provided. In recent years, particularly with respect to inpatient stays, CMS has been moving toward pay for performance, which is designed to reward those hospitals that meet and/or exceed certain quality of care standards. CMS has also attempted to assure that those hospitals who fail to provide an acceptable level of care during an inpatient stay are not rewarded for their failure to meet such standards.

Cost savings under the Affordable Care Act

Medicare Advantage plan reimbursement. As part of the ACA, Congress continued its efforts to contain costs while at the same time assuring the delivery of high quality care without a reduction in benefits. To that end, approximately $716 billion in savings have been built into the ACA. These are savings, not cuts to Medicare benefits. A significant portion of savings will come from a reduction in reimbursement to Medicare Advantage plans. Medicare Advantage plans utilize a managed care delivery mechanism to deliver the very same inpatient (Part A) and outpatient (Part B) benefits that are otherwise available to beneficiaries who enroll in what is referred to as “Original” Medicare. Under original Medicare, beneficiaries are generally unrestricted in their selection of providers, whereas certain Medicare Advantage plans may have more restricted provider networks.

The precursors to today’s Medicare Advantage plans were initially introduced as part of a Medicare risk demonstration project that was designed to provide for a more cost effective managed care model for delivering exactly the same benefits offered under original Medicare (Parts A and B). Starting with an initial cost savings of 5% (Medicare risk plans were paid 95% of what it would have cost the Medicare program for those same services if provided under original Medicare), Medicare had come to a point where Medicare Advantage plans were not able to provide the same benefits more cost effectively, particularly to the extent that they attempted to extend their services to rural and other more remote areas. As a result, they were receiving subsidies to provide exactly the same benefits at a higher cost than under original Medicare. Prior to the implementation of the related ACA changes, they were receiving up to 114% of what the comparable costs would have been under original Medicare.

Under the ACA, certain adjustments are now being made to reduce these subsidies. Such reduction in subsidies, however, does not result in a reduction in the services provided to Medicare Advantage enrollees. That is, whatever Medicare Advantage plans receive in reimbursement, there will be no cuts in benefits, because they are bound to provide equivalent benefits to those offered to original Medicare beneficiaries under Part A (inpatient) and Part B (outpatient). Many Medicare Advantage plans also provide prescription drug benefits under Part D.
Other sources of cost savings. Some of the other savings included in that $716 billion are accounted for by the implementation of decreases in facility reimbursement that have been in the works for a number of years, starting in FY 2004, with the voluntary reporting of certain quality indicators. For the first time, during FY 2013, hospitals will be reimbursement based upon their performance (either by achievement or improvement), as identified by quality data submitted by the hospitals themselves. This is a meaningful step toward pay for performance across the board. Beneficiaries have access to these performance scores, which may be helpful to them in making their own health care decisions. Additional savings will also come from reduced Medicare payments that would otherwise be made to hospitals to account for certain excess (preventable) hospital readmissions.

Cost savings to extend economic viability of Medicare program. The ACA cuts to Medicare costs are to be used to extend the economic viability of the Medicare Program. The initial projections were that they would do so for eight more years (through 2024, rather than 2016), without any decrease in the benefits that beneficiaries will receive. Let us hope that these cost containment efforts are successful without compromising the quality of care provided.

Correction to the FY2013 IPPS Final Rule

Last week CMS issued a correction to the FY2013 IPPS Final Rule. The most notable correction is to the adjustment factors for the Hospital Readmission Reduction program or HRRP.

CMS noted in the correction that they used incorrect MedPAR data in calculating the original factors published with the final rule in August. They originally used data from all of FY2008 in error, rather than just the data from July 1, 2008 forward. The corrected Table 15 is posted on the FY2013 Final Rule Tables page.

Kaiser Health News published a table comparing the originally published HRRP factors with the corrected factors. According to the table published by Kaiser, most hospitals will see no or only a slight increase, although there were a few with a slight decrease to the factor. The table is available at the Kaiser Health News website at this link.

On a related note, as many hospitals are aware, the other new quality adjustment for this year, the Value-Based Purchasing (VBP) adjustment, is also experiencing its own implementation delays. CMS indicated the factors published in Table 16 of the final rule was just proxy amounts with the final being published later this year. In the FY2013 IPPS Implementing Transmittal they also indicated that they will reprocess all claims from October 2012 – December 2012 once the correct factors are implemented in January of 2013.

