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Please refer to the Medicare Mentor blog for all the helpful information previously found here.

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Dear healthcare professional,

Medical Records Briefing is conducting it’s a benchmarking survey on electronic health record implementation, and we would appreciate your input. Please take a few moments to complete this survey. The results along with commentary from industry experts will be featured in the October 2014 issue of Medical Records Briefing.

To show our thanks, we will select one respondent at random to win a complimentary HCPro on-demand webcast of his or her choice. To enter to win, please include your contact information at the end of the survey once you have answered the questions.

The link below will take you to the survey’s website; simply click on the link to answer the survey questions online. If the click-through does not work, please cut and paste the URL below into the address bar of your browser.

Here’s the link to the survey: https://www.surveymonkey.com/s/J6DRJBR.

Thank you for your input!

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Thank you for your interest in HCPro’s webcast A Brave New World for UR Committees: UR Conditions of Participation and an Effective UR Plan. Due to great interest in the program and an overwhelming amount of questions asked during the webinar, Kimberly A. Hoy Baker answered some of the questions that she was unable to answer during the Questions and Answers portion of the webinar. We hope that you find these answers informative and helpful.

Q:  If a UR committee at a CAH only meets quarterly, is that enough for reporting those Part A to Part B rebilling case?

A:  The requirement is that the Inpatient Part B claim is submitted within one year of the date of service so this should allow plenty of time for the determination to be made and conveyed to the business office for billing under the Part B Inpatient billing provisions.  One thing to consider, though, is that this will mean the revenue from this stay will be delayed until the determination is made and the billing (which requires a Part A non-covered claim followed by a Part B Inpatient claim) is completed.  Also, it creates additional work and potential delays if the business office has already submitted a Part A covered claim and then has to change this to a non-covered claim before then submitting the Inpatient Part B claim.  Therefore, you may consider a more frequent process for determinations by a subcommittee or designated member of the UR committee (determinations generally only require one member).  If the subcommittee meets frequently enough there should be negligible delay in billing.  As part of that process, consider a notice to the business office to hold billing of suspected non-covered cases that are referred to the subcommittee for a determination. This will avoid extra claims and adjustments having to be submitted which cost time and effort and may further delay reimbursement.

Q.:  What are your recommendations for operationalizing this for large facilities with very busy medical staff and / or UR Committee members?

A.:  In a larger facilities, the number of cases that potentially need review and rebilling is much greater and additionally the dollars involved in the potentially non-covered cases can be substantial.  Therefore, it’s important to streamline processes to ensure both a workable process for the busy UR committee members and no disruption to the revenue for the hospital.

Larger facilities will most likely benefit from splitting the determinations that inpatient admissions do not meet requirements, resulting in billing for Part B payment, (i.e. reviews under 42 CFR 482(d)) from the rest of the business of the UR Committee.  The determination related to inpatient admissions only requires one physician as long as the attending physician either does not wish to present their views or agrees with the determination.  Therefore, one delegate of the UR committee could meet with UR nurses to review cases and make determinations. This review, even for very large facilities, should not take an extensive period of time because a detailed review of clinical factors will not be required for most of the reviews.  All that is required is a review of whether the 2-midnight benchmark is met, including whether an exception might apply.

This review by the UR committee delegate could happen quite frequently based on the facility’s needs (e.g. every Friday or even daily for very large facilities) and the delegate could rotate based on the UR physician available at the time of the meeting.  Meeting more frequently will make the workload more manageable and ensure that there are not substantial delays in billing for these cases.  Note that previously, in order to operationalize condition code 44 the UR delegates, often called physician advisors, would have to be consulted while the patient was at the hospital.  Now these reviews can be done after the patient’s discharge, at a scheduled interval, which should actually make the process more manageable for the UR committee members/physician advisors because reviews can be consolidated into these periodic meeting rather than occurring as needed throughout the day.

For example, each Monday, Wednesday, and Friday at 4pm, the UR nurses could meet with the designated hospitalist of that day, who is also on the UR committee.  They could review inpatient cases from the prior two to three days that did not meet the 2-midnight benchmark.  When a case is referred for review, the UR nurse would send a notice to the attending physician that their case was being reviewed at the meeting and offering them an opportunity to present their views.  Based on the hospitalist’s review, a determination on the appropriateness of the stay can be documented.  If the determination is that the case did not meet inpatient requirements and to bill Part B, the UR nurse can then proceed with the notification to the patient (required within 2 days) and to the business office for correct billing.

