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1 ZIMMET HEALTHCARE SERVICES GROUP, LLC, 2017 ZIMMET HEALTHCARE 2017 LeadingAge New York Financial Professionals 2017 Medicare PPS Payment System Reform: Introduction to Resident Classification System - I ZIMMET HEALTHCARE 2017 Problem with Current PPS Mispriced therapy – especially at Ultra High level Incentive to “treat to the minutes” Does not recognize comorbidities Non-therapy ancillary costs poorly accounted for Flawed nursing time studies ADL inconsistencies & inversions Not conducive to accurate benchmarking Minimizes relevance of the Medicare claim as analytics tool The result is a hyper-active audit environment predicated almost exclusively on “Necessity” of therapy services

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Reforming Healthcare ReformZIMMET HEALTHCARE 2017
LeadingAge New York
Financial Professionals 2017
Introduction to Resident Classification System - I
ZIMMET HEALTHCARE 2017
• Incentive to “treat to the minutes”
• Does not recognize comorbidities
• Flawed nursing time studies
• Minimizes relevance of the Medicare claim as analytics tool
The result is a hyper-active audit environment predicated
almost exclusively on “Necessity” of therapy services
2ZIMMET HEALTHCARE SERVICES GROUP, LLC, 2017
ZIMMET HEALTHCARE 2017
• 2015 improper payment rate = 12.09% ($43.3B)
• 2016 improper payment rate = 11.08% ($41.1B)
• 2016 “Improper” SNF payments = $2.8B
• Insufficient documentation and coding errors
• Up 60% from 2014’s improper payment rate • https://www.cms.gov/Research-Statistics-Data-and-Systems/
Concentration remains on Rehab Ultra High (RU)
CMS orders auditing by Supplemental MR Contractor (April 2017)
WPS MAC starts pre-pay review of RU (April 2017)
ZPICs extrapolating therapy denial % for $ million+ recoupments
SNFs routinely being held accountable for actions of their contractors
ZIMMET HEALTHCARE 2017
Recent Therapy Settlements
• Extendicare: $32M for medically unreasonable and unnecessary
therapy services (plus $6M to 8 state Medicaid programs) (2015)
• Manor Care: Whistleblower suit re: unnecessary therapy ongoing
• Life Care Centers: $145M for unwarranted therapy (2016)
• DOJ: “Life Care carefully tracked the minutes of therapy provided
to each patient and number of days in therapy…”
• Regional operators also targeted: Ohio: $19.5M (2017);
Boston: $2.5M (2016); Missouri: $8.4M (2017)
3ZIMMET HEALTHCARE SERVICES GROUP, LLC, 2017
ZIMMET HEALTHCARE 2017
ZHSG Audit / Investigations
• Midwest Region: OIG shows up a MDSC house and asks questions about R&N, keeping patients on at specific therapy levels
• Mid-Atlantic Region: Medium size multi-state chain under ZPIC scrutiny for one facility, but quickly expands to dozens (all therapy related)
• Northeast Region: OIG investigating marketing and operating issues of a national contract therapy company – asks SNF for all marketing material used by the company
• Southern Region: Medium size, one-state “in-house” chain under ZPIC for whistleblower relating to excessive therapy (even though their RUGs were below average)
• Southwest Region: OIG penalizes single provider for productivity and RUG level mandates
ZIMMET HEALTHCARE 2017
• IMPACT Act mandated MedPAC to outline a unified payment system
that would replace the four current post-acute care Medicare
payment systems (SNF, HHA, IRF, LTCH)
• Objective is to base payment on patient characteristics rather than setting or
amount of therapy furnished (significant redistribution of PAC dollars)
• IMPACT Timeline: Propose system by 2023, then implement
• MedPAC demonstrated that the system is highly feasible & accurate;
recommends implementation in 2021 with 3-year optional phase-in
• See June 2017 MedPAC Report to Congress, chapter 1 for details
RCS is NOT the Unified Post-Acute Payment System
4ZIMMET HEALTHCARE SERVICES GROUP, LLC, 2017
ZIMMET HEALTHCARE 2017
• Advanced Notice of Proposed Rulemaking (5/4/17; CMS-1686)
• Public comment period extended from June 26 to August 25, 2017
• Based on extensive research and TEPs (revisions are likely)
• Target date is October 1, 2018
• Likelihood of implementation?
