© 2011 Unit 4 Task Unit 4 What do you have to do in this unit? Review Key Terms On the Reading page Read Chapter 7 of Principles of Healthcare Reimbursement.

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Unit 4 Task

• Unit 4 • What do you have to do in this unit?• Review Key Terms • On the Reading page• Read Chapter 7 of • Principles of Healthcare Reimbursement • Attend the Weekly Seminar or complete Option 2 • 15 Points • Respond to the Discussion Board • 10 Points • Complete the Assignment/Chapter 7 Workbook “Questions and Review Quiz”• 40 Points • Complete the Quiz • 50 Points

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Assignment

• 1. What factors other than financial performance can leaders of healthcare organizations consider as they evaluate organizational programs?

• 2. What reasons could account for the gap between the reimbursement for multidisciplinary care and the expenses of delivery of multidisciplinary care?

• 3. In evaluating the RBRVS reimbursements for the physician practice, what other data should the intern consider? The intern notes that code 99205 has the highest RVU. Explain whether the intern should advise the practice to recruit more very sick new patients (Office visit, new patient, high complexity).

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Review QuestionsWorkbook Chapter 7• 1. How can physician payments be adjusted for the price differences among

various parts of the country?• 2. What is the control mechanism the government uses on Medicare payments

to physicians and how is it applied?• 3. Describe at least two issues that delayed implementation of the APC

system for ambulatory surgical centers.• 4. What is the current status of the ASC PPS?• 5. How is the “two-times rule” applied to APC groups?• 6. When a patient is pronounced dead during ambulance transport, Medicare

payment rules are followed as if the patient were alive. True or false?• 7. CMS, not the APC Advisory Panel or MedPAC, makes the final ruling for

updates and changes to HOPPS. True or false?• 8. The number of APCs per encounter for a single patient is limited to 10.

True or false?• 9. Describe how observation services are currently reimbursed under HOPPS.• 10. What adjustments if any are used under HOPPS to account for cost

differences among facilities under HOPPS?

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Principles of Healthcare Reimbursement

Third Edition

Chapter 7Resource-Based Relative Value Scale for Physician Payments

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Objectives

• Outline the history and development of the Resource-Based Relative Value Scale (RBRVS) for Physician Payments

• Define key terms• Describe the structure of the payment system

• Calculate a payment under the RBRVS

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Resource-Based Relative Value Scale (RBRVS)

• Federal Payment System for Physicians across Continuum of Care

• System of Classifying Health Services

• Based on:– Cost of Furnishing Physician Services in Different Settings,

– Skills and Training Levels Required to Perform the Services, and

– Time and Risk Involved

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History of RBRVS

• Concept of Relative Value Scale (RVS) Dates from 1940s

• RVS Represents Worth of Healthcare Services

• Multiple Views of “Worth”– Historical Charges– Amt. Patients Will Pay

– Physicians’ Assessments of Worth

– Monetized Societal Good

– Micro-costing from Time & Motion Studies

– Etc.

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History of RBRVS (cont.)

• Consolidated Omnibus Reconciliation Act (COBRA) of 1985: HHS Directed to Develop RVS

• Purpose– Decrease Medicare Part B Payments

– Eliminate Inequities in Payments• Specialty• Type of Procedure• Geographic Locality• Service Site• Carrier Policies

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History of RBRVS (cont.)

• 1985 CMS Awarded Grant to Harvard, William Hsaio– RVS Research– 4,000 Services (85% of Medicare Payments)

• Omnibus Budget Reconciliation Act (OBRA) of 1989– CMS to Set Up System of Payment Reform

– RBRVS Adopted

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History of RBRVS (cont.)

• Jan. 1, 1992 RBRVS Effective (Phase-In Through 1996)

• Controlled Fee-for-Service System Based on CMS’s Estimation of Value of Physician Services (Not PPS)

• Services– Physician

• Medical/Surgical• Diagnostic• Radiologic• Physical & Occupational Therapy

– Physician Assistant– Nurse Practitioner– Nurse Midwife

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Structure of Relative Value Units (RVUs)

• HCPCS/CPT Codes Assigned Relative Value Units

• RVUs Permit Comparison of Resources by Assigning Weights to Personnel Time, Level of Skill, and Technology

• National Averages

• RVU Elements– Time & Intensity of Work (Physician Work, WORK)

– Cost of Practice (Physician Practice Expense, PE)

– Risk of Malpractice (MP)

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Structure of RVUs (cont.)

• WORK– Covers Physician’s Salary• Time

• Intensity– Mental Effort & Judgment

– Technical Skill– Physical Effort– Psychological Stress

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Structure of RVUs (cont.)