Because of these delays, CMS has also not released the IPPS Pricer for FY2013. The Pricer will have to be modified substantially to account for the new quality based adjustments and it is not clear if CMS is waiting until the January implementation of the VBP amounts to release the Pricer or if it will be released sooner. Additionally, although not affected by the two quality adjustments at this time, other pricers such as the inpatient psychiatric and rehabilitation pricers which draw from the IPPS Pricer are also not published yet.

Judith Kares, one of my co-authors on the blog did a wonderful breakdown of these adjustments a couple weeks ago. I encourage you to read her article (on the MedicareMentor blog) if you haven’t already and keep an eye on your hospital’s adjustments to ensure they are correct and applied correctly to your payments.

Hospital Outpatient Payment Panel announces recommendations

For the second time this year, the Hospital Outpatient Payment Panel has made its recommendations to establish supervision levels different than the default level of direct supervision for certain outpatient therapeutic services. The alternate level of supervision must take into consideration the quality and safety for the delivery of the service in relation its clinical nature and inherent risks.

Beginning in 2012, CMS established a sub-regulatory process for an independent panel made up of members from the prospective payment system hospital and critical access hospital communities to recommend, at the request of CMS or the public at large, the alternate levels of supervision (e.g. general or personal) for individual services described by HCPCS codes.

The panel held their first meeting in March of this year and the CMS approved recommendations became effective on July 1, 2012. The second meeting was held in August and based on those recommendations; CMS is proposing the following changes to the current supervision levels for these categories:

• Influenza, pneumococcal and hepatitis B vaccine administration;
• Trimming of nails;
• Venipuncture via vein, VAD or central catheter;
• Foley catheter insertion;
• Changing of cystostomy tube;
• Bladder scan for residual urine measurement;
• Refilling portable pump;
• Irrigation of implanted VAD; and,
• IV hydration, initial hour and each additional hour.

The last service, IV hydration, had been previously identified by CMS as a “non-surgical extended duration service” in the CY 2011 OPPS final rule. Those types of services must be provided under direct supervision during the initiation of the service followed by general supervision for the remainder of the service. Initiation of the service is defined as the beginning portion of the service until the supervising physician or non-physician practitioner determines the patient is stable and the remainder of the service can be delivered safely under general supervision. The supervising physician must document the transition from direct to general supervision in the patient’s medical record.

However, CMS would not accept the Panel’s recommendations that the following services to be furnished under general supervision because the services either involve assessment by a physician or there is a significant potential for patient complications or reactions that would require the supervising physician or appropriate non-physician practitioner to be immediately available:

• IV infusions and injections that are currently designated as non-surgical extended duration services;
• H1N1 vaccine administration with family counseling.
• Bladder irrigation;
• Two casting/strapping procedures; and,
• Direct admission for observation and observation per hour.

Of note is the fact that observation services were not addressed in the first meeting by the Panel, possibly because those services had been previously categorized into the non-surgical extended duration services; however, that did not alleviate the supervision concerns that critical access hospitals had raised. CMS announced in the 2013 OPPS proposed rule that they are considering giving CAHs and small rural hospitals one more year of non-enforcement for meeting supervision rules and also stated that it would most likely be the last year for that “waiver.” Based on CMS’ position that there is a significant potential for patient complications in regards to observations services, it is highly unlikely that we will see this move to a general supervision category any time soon and smaller hospitals should begin to prepare now.

These recommendations are open for public comment through October 24, 2012 and the final decisions will become effective on January 1, 2013. Hospitals that may have a stake in loosening the supervision requirements for the delivery of these outpatient services may submit their comments via email to: HOPSupervisionComments@cms.hhs.gov .

Implementation of FY 2013 Value-Based Purchasing Program (VBPP) and Hospital Readmission Reduction Program (HRRP) adjustments to IPPS hospital operating payments has begun

On the road to pay-for-performance

At the risk of being redundant, I would like to spend just a few more minutes focusing on CMS’ latest efforts on the road to pay-for-performance with respect to inpatient hospital services, particularly those reimbursed under the Inpatient Prospective Payment System (IPPS) methodology. This is all part of CMS’ overall Hospital Quality Improvement Program, that began with reporting certain inpatient quality indicators. Eventually, those hospitals who failed to do so, with reasonable reliability during the prior fiscal year (FY), received 2% less than the full update to their standardized operating payments in the following FY

CMS then moved on to identify certain hospital-acquired conditions (HACs) that, in its estimation, would not occur after the patient had been admitted if the hospital was providing a reasonable quality of care. The HACs all rose to the level of conditions and comorbidities (CCs) or major conditions and comorbidities (MCCs), the presence of at least one of which is likely to result in higher-paying MS-DRG assignment. If the HACs were not documented as being present on admission, they were ignored for purposes of MS-DRG assignment.