• No mention of “phase-in”
ZIMMET HEALTHCARE 2017
• “Focus on reducing administrative burden for providers”
• MDS remains basis for rate setting, but the 5-day locks the composite score
for the entire benefit period (assuming no discharges or sig. changes)
• Current assessment schedule is eliminated, including COTOs
• Sets up benchmarking mechanism from admission – discharge
• Recognizes disproportionate costs during first days of stay
• Frequency / Amount of therapy does not impact reimbursement
• Therapy is “just another component of the care plan” –
Nursing acuities and Diagnosis coding drive revenue
About RCS-I
ZIMMET HEALTHCARE 2017
• Therapy, Nursing (including NTAs) and Overhead
• Blended into one of 66 distinct per diem rates
• RCS includes 5 distinct, variable rate components:
• PT/OT (30 categories)
• SLP (18 categories)
• Nursing (43 RUGs)
Per Diem RUG
1
Composite
Each component has its own
grouping process using
different variables and
6ZIMMET HEALTHCARE SERVICES GROUP, LLC, 2017
ZIMMET HEALTHCARE 2017
• 10 “Clinical Categories” capture the “range of general resident
types” found in SNFs
•DRG “Mapping”
Surgery
Medical Management
Other Orthopedic
Surgery
Surgery
ZIMMET HEALTHCARE 2017
Other Orthopedic
Medical Management
Non-Orthopedic Surgery
Acute Neurologic
14 – 18
8 – 13
0 – 7
Cognitive: C Cognitive Function Scale
All patients score in one PT/OT group no matter if they receive therapy (or how much)
ZIMMET HEALTHCARE 2017
PT/OT Functional Score
• Transfers, Eating and Toileting Self-Performance scores only
• Each ADL scored on a 0 – 6 scale; (v. 4 in RUG-IV)
• 0 – 18 point range
• Higher point totals increase reimbursement but are not linearly correlated with functional performance changes
• “Points assigned to each response mirror the inverse U-shape of the dependence-cost curve for the transfer and toileting items and the monotonic decrease in costs associated with increasing dependence on the eating item.”
8ZIMMET HEALTHCARE SERVICES GROUP, LLC, 2017
ZIMMET HEALTHCARE 2017
ZIMMET HEALTHCARE 2017
ZIMMET HEALTHCARE 2017
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PT/OT Cognitive Function
• Combines Brief Interview for Mental Status (BIMS) and Cognitive Performance Score (CPS) into one scale
10ZIMMET HEALTHCARE SERVICES GROUP, LLC, 2017
ZIMMET HEALTHCARE 2017
ZIMMET HEALTHCARE 2017
Clinical Category (2)
MDS Section
Clinical: I8000 Sw Dis: K0100Z MA Diet: K0510C2 Comorb: Misc. Cognitive: C (CFS)
All patients score in one SLP group no matter if they receive therapy (or how much)
Acute Neurologic
Non- Neurologic
ZIMMET HEALTHCARE 2017
SLP Related Comorbidities
ZIMMET HEALTHCARE 2017
12ZIMMET HEALTHCARE SERVICES GROUP, LLC, 2017
ZIMMET HEALTHCARE 2017
Nursing Case-Mix Classification
• 43 “nursing RUGs”
• RUG-IV Reimbursement drivers, ADL scoring & splits and hierarchy remain intact
• Minus Rehab RUGs
• Triggered by ICD-10 code B20 on the UB-04
See handout for complete listing of case-mix groups and comparison of RUG-IV to RCS CMI weights
ZIMMET HEALTHCARE 2017
NTA Group Classification
• Non-Therapy Ancillaries
• Based on the number of services and conditions: • When did it occur?