There are a couple of additional things a hospital may wish to consider in this process.  If an attending physician indicates they want to present their views, that case could be referred to the larger UR Committee, or even a subcommittee that meets more frequently than the full committee, for a review with two UR physicians available.  The UR delegate also cannot review their own cases, so if one of their cases comes up for review, it would have to either be delayed to a later meeting with a different delegate, referred to the larger committee or a subcommittee as discussed above.  Additionally, the results of all reviews should be reported up to the UR Committee for trending and analysis as part of the overall UR plan.

Q:  Is there a requirement as part of the Condition of Participation (CoP) that all observation patients need to have a second level physician review?

A:  No, the CoP does not directly require a review of all observation stays by the UR committee.  In general, the UR CoP addresses inpatient admissions and is most concerned with inappropriate use of inpatient status and medical necessity of the inpatient admission.  The CoP does require that the committee review the professional services relative to medical necessity and “to promote the most efficient use of available health facilities and services”.  This requirement certainly could encompass a review of observation stays, but falls short of requiring a review of all observation stays.

It is also important to note that a second level review of an observation stay is normally looking at whether the patient should have been admitted as an inpatient.  Although the inpatient order cannot be backdated to the beginning of the patient’s stay, the physician can order inpatient upon recommendation of the reviewer and the whole stay is generally treated as an inpatient stay under the three day payment window. Additionally, these reviews may also determine that the observation stay itself was not medically necessary (i.e. custodial).  Neither of these determinations require a UR physician reviewer.  The UR CoP only requires that a determination that an inpatient stay is not medically necessary be made by physician members of the UR committee.

For example, a UR nurse could review an observation case and determine that the physician’s plan of care will require a second night at the hospital and recommend to the physician that he or she order inpatient care.  Similarly, a UR nurse could review an order for observation and determine, notwithstanding the order for observation, the patient’s observation care is not medically necessary (i.e. is custodial).  The hospital would then bill appropriately based on that determination; billing it to the patient if an ABN was given, and writing it off or billing as non-covered if not.

Q.:  Do you have to notify the patient within two days if you are doing a condition code W2?

A.:  Condition code W2 is used to indicate that an inpatient stay is being billed for Part B payment following a UR review or denial by a contractor.  The W2 distinguishes inpatient stays billed to Part B as a result of a determination of lack of medical necessity from inpatient stays billed to Part B simply because the patient does not have Part A benefits.  This allows for the full payment of nearly all services normally payable on a Part B claim for those determined to be not medically necessary as inpatient stays under the new regulation for Part B billing adopted at 42 CFR 414.5.

Because W2 is used in both these situation, a notice to the patient by the hospital would not always be required when billing with W2.  The 2 day notice requirement is part of the UR committee determination process and therefore if the UR committee is the one making the determination that results in billing with W2, then the notice would be required within 2 days of that determination.  But if W2 is being used as a result of a contractor audit determining the stay to be not medically necessary, then the same notice requirement does not apply.  Additionally, I’m not aware of any other requirement for providing notice to the patient when the contractor has denied a claim.  In the spirit of good customer service, the hospital may wish to nevertheless provide some kind of notice to the patient so that the patient knows why the claim is being submitted for Part B payment and what to expect for Part B co-payments.  However, because there is no requirement for this notice the content and timing would be up to the hospital.

Q.:  What is the requirement for letters to patients for retrospective self-audits? Does a letter need to be sent? Is there a template for the letters or recommended language? Where can this be found?

A.: A “self-audit” as described in the FY2014 IPPS rule, which allows payment for Part B services for inpatient cases found to be not medically necessary, is essentially the determination referred to in the UR CoP at 42 CFR 482(d).  This determination does require a notice to the patient two days following the review.  Unfortunately, CMS does not provide recommended language for this notice so the hospital will have to develop their own notice.  I have reviewed a few examples and they may include information such as the reason for the denial, the resulting payment under Part B, and the resulting co-payment liability for the patient.  This is an opportunity for the hospital to give the patient information about the process of rebilling to Part B and start a dialog to ensure good customer service to the patient surrounding this process.

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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.

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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.

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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.

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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.

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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.

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