MEDICAID DRGS GET READY, CUZ HERE THEY COME!

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1 MEDICAID DRGS GET READY, CUZ HERE THEY COME!

2 TODAY S PROGRAM All about Medicaid DRGs AHCA and HP implementation plan APR-DRGs details Panel discussion on hospital implementation

3 BACKGROUND Required by Florida Statues (5)(f) Implementation 7/1/2013 (admission date) Budget neutral in total Agency for Health Care Administration Contracted with MTG of America (subcontract with Navigant) Report of recommendations issued 12/12/12

4 LEGISLATED POLICIES To the extent possible, the agency shall propose an adaptation of an existing prospective payment system, such as the one used by Medicare, and shall propose such adjustments as are necessary for the Medicaid population and to maintain budget neutrality for inpatient hospital expenditures.

5 LEGISLATED POLICIES Apply current statewide levels of funding to DRGs based on the associated resource value of DRGs. Current statewide funding levels shall be calculated both with and without the use of intergovernmental transfers.

6 LEGISLATED POLICIES The plan must propose supplemental DRG payments to augment hospital reimbursements based on patient acuity and individual hospital characteristics, including classification as a children s hospital, rural hospital, trauma center, burn unit, and other characteristics that could warrant higher reimbursements, while maintaining budget neutrality.

7 GUIDING PRINCIPLES Efficiency - Is the option aligned with incentives for providing efficient care? Access - Does the option promote access to quality care, consistent with federal requirements? Equity - Does the option promote equity of payment through appropriate recognition of resource intensity and other factors? Predictability - Does the option provide predictable and transparent payment for providers and the State? Transparency and Simplicity - Does the option enhance transparency, and contribute to an overall methodology that is easy to understand and replicate? Quality - Does the option promote and reward high value, qualitydriven healthcare services? Budget Neutrality - Do the payment rates maintain current statewide levels of funding?

8 AHCA POLICIES Includes all hospitals except 4 State psychiatric facilities (freestanding private psychiatric hospitals remain excluded from Medicaid) Includes all case types (acute, rehabilitation, and psychiatric) Excludes transplant cases Concurrent newborns bill on separate claims 45-day adult benefit limit remains Admission review rather than continuing stay

9 ACHA POLICIES No interim billing No area wage adjustment Coding and documentation improvement factor Outliers include rate enhancements in threshold Charge cap on total case payments Separate payment for newborn hearing screenings

10 FLORIDA S DRG MODEL DRG system: All Payer Refined (APR) DRGs APR-DRG weights: National, re-centered to Florida average of 1.0 (actual avg ) 1% regular increase in case mix +4% expected Coding/Documentation Improvement is built into the base rate Base Rate = $2, Outliers: Threshold = DRG + $31,000 Marginal cost factor = 80%

11 OTHER ADJUSTMENTS Policy adjustors: Freestanding rehabilitation hospitals LTAC hospitals High Medicaid, high outlier hospitals Rural hospitals Service adjustors: Neonates 1.30 Normal newborns 1.00 Pediatric 1.30 Obstetrics 1.00 Rehabilitation 1.00

12 RATE ENHANCEMENTS Exemptions and Buybacks are called IGTs Funded via Low Income Pool = Automatic Funded with new IGTs = Self-funded Converted from per diem adjustments to case rate adjustments Included in outlier and charge cap adjustments 10% of federal portion of self-funded amount shifted from individual hospitals to base rate

13 GRADUATE MEDICAL EDUCATION Separate funding provided by Legislature Allocation model independent of DRGs Quarterly payments No more than $50,000 per FTE No resident cap Weighted 50% if beyond initial residency Except for primary care or general surgery

14 PUTTING IT ALL TOGETHER Assignment of APR-DRG Version 30 of software Severity based on Risk of Mortality (ROM) and Severity of Illness SOI) Results in a combined severity level of 1 to 4 Present-on-admission indicators will edit for health care acquired conditions (HCACs) May result in a lower-weighted APR-DRG or severity score

15 PUTTING IT ALL TOGETHER DRG base payment = hospital base rate x DRG relative weight x maximum applicable policy adjustor Transfer adjustment Cost outlier adjustment Non-covered days adjustment Charge cap adjustment Transitional Adjustment

16 TRANSFER ADJUSTMENT Acute-to-acute transfers only Discharge status 02, 05, 65 or 66 Payment reduced if case LOS is less than the DRG average LOS minus 1 Adjustment applies to the base payment only and not the IGT payments

17 COST OUTLIERS Cost = submitted charge x cost-to-charge ratio Qualify if cost exceeds payment by threshold Payment = base + IGT amounts Threshold = $31,000 Amount of loss (Cost less payment) paid at marginal cost rate Marginal cost factor = 80%

18 NON-COVERED DAYS 45-Day adult limit still applies If one day is left, hospital received full DRG payment Emergency care in excess of 45 days Children in Medicaid managed care who exhaust 45 days Emergency Alien Medicaid Medically Needy Compute full DRG payment, then adjust for days

19 CHARGE CAP Full DRG payment compared to submitted charges Payment reduced if it exceeds charges Proportional reduction to: Base payment Outlier payment Automatic IGTs Self-funded IGTs

20 Transitional Adjustment Quarterly lump-sum payment to some hospitals Rural hospitals estimated to lose funds compared to baseline Non-rural hospitals expected to lose at least $300,000 compared to baseline

21 GETTING READY Change in prior authorization Medicaid eligibility for newborns Documentation of POA, ROM and SOI factors Coding and grouping APR-DRGs Billing changes Prorating expected payment Payment posting changes Financial modeling and budgeting

22 TOOLS AVAILABLE Florida Hospital Association members only 3M APR DRG calculator Contact FHA for link, user ID and password ACHA Florida DRG calculator (MS-Excel tool by Navigant) Quick Reference Guide DRG%20PRICING/DRG_QRG_v10_ pdf

23 QUESTIONS Scott Davis, FHFMA CPA Director, Revenue Cycle Management Memorial Healthcare System

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