• Crosswalk considered for conditions & services where the source is indicated as MDS item I8000 to the ICD-10-CM codes
See handout for complete listing of NTA service / condition drivers and related Points
13ZIMMET HEALTHCARE SERVICES GROUP, LLC, 2017
ZIMMET HEALTHCARE 2017
ZIMMET HEALTHCARE 2017
• 5-day MDS (ARD 1 – 8) establishes Composite for the entire
benefit period with limited exceptions
• Significant Change / Readmissions
• Multiply each Base Rate by respective CMI weight
• “Variable Per Diem Adjustment Factors”
• PT/OT and NTA components decrease as the benefit period
progresses (see handout for detail on Base Rates & VPDA)
14ZIMMET HEALTHCARE SERVICES GROUP, LLC, 2017
ZIMMET HEALTHCARE 2017
• SCSA would change the resident’s RCS-I classification but NOT
reset Variable per diem adjustment schedule
• Interrupted Stay Policy:
• Resident discharged from SNF and returns to same SNF within 3
calendar days: Stay is treated as a “continuation” for purposes of RCS
classification and VPDA
• Resident readmitted to the same SNF more than 3 calendar days after
discharge, or in any case where resident is readmitted to a different
SNF: Resident receives a new 5-day; RCS and VPDA are reset to Day 1
• PPS Discharge Assessment required (CMS to add items to track
therapy minutes over the course of a resident’s stay)
ZIMMET HEALTHCARE 2017
• “Rationing” therapy (too little?)
• ADL scoring
• Justification for Significant Change assessments
• Technical Eligibility (OIG: 3-day stay within 30 days of SNF admit)
• DRG – ICD-10 assignment (“Mapping”)
Possible RCS Audit Scope
ZIMMET HEALTHCARE 2017
• 757 active MS-DRGs in 2017
• Medicare Severity – Diagnosis Related Group:
• The system of clinically classifying a Medicare patient’s hospital stay into groups in order to set payment
• Diagnoses drive variable RCS components
• Link to MDS: ICD-10 Coding
• Section I8000: Primary reason for SNF stay
• Secondary & Tertiary codes
ZIMMET HEALTHCARE 2017
RCS Operations Implications
• Target length of stay
• Financial modeling / revenue projections
• Hospital-based resurgence?
• Assessment burden – MDS staffing & qualifications • No margin for error on 5-day
• We need “New Analytics”
ZIMMET HEALTHCARE 2017
Therapy Implications
• No treatment minimums, but ANPRM specifies limits of 25% each for Concurrent and Group of whatever formal therapy is provided
• No RUG / COTO management
• Development of therapy-centric programs under the direction of licensed staff (Activities, Restorative Nursing)
• Alternative modalities (Acupuncture, Therapeutic Massage, Chiropractic)
• Outsource v. In-House management considerations: • “Pricing” therapy component: no direct link to reimbursement may
incentivize over/under-utilization depending on contract structure
• Reconciling Dx to need, inverse ADL / Cognitive revenue issues
ZIMMET HEALTHCARE 2017
RCS Reimbursement Implications
• Comparison to RUG-IV transition projections
• Changes in Provider behavior
• Realizable value of non-therapy payment drivers • Reimbursement-sensitivity & documentation requirements
• Diagnosis mapping & coding
• Timing of NTA drivers
ULTRA HIGH 11 - 16 Extensive Services qualifier RUX $812.97