That brings us to FY 2013, during which CMS is implementing two significant additional quality-related adjustments to the base operating payments of most IPPS hospitals. These two new quality initiatives—the VBPP and the HRRP– were mandated under the Affordable Care Act, effective for discharges on and after October 1, 2012.

VBPP and HRRP adjustments to the base operating portion of the DRG payment

Note that these adjustments, if applicable, are made to what CMS refers to as the “base operating portion of the DRG payment.” For purposes of both the VBPP and HRRP, the base operating portion of the DRG payment is calculated, as follows:

• Identify the applicable standardized operating amount from Tables 1A or 1B (which takes into consideration whether that hospital is eligible for the full or reduced update)
• Apply applicable wage index and/or cost-of-living adjustments to the respective labor-related and non-labor-related portions of the applicable standardized amount
• Multiply the wage-index/COLA adjusted standardized amount by the relative weight for the MS-DRG to which that case has been assigned
• Add to that amount any applicable New Technology add-on payment that may apply

In addition, in the FY 2013 IPPS Final Rule, CMS clarified that the base operating portion of the DRG also includes any applicable adjustments for transfer cases (either acute or post-acute), as well as adjustments for sole community hospitals that qualify for certain adjustments to their operating payments based upon certain hospital-specific rates.

Please note, however, that the base operating portion of the DRG payment subject to potential VBPP or HRRP adjustments does not include any DSH, IME, or LV adjustments or any applicable operating outlier payment.

Summary of VBPP and HRRP adjustments to the base operating portion of the DRG payment

VBPP Adjustments. Under the VBPP, for FY 2013, CMS has withheld 1% from participating hospitals’ total base operating DRG payments, a portion of which may be returned to hospitals in the form of upward adjustments to their base operating DRG payments for discharges during the fiscal year. In addition, CMS has established two VBPP domains: (1) A clinical process of care domain, composed of 12 specific clinical measures; and (2) a patient experience of care domain, composed of eight hospital consumer assessment healthcare providers system (HCAHPS) dimensions.

For those hospitals eligible to participate in the VBPP, CMS calculates both an achievement and an improvement score for each of the respective measures and dimensions.  An “achievement threshold” and a benchmark are established for each measure and dimension. The domain score is generally determined based upon whichever is the higher for each measure and dimension. The achievement score (which can be anywhere from 0 to 10 points) is based upon the hospital’s performance during the performance period compared to all hospitals’ baseline period (the “baseline period”) performance.  For these purposes, the baseline period is the 9-month period from July 1, 2009 through March 31, 2010.

The improvement score (which can be anywhere from 0 to 9 points) is based upon the hospital’s performance during the performance period compared to the hospital’s performance during the baseline period. The performance period for FY 2013 is the 9-month period from July 1, 2011 through March 31, 2012.

The patient experience of care domain score will be calculated as the sum of the HCAHPS earned base score (the sum of the higher of the achievement or improvement scores for each dimension) and the HCAHPS consistency score (a complex calculation that recognizes consistent achievement across all eight HCAHPS dimensions and rewards performance above the median for all eight dimensions).

For FY 2013, hospitals’ domain scores will be weighted at 70% for clinical process of care and 30% for patient experience of care.

HRRP adjustments. For discharges during FY 2013, the HRRP requires a reduction to a hospital’s base operating DRG payments to account for excess readmissions of selected applicable conditions—acute myocardial infarction (AMI), heart failure (HF), and pneumonia (PN). As noted above, the base operating portion of the DRG payment to which the excess readmission adjustment under the HRRP is made is defined in the same way as for the VBPP.

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 hospital. 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. Certain patients (e.g., patients discharged AMA, patients under 65), as well as certain readmissions (e.g., transfers, planned readmissions) are excluded from this definition for purposes of determining excess readmissions.

