Comparison of the Prospective Payment System Methodologies Currently Utilized in the United States

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1 Comparison of the Prospective Payment System Methodologies Currently Utilized in the United States 1

2 Can you speak the jargon of Prospective Payment Systems? MS- DRGs APCs IPF-PPS RBRVS HHRGs RUGs MS-LTC DRGs IRF-PAI CMGs 2

3 Each of the prospective payment systems is unique and complex. We are all challenged to understand the application of these prospective payment systems. 3

4 Reimbursement is based upon the: third party payer healthcare setting or provider coding system used data set utilized encoder, grouper, and data entry software used 4

5 Third Party Payers Third party payers are entities or organizations that pay for some or all of the covered medical expenses. There are many forms of health insurance coverage in the United States. Categories of health insurance include: Government plans (i.e., Medicare, Medicaid, TRICARE, CHAMPVA) Commercial or private insurance plans (i.e, Blue Cross/ Blue Shield, Prudential, Aetna) Managed care contracts Workers compensation plans 5

6 Healthcare Setting or Providers Providers are those persons, institutions, facilities and firms who are eligible to provide services and supplies. Examples of providers include: hospitals of all types (i.e., acute care, rehab, psych, long term, specialty) skilled nursing facilities intermediate care facilities home health agencies physicians independent diagnostic laboratories independent facilities providing x-ray services outpatient physical, occupational, and speech pathology services ambulance companies chiropractors facilities providing kidney dialysis or transplant services rural clinics veterinary clinics 6

7 The Coding System There are two primary coding systems utilized in reimbursement: ICD-9-CM CPT These and other coding systems are used for statistical purposes. 7

8 The Data Sets Some of the prospective payment systems require the standardized collection of a core set of common data items which can be utilized for many purposes, such as; measuring patient outcomes, assessing the quality of services, and measuring the effectiveness of interventions and treatments. These data sets can also be used to form the basis of reimbursement for the services provided. 8

9 The Data Sets MDS/RAI Data Set Acronym MDS-PAC/PAI OASIS CMAT Name of Data Set Minimum Data Set/Resident Assessment Instrument Minimum Data Set for Post Acute Care/Patient Assessment Instrument Outcomes and Assessment Information Set Case Mix Assessment Tool Healthcare Setting Skilled Nursing Facility (SNF) Inpatient Rehabilitation Facility (IRF) Home Health Agency (HHA) Inpatient Psychiatric Facility (IPF) 9

10 Encoder, Grouper, and Data Entry Software Encoder: a computer software program designed to assist coders in assigning appropriate clinical codes to words and phrases expressed in natural human language. There are two types of encoders: Logic-based: prompts the user through a variety of questions and the choices are based upon the clinical terminology entered Automated codebook: prompts screen views that resemble the actual format of the coding book 10

11 Grouper Grouper: a computer software program that applies appropriate logic to assign a particular payment group (i.e, MS-DRG, APC) according to the information provided for that episode of care. 11

12 Data Entry Software Data Entry Software: computerized data entry software may be required for the establishment of a database and for purposes of transmission of data. 12

13 Data Entry Software Software Acronym RAVEN IRVEN HAVEN Name of Software Resident Assessment Validation and Entry Inpatient Rehabilitation Validation and Entry Home Assessment Validation and Entry Used For Skilled Nursing Facility (electronic transmission of data in MDS format) Inpatient Rehabilitation Facility (electronic transmission of data from the IRF-PAI) Home Health Agency (electronic transmission of data in OASIS format) 13

14 Why Prospective Payment? Development of prospective payment systems was mandated by federal law for Medicare reimbursement Current retrospective payment systems were not effective in controlling costs or in controlling government expenditures for Medicare beneficiaries 14

15 Retrospective Payment Systems Reimbursement is established after the healthcare services are rendered and the costs are incurred Increases in the length of stay translates to increased charges on the itemized bill and therefore an increase in the reimbursement Increases in the services rendered means increased charges on the itemized bill and therefore an increase in the reimbursement 15

16 Prospective Payment Systems Reimbursement is established before the healthcare services are rendered and monies are expended Reimbursement is based upon a specific prospective payment system methodology The length of stay and services rendered will result in increased charges on the itemized bill, but will not necessarily result in an increase in the reimbursement 16

17 MS-DRG FACT SHEET Reimbursement to (Provider): Acute Care, Short Term Hospitals MS-DRG stands for: Medicare Severity Diagnosis Related Group Reimbursement for: Medicare and TRICARE Inpatients Coding System Used: ICD-9-CM Effective Dates for Original DRGs: October 1, 1983 for Medicare Inpatients October 1, 1987 for TRICARE Inpatients Effective Date for MS-DRGs: October 1, 2007 Number of MS-DRGs: about

18 MS-DRG ASSIGNMENT 1. Diagnoses and major procedures are coded using ICD-9-CM codes. 2. Case is categorized into an MDC (Major Diagnostic Category), which are divided by body systems. 3. Case may be further divided into surgical versus medical partitioning. 4. Each MS-DRG has a CMS relative weight and when multiplied by the hospital s specific rate, the reimbursement is derived. 18

19 RBRVS FACT SHEET RBRVS stands for: Resource Based Relative Value System Reimbursement to (Provider): Physicians Reimbursement for: Medicare Patients Coding System Used: HCPCS/CPT Effective Date: January 1, 1982 Number of RBRVSs: each CPT and HCPCS code has a payment amount (thousands) 19