Tx. 720 mins. a week minimum 2 - 10 Extensive Services qualifier RUL $795.25
2-3 disciplines: one 5+days, one 3+ days 11 - 16 RUC $616.32
6 - 10 RUB $616.32
0 - 5 RUA $515.34
VERY HIGH 11 - 16 Extensive Services qualifier RVX $723.61
Tx. 500 mins. a week minimum 2 - 10 Extensive Services qualifier RVL $649.20
At least 1 discipline - 5 days 11 - 16 RVC $528.73
6 - 10 RVB $457.87
0 - 5 RVA $456.10
HIGH 11 - 16 Extensive Services qualifier RHX $655.60
Tx. 325 mins. a week minimum 2 - 10 Extensive Services qualifier RHL $584.73
1 discipline, 5 days a week 11 - 16 RHC $460.72
6 - 10 RHB $414.66
0 - 5 RHA $365.06
MEDIUM 11 - 16 Extensive Services qualifier RMX $601.40
Tx. 150 mins. a week minimum 2 - 10 Extensive Services qualifier RML $551.79
5 distinct days across 3 disciplines 11 - 16 RMC $404.75
6 - 10 RMB $379.95
0 - 5 RMA $312.62
LOW 2 - 16 Extensive Services qualifier RLX $528.16
3 + days Tx / 45 min/wk; >5 days; >1 activity 11 - 16 RLB $393.52
0 - 10 RLA $253.56
Tracheostomy care AND ventilator/respirator 2 - 16 Not Used ES3 $742.23
Tracheostomy care OR ventilator/respirator 2 - 16 Not Used ES2 $581.02
Isolation for active infectious disease 2 - 16 Not Used ES1 $519.01
SPECIAL CARE HIGH
Any of the following conditions: 15 - 16 PHQ Depression HE2 $501.30
Comatose; Septicemia; Diabetes w/ daily inj. & insulin order change 15 - 16 HE1 $416.26
on 2 or more days; Quadriplegia with ADL score ≥ 5; 11 - 14 PHQ Depression HD2 $469.41
Chronic obstructive pulmonary disease and shortness of breath 11 - 14 HD1 $391.46
when lying flat; Fever with pneumonia, Vomiting, Tube feed 6 - 10 PHQ Depression HC2 $442.83
or Weight loss; Parenteral/IV feedings; 6 - 10 HC1 $370.20
Respiratory therapy for 7 days 2 - 5 PHQ Depression HB2 $437.52
Depression split qualifier: PHQ score ≥ 10 2 - 5 HB1 $366.65
MEDICARE PART A SNF PROSPECTIVE PAYMENT SYSTEM MDS 3.0 Captured Services as Qualifiers for Medicare Part A RUG-IV Grouper
Base Rates Urban END
Unadjusted AWI = 1.0000 SPLITS
ADL 10/1/2017
INDEX RUG 9/30/2018
MEDICARE PART A SNF PROSPECTIVE PAYMENT SYSTEM MDS 3.0 Captured Services as Qualifiers for Medicare Part A RUG-IV Grouper
Base Rates Urban END
Unadjusted AWI = 1.0000 SPLITS
SPECIAL CARE LOW
Any of the following conditions: 15 - 16 PHQ Depression LE2 $455.23
Cerebral palsy, Multiple sclerosis, or Parkinson’s disease with ADL 15 - 16 LE1 $380.83
score ≥ 5; Feeding tube (calories ≥ 51% or 26-50% & fluid ≥ 501cc); 11 - 14 PHQ Depression LD2 $437.52
2 or more Stage II or 1 or more III or IV pressure ulcer; 2 or more 11 - 14 LD1 $366.65
skin Tx w/ 2 or more ven/art ulcers; or 1 Stage 2 PU & 1 venous/arterial ulcer 6 - 10 PHQ Depression LC2 $384.37
foot infection/diabetic foot ulcer/open lesions of foot with treatment; 6 - 10 LC1 $324.14
Radiation therapy while a resident; Oxygen therapy w/ respiratory failure 2 - 5 PHQ Depression LB2 $364.88
while a resident; Dialysis while a resident 2 - 5 LB1 $309.96
CLINICALLY COMPLEX
Extensive Services, Special Care High or Special Care Low qualifier 15 - 16 PHQ Depression CE2 $405.63
and ADL score of 0 or 1; OR 15 - 16 CE1 $373.74
Pneumonia; hemiplegia with ADL score ≥ 5; 11 - 14 PHQ Depression CD2 $384.37
Surgical wounds or open lesions with treatment; burns; 11 - 14 CD1 $352.48