For FY 2013, an applicable hospital’s HRRP adjustment factor will be the higher of a hospital-specific ratio (to be calculated as set out below) or a floor adjustment factor of .99, resulting in a maximum reduction in base operating DRG payments of 1%. The hospital-specific ratio will be rounded to the fourth decimal place. The ratio used to calculate the HRRP adjustment factor is equal to one minus the ratio of the “aggregate payments for excess admissions” and the “aggregate payments for all discharges.”

The term “aggregate payments for excess readmissions” for a specific hospital for a specific period is defined as the sum, for applicable conditions, of the product (for each applicable condition) of

• The base operating DRG payment for that hospital for that period for that condition
• The number of admissions for that hospital for that period for that condition; and
• The “excess readmission ratio” for that hospital for that period minus one

The “excess readmission ratio” is defined as the ratio of “risk-adjusted readmissions based on actual readmissions” for an applicable hospital for each applicable condition, to the “risk-adjusted expected readmissions” for the applicable hospital for the applicable condition.

“Aggregate payments for excess readmissions” is the numerator for the ratio used to calculate the adjustment factor under the HRRP. To avoid aggregate payments for excess readmissions, a hospital’s excess readmission ratio must be less than or equal to one for each applicable condition.

The term “aggregate payments for all discharges” for a specific hospital for a specific period is defined as the sum of the base operating DRG payment amounts for all discharges for all conditions from that hospital for that period. “Aggregate payments for all discharges” is the denominator for the ratio used to calculate the adjustment factor under the HRRP.

A listing of the ICD-9-CM diagnosis codes that are subject to the HRRP for FY 2013 can be found in Volume 77 of the Federal Register, pages 53388-53389. CMS will apply the HRRP adjustment factor to all discharges from that hospital during FY 2013, not just to discharges from that hospital for applicable conditions where readmissions to that or another acute care hospital occurred within 30 days following the initial discharge.

These two initiatives involve highly complex calculations that may have a significant impact on a hospital’s inpatient reimbursement during FY 2013. Therefore, hospitals are encouraged to learn as much as they can and to take advantage of any resources being offered by CMS to that end. This includes a National Provider Call (NPC) that CMS is hosting on the FY 2013 Actual Percentage Payment Summary Report (APPSR). The purpose of the call is to discuss the APPSR, along with implementation details for FY 2013. CMS will also discuss two VBPP program related processes—a review and corrections process and an appeals process. The NPC will be held on Thursday, October 4, 2012, from 1:30-3:00 p.m. ET.

CMS policies and conversion from ICD-9 to ICD-10

It was a rather quiet week last week as CMS and the Medicare contractors, including providers, get ready to implement the IPPS final rule on October 1, 2012. A transmittal was published last week that I thought was worthy of a little more discussion.

As we all know the implementation deadline for ICD-10 was officially changed from October 1, 2013 to October 1, 2014 for all providers and suppliers. Although this may seem like a long way off with all of the other items that need more immediate attention, keep in mind that it takes a lot of work behind the scenes to convert ICD-9 data to ICD-10 data – especially when there is not a one-to-one match for many of the code conversions.

CMS is announcing in transmittal R1122OTN that it is beginning the process of converting the ICD-9 diagnosis and procedure codes over to “comparable” ICD-10 codes including any related denial messages, frequency edits, and other claims processing logic. We know what a huge operational task our own data conversion will be; however, CMS must also convert national coverage determinations as well as make other system changes well in advance to prevent unnecessary denials and delays in payment to its providers.

One item of interest in this transmittal is that CMS has stated that they will not only be updating but also creating national coverage determination (NCD) hard-coded shared system edits as they relate to the coding conversion. At first glance, the statement that they would be creating new NCD edits set me back and sounded a little opportunistic and outside of the current policy making procedures. However, CMS included the following “disclaimer” in the transmittal:

THIS EXERCISE IN NO WAY IS INTENDED TO EXPAND, RESTRICT, OR ALTER EXISTING MEDICARE NATIONAL COVERAGE. NOR IS IT INTENDED TO MINIMIZE THE AUTHORITY GRANTED TO MEDCARE ADMINISTRATIVE CONTRACTORS IN THEIR DISCRETIONARY IMPLEMENTATION OF NCDs OR LCDs. HOWEVER, WHERE HARD-CODED EDITS WERE NOT INITIALLY IMPLEMENTED DUE TO TIME AND/OR RESOURCE CONSTRAINTS, DOING SO AT THIS TIME WILL BETTER SERVE THE INTENT AND INTEGRITY OF NATIONAL COVERAGE AND THE MEDICARE PROGRAM OVERALL.