20 RBRVS ASSIGNMENT 1. Each service and procedure is coded using the HCPCS/CPT codes. 2. Each HCPCS/CPT code has RVUs (relative value units) for the physician s work, practice expense, and malpractice. 3. Each RVU is adjusted by a GPCI (geographical practice cost indices). 4. The sum of the adjusted RVUs is multiplied by a conversion factor which constitutes the Medicare fee schedule amount. 5. The physician is reimbursed the lower of the Medicare fee schedule amount or the actual charges. 20

21 ASC FACT SHEET ASC stands for: Ambulatory Surgery Center Reimbursement to (Provider): Free- Standing Surgery Centers Reimbursement for: Medicare Ambulatory Surgery Coding System Used: HCPCS/CPT Effective Date: January 1, 1997 Number of ASCs: Originally only 9 groups, effective January 1, 2008 there were several hundred payment groups (APCs) 21

22 ASC ASSIGNMENT 1. Ambulatory surgery is coded using CPT codes. 2. The CPT code should appear on the approved list of ASC procedures. 3. Each CPT code is categorized into one of several hundred payment groups. 4. Each payment group has a payment rate. 22

23 RUG FACT SHEET RUG stands for: Resource Utilization Group Reimbursement to (Provider): Skilled Nursing Facilities Reimbursement for: Medicare Inpatients Coding System Used: ICD-9-CM Effective Date: July 1, 1998 Number of RUGs: 53 23

24 RUG ASSIGNMENT 1. This case mix payment system utilizes information from the MDS (Minimum Data Set). 2. The patient is classified into 1 of 7 major categories depending on the patient type (rehab, extensive services, special care, clinically complex, impaired cognition, behavior problems, and reduced physical function). 3. Each of these 7 categories is further distinguished to yield 53 specific patient groups used for payment. 4. Each of the 53 RUGs has a per-diem rate. 24

25 APC FACT SHEET APC stands for: Ambulatory Payment Classification Reimbursement to (Provider): Hospitals Reimbursement for: Medicare Outpatients Coding System Used: HCPCS/CPT Effective Date: August 1, 2000 Number of APCs: about

26 APC ASSIGNMENT 1. All services (major and minor) are coded using HCPCS/CPT codes. 2. Each HCPCS/CPT code is grouped to an APC. There can be many different APCs. 3. Each APC has a Medicare payment amount and a beneficiary coinsurance amount. The provider receives the sum of these dollar amounts as reimbursement for each APC. 26

27 CMG FACT SHEET CMG stands for: Case Mix Group Reimbursement to (Provider): Rehabilitation Hospitals and Units Reimbursement for: Medicare Inpatients Coding System Used: ICD-9-CM Effective Date: January 1, 2002 Number of CMGs: 92 27

28 CMG ASSIGNMENT 1. This prospective payment system uses information from the Inpatient Rehabilitation Facility-Patient Assessment Instrument (IRF-PAI). 2. Patients are classified into distinct Case Mix Groups (CMGs) based upon clinical characteristics and expected resource needs. 3. The CMGs were constructed using rehab impairment categories, functional status (both motor and cognitive), age, comorbidities, and other factors. 4. Each CMG has a different payment amount. 28

29 HHRG FACT SHEET HHRG stands for: Home Health Resource Group Reimbursement to (Provider): Home Health Agencies Reimbursement for: Medicare Patients Coding System Used: ICD-9-CM Effective Date: October 1, 2000 Number of HHRGs:

30 HHRG ASSIGNMENT 1. This prospective payment system uses information from the Outcomes and Assessment Information Set (OASIS). 2. Each HHRG has an associated weight value that increases or decreases Medicare s payment for an episode of care and this payment is relative to a national standard per episode amount. 30

31 MS-LTC-DRG FACT SHEET MS-LTC-DRG stands for: Medicare Severity Long Term Care-Diagnosis Related Group Reimbursement to (Provider): Long Term Care Hospitals Reimbursement for: Medicare Inpatients Coding System Used: ICD-9-CM Effective Date: October 1, 2002 Number of MS-LTC-DRGs:

32 MS-LTC-DRG ASSIGNMENT 1. The assignment of a patient case into a MS-LTC-DRG is similar to the way a patient is classified to a MS-DRG. 2. The biggest difference is that the relative weights are different. 32

33 IPF-PPS FACT SHEET IPF-PPS stands for: Inpatient Psychiatric Facility-Prospective Payment System Reimbursement to (Provider): Psychiatric Facilities Reimbursement for: Medicare Inpatients Coding System Used: ICD-9-CM Effective Date: January 1, 2005 Number of IPF-PPSs: 15 33

34 IPF-PPS ASSIGNMENT 1. This prospective payment system is based on the cost of an average day of care in a psychiatric facility. 2. Payment for the average day or per diem would be the Federal per diem base rate, to which various adjustments would be applied applicable to the patient treated and facility characteristics. 3. The proposed IPF-PPS uses the existing inpatient hospital MS-DRG system to group inpatient psychiatric patients into one of the 15 allowed psychiatric MS-DRG groups, but does not use the inpatient PPS payment amount. The IPF-PPS has its own set of payment adjusters for each of the MS-DRG codes. 4. The MS-DRG payment adjustment amount is applied to the Federal per diem rate along with the applicable payment adjusters to derive the final per diem amount for each inpatient psychiatric stay. 34

35 CHALLENGE YOUR MISSION IS TO STAY INFORMED OF THE PARTICULAR PROSPECTIVE PAYMENT SYSTEM(S) THAT RELATES TO YOUR JOB! 35

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