• PE– Overhead Costs of Practice• Office Rent• Wages of Nonphysician Personnel

• Supplies & Equipment

– Two Rates• Facility (Hospital, etc.) Lower

• Nonfacility (Physician Office) Higher

• MP– Cost of Premiums for Professional Liability (Malpractice) Insurance

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Payment Structure: GPCIs

• Geographic Practice Cost Index (GPCI)– Adjustment for Geographic Differences in Costs

– Each Element of RVU Has Unique GPCI•WORK•PE•MP

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Payment Structure: CF

• Conversion Factor (CF)– Converts RVU into Medicare Payment

– Conversion Factor is Across-the-Board Multiplier (Constant)

– CMS Determines Annually and Notifies in Federal Register

• Conversion Factor Most Direct Control on Medicare Payments– Raising or Lowering CF Increases or Decreases Medicare Payments to Physicians

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RBRVS Formula

• [(WORK RVU) (WORK GPCI) + (PE RVU) (PE GPCI) + (MP RVU) (MP GPCI)] = (SUM) X CF = Medicare Physician Fee Schedule (MPFS) Amount

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Generic Example: RBRVS (99202)

RVU X GPCI = WORK .88 1.00 .88 PE .79 0.925 .73075 MP .05 0.64 .032 RVU 1.64275 X CF $37.8975 $62.26

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Payment Structure

• Actual Payment– 80% of National Allowance– Medicare Beneficiaries Responsibility•Part B Deductible•20% Coinsurance

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Adjustments: Variation to RBRVS Formula

– Budget Neutrality (BN) Adjustor– Clinician Type

•Participating v. Nonparticipating•Anesthesiologists•Nonphysician Providers

– Special Circumstance– Underserved Area– Incentive for Quality– Technology

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Operations: RBRVS & Poor CPT Coding*

• 43200 Esophagoscopy– WORK 1.59 x 1.000 = 1.59

– PE 4.13 x 0.925 = 3.82025

– MP 0.13 x 0.64 = 0.832

– Sum = 5.49345 x CF $37.8975

– $208.19

• 43217 with Removal of Tumor, Polyp, or Lesion….– WORK 2.9, PE 6.95, MP 0.26 (GPCI Stays the Same)

– Sum = 9.49515 x CF $37.8975

– $359.84– Lost $121.65

*Nonfacility, Generic Example

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Future Issues

• Adoption of Electronic Health Record

• Correction of Overrides of Sustained Growth Rate

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Summary

• Payment System Specific to Physician Services across the Continuum of Care

• Accurate Coding Necessary for Appropriate Reimbursement

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Principles of Healthcare Reimbursement

Third Edition

Chapter 7Medicare-Medicaid Prospective Payment

Systems for Nonhospitalized Patients: Ambulance Fee Schedule

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Covered Services

• Medicare Part B provides beneficiary coverage for ambulance services– Will provide transport service, only if other means are

inadvisable based on the beneficiary’s medical condition

– Provided to the nearest facility that is able to provide services for that patient’s condition

– Transported• From one hospital to another

• To home

• To an extended care facility

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History

Two types of ambulance service entities1. Providers: Associated with a medical facility

such as a hospital, CAH, SNF, or HHA– Retrospective reasonable cost payment

– Previous year’s cost-to-charge ratio (CCR)

2. Suppliers: Not associated with a medical facility

– Reasonable charge payment mechanism– Fours ways to report ambulance services

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History (cont.)

• Both types used HCPCS Code Set– Providers

• A0030–A0999, excluding A0888 (ambulance codes)

• And codes to report type of mileage

– Suppliers• A0030-A0999, excluding A0888

• Level I codes 93005 and 93041

• Various other Level II codes

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Legislation

• BBA of 1997– Added section 1834(1) to the SSA

– Required the creation of a fee schedule to establish prospective payment rates for ambulance services

– Devised through negotiated rulemaking (Negotiated Rulemaking Act of 1990)

• Negotiated Rulemaking Committee on Medicare Ambulance Services Fee Schedule

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Legislation (cont.)

• The committee was instructed to:– Control Medicare expenditures through PPS– Establish service definitions to link payment to the type

of service– Consider regional and operational differences– Consider inflation– Construct a phase-in period for implementation– Require providers and supplier to accept Medicare

assignment– Reimburse providers and suppliers at the lower of FS

or billed charges

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Legislation (cont.)

• BBA (cont.)– Established the paramedic intercept service

type (discussed under levels of service)

• BBRA of 1999– Modified the definition of rural for the

paramedic intercept service type

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Legislation (cont.)

• BIPA of 2000– Excluded CAH from the fee schedule payment

methodology when the CAH is the only supplier or provider of ambulance services within a 35 mile drive.

• Reasonable cost basis

– Increased payment rates for rural ambulance mileage

– Modified inflation factor for 7/1/01 to 12/31/01• Increased 2%

– Eliminated blended payment rate for mileage phase-in provision for suppliers

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Ambulance FS

• Implemented April 1, 2002

• Five year phase-in plan

• Reimbursement is based on the level of service provided to the beneficiary– Seven levels of service

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Provisions

• Immediate response payment– Emergency response involves responding

immediately at the basic life support or advanced life support level 1 of service to a 911 or 911-type call

– Immediate response is one in which the ambulance begins as quickly as possible to take the steps necessary to respond to a call

• Additional payment is provided for the extra overhead expenses incurred to stay prepared at all times for emergency service

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Provisions (cont.)