If the purpose is to create only edits to match the current policies and/or policies that are created between now and October 1, 2014, that makes sense in an effort to have efficient conversion processes and ultimately kill two birds with one stone. One new edit that will be created in the Common Working File (CWF) is for frequency restrictions when billing the HCPCS codes for bone density to be 1 X per 23 month period. This edit will not be a change in current coverage policy but rather will put into place front end processes to streamline claims payment systems.

Usually, providers will see in the transmittal an effective date that is on or before the implementation date that the Medicare contractors have to comply with. In this rare case, we see the reverse where their implementation date is January 7, 2013 and the providers’ effective date is October 1, 2014.

Going forward, providers should monitor these types of transmittals and share with their ICD-10 implementation committees. Both local and national coverage determinations will be converted and if facilities have created their own internal edits, these will also need to be updated to prevent delays inadvertently caused by the providers themselves.

National provider call on implementation of Value-based Purchasing Program to be held in October

CMS will host a National Provider Call (NPC) with a question and answer session on the FY 2013 Actual Percentage Payment Summary Report (APPSR). The purpose of the call is to discuss the APPSR, along with implementation details for FY 2013.  FY 2013 is the first year in which value-based incentive payments will be made under the Hospital Value-based Purchasing Program (the “VBP”). CMS will also discuss two program related processes—a review and corrections process and an appeals process.  The NPC will be held on Thursday, October 4, 2012, from 1:30-3:00 p.m. ET.

Hospitals must register for the call on the CMS Upcoming National Provider Calls registration website. Registration will close at 12 p.m. on the day of the call or when available space has been filled, so early registration is advisable.

Key aspects of the VBP for FY 2013

FY 2013 VBP measures.  For FY 2013, CMS has adopted 13 of 45 quality measures tracked in the Hospital Inpatient Quality Reporting Program.  The selected measures include 12 clinical quality of care measures and one survey measure, as set out below:

FY 2013 performance assessment.  For FY 2013, CMS will assess a hospital’s performance on each hospital VBP measure using an achievement threshold and a benchmark. The benchmark is a reference point used to define a high level of performance, while the achievement threshold is the minimum level of hospital performance required to receive achievement points. CMS has empirically established benchmarks and achievement thresholds using national data from a prior baseline period. Final performance standards and benchmarks for FY 2013 are set out below:

Calculation of hospital’s total performance score. For FY 2013, a hospital’s total performance score will be calculated by taking the sum of the hospital’s weighted domain scores, determined, as follows:

• A hospital’s clinical process of care domain score will be calculated as the sum of earned domain points (higher of either achievement or improvement score) divided by the sum of possible points scored on applicable clinical process measures multiplied by 100. (In FY 2013, a hospital’s total performance score will be based on all clinical process of care domain measures that apply to the hospital [Meaning, the measures that count toward the financial incentive for which the hospital submitted data and for which it had a sufficient number of cases]).
• The patient experience of care domain score will be calculated as the sum of the HCAHPS earned base score (the sum of the higher of the achievement or performance score for each of the eight HCAHPS dimensions) and the HCAHPS Consistency score (a complex calculation that recognizes consistent achievement across all eight HCAHPS dimensions and rewards performance above the median for all eight dimensions).
• For FY 2013, hospitals’ domain scores will be weighted at 70% for clinical process of care and 30% for patient experience of care.

Preparation for the NPC

In preparation for the call, hospitals are encouraged to review the VBP Final Rule and the Frequently Asked Questions in the Hospital-Inpatient Questions and Answers tool available on the QualityNet website. There will be a question and answer period at the end of the presentation, but hospitals may also submit questions in advance, as part of the registration process. In addition, if they have not done so already, hospitals are encouraged to review their estimated percentage payment summary report, which should be available on the QualityNet website. For technical questions or issues related to accessing the report, hospitals should contact the QualityNet Help Desk at the following email address: qnetsupport@sdps.org or call 866-288-8912.