• Multiple-patient transport – Example: traffic accident

– 2 passengers• Each beneficiary is reimbursed at 75% of the base rate for the

level of service provided

– 3 or more passengers• Each beneficiary is reimbursed at 60% of the base rate for the

level of service provided

– Single payment is made for the mileage

– Modifier GM is reported with level of service HCPCS code

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Provisions (cont.)

• Transport of deceased patients– Specific rules

• Patient is pronounced dead prior to the ambulance being called, no payment is made to the ambulance provider/supplier

• Patient is pronounced dead after the ambulance has been called but prior to its arrival, BLS base rate for group transport or air ambulance base rate payment will be made. Mileage will not be reimbursed.

• Patient is pronounced dead during transport, payment rules are followed as if the patient were alive. Modifier QL should be reported with the level of service code.

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Adjustments

• Regional variations– Based on point of beneficiary pick-up (zip code)

– Geographic adjustment factor is applied• Equal to the practice expense portion of the geographic practice

cost index used in the Medicare physician fee schedule

– Ground transport• 70% of payment rate is adjusted

– Air transport• 50% of payment rate is adjusted

– Mileage is not adjusted

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Modifiers

• HCPCS Level II modifiers– Origin and destination modifier must be

reported for each trip– Additional modifiers are used

• Provided under arrangement of a provider of services (QM)

• Furnished directly by a provider of services (QN)

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Payment Steps

• Six step process– Takes into consideration

• Patient service level

• Modifiers

• Zip codes

• Miles

• Add-on payments

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Payment Steps (cont.)

1. Identify the level of service code for the transportation provided

• Does the case meet emergency response criteria?

2. Determine the number of patients transported

• If yes, append modifier and reduce payment

3. Determine if the Medicare beneficiary was pronounced dead

• If yes, append modifier and adjust payment

4. Apply the regional variation adjustment• Identify zip code

5. Identify the mileage code and number of miles

6. Add together the level of service payment and mileage payment to determine total reimbursement

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Compliance

• “Medicare Payments for Ambulance Transports” report– 25% of the ambulance transport claims did not meet

CMS program requirements – deficient claims resulted in $402 million of improper

payments

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Compliance

• OIG recommendations:– Prepayment edits– Post-payment review guidelines– Education, education, education

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Condition Lists

• Numerous requests for medical condition lists to aid in determining level of service– Do not use ICD-9-CM– Broad categories of issues– Do not use a HIPAA approved code set

• CMS implemented a Medical Conditions List February 2007– Condition list– Transportation indicators

• Assist with determining the appropriate level of service

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Principles of Healthcare Reimbursement

Third Edition

Chapter 7Medicare-Medicaid Prospective Payment Systems for Nonhospitalized Patients: Hospital Outpatient Prospective Payment

System

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Objectives

• Describe the Hospital Outpatient Prospective Payment System

• Identify the components, adjustments, and provisions of the APC system

• Recall the steps for APC assignment

• Recall the Payment determination steps for HOPPS payment

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Hospital Outpatient Prospective Payment System

• Hospital outpatient services– Clinic

– Emergency department

– Ambulatory surgery unit• NOT free-standing ambulatory surgery centers (ASCs)

– Effective period• January 1 – December 31

– Calendar year (CY)

• Updated yearly

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Legislation

• Legislative background– Omnibus Reconciliation Act (OBRA) of 1986

• Mandated that Medicare must move to a prospective payment system for hospital outpatient services

– The following requirements were provided:• Hospitals must report procedures using the Healthcare Common

Procedure Coding System (HCPCS)– CPT– HCPCS Level II

• The PPS must be developed by 1991 and should only include facility costs

• The system must exclude any professional charges for healthcare providers

– Physician charges

• What was the motivation to move to a prospective system?

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Principles of Healthcare Reimbursement

Third Edition

Chapter 7Medicare-Medicaid Prospective Payment Systems for Nonhospitalized Patients: Ambulatory Surgical Center Prospective

Payment System

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Objectives

• Describe the Ambulatory Surgical Center Prospective Payment System

• Identify the components, adjustments, and provisions of the ASC PPS

• Recall the payment determination steps for ASC payment

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Ambulatory Surgical Centers

• Ambulatory surgical centers (ASCs)– Provide designated surgical services to

Medicare beneficiaries– Under Medicare supplementary medical

insurance program (Part B)– Facility must be Medicare certified

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Ambulatory Surgical Centers

• Medicare-certified criteria– Separate entity

– Have own national identifier or supplier number

– Maintain own licensure, accreditation, governance, professional supervision, administrative functions, clinical services, record keeping, and financial accounting systems

– Sole purpose of delivering services in connection with surgical procedures not requiring inpatient admission

– Meet all requirement of applicable sections of SSA