Chemotherapy while a resident; 6 - 10 PHQ Depression CC2 $336.54
IV medications while a resident; 6 - 10 CC1 $311.73
Transfusions while a resident 2 - 5 PHQ Depression CB2 $311.73
Oxygen therapy while a resident 2 - 5 CB1 $288.70
Depression split qualifier: PHQ score ≥ 10 0 - 1 PHQ Depression CA2 $263.90
0 - 1 CA1 $246.18
BEHAVIORS & COGNITIVE PERFORMANCE
Cognitive impairment BIMS score ≤ 9 or CPS ≥ 3 OR 2 - 5 Nursing Rehabilitation BB2 $279.85
Hallucinations or delusions OR Physical or verbal behavioral symptoms 2 - 5 BB1 $267.44
toward others, Other behavioral symptoms, Rejection of care, or Wandering 0 - 1 Nursing Rehabilitation BA2 $232.01
See Reduced Physical Function for restorative nursing services 0 - 1 BA1 $221.38
PHYSICAL FUNCTION REDUCED
No clinical variables used 15 - 16 Nursing Rehabilitation PE2 $373.74
15 - 16 PE1 $356.02
Restorative nursing services: 11 - 14 Nursing Rehabilitation PD2 $352.48
2 or more restorative nursing on 6+ days/wk 11 - 14 PD1 $334.76
Urinary and/or bowel training program, 6 - 10 Nursing Rehabilitation PC2 $302.88
Passive or Active ROM, amputation/prosthesis care training, 6 - 10 PC1 $288.70
Splint or brace assistance, Dressing or grooming training, 2 - 5 Nursing Rehabilitation PB2 $256.81
Eating or swallowing training, Transfer training, 2 - 5 PB1 $246.18
Bed mobility and/or walking training, Communication training 0 - 1 Nursing Rehabilitation PA2 $212.52
0 - 1 PA1 $203.67
DEFAULT Resident is clinically eligibility but no valid MDS record; technical violations, etc. AAA $203.67
NOTE: Rates are NOT net of sequestration.
Zimmet Healthcare Services Group, LLC
RCS-I Impact Projections
Winner Change Loser Change
Resident Characteristics
Length of SNF stay 1 - 15 days 15.9% 31+ days   -2.5%
Length of qualifying H stay 31+ days   4.6% 3 days   -2.3%
Cognitive impairment Severe   6.1% Moderate   -1.8%
HIV diagnosis No   0.2% Yes -40.0%
IV meds during stay Yes 22.9% No   -2.0%
Wound infection With 17.9% Without   -0.4%
Therapy services 1 therapy only 37.3% Receiving 3 types   -3.9%
NTA cost $150+ / day 19.2% $10 - $50 / day   -3.2%
Tracheostomy Receiving 18.1% - -
Ownership status Non-profit   3.1% For-profit   -1.1%
Institution type Hospital-based 15.8% - -
Compiled by Zimmet Healthcare
from Advance Notice of Proposed Rulemaking: CMS-1686-ANPRM
PT/OT Case-Mix Classification Groups
8 - 13 Yes TD 1.45
0 - 7 No TE 1.68
0 - 7 Yes TF 1.36
Other Orthopedic 14 - 18 No TG 1.70
14 - 18 Yes TH 1.55
8 - 13 No TI 1.58
8 - 13 Yes TJ 1.39
0 - 7 No TK 1.38
0 - 7 Yes TL 1.14
Acute Neurologic 14 - 18 No TM 1.61
14 - 18 Yes TN 1.48
8 - 13 No TO 1.52
8 - 13 Yes TP 1.36
0 - 7 No TQ 1.47
0 - 7 Yes TR 1.17
Non-Orthopedic 14 - 18 No TS 1.57
Surgery 14 - 18 Yes TT 1.43
8 - 13 No TU 1.38
8 - 13 Yes TV 1.17
0 - 7 No TW 1.11
0 - 7 Yes TX 0.80
Medical 14 - 18 No T1 1.55
Management 14 - 18 Yes T2 1.39
8 - 13 No T3 1.36
8 - 13 Yes T4 1.17
0 - 7 No T5 1.10
0 - 7 Yes T6 0.82
Compiled by Zimmet Healthcare
from Advance Notice of Proposed Rulemaking: CMS-1686-ANPRM
SLP Case-Mix Classification Groups
Case-Mix
Both Either SB 3.71
Both Neither SC 3.37
Either Both SD 3.67
Either Either SE 3.12
Either Neither SF 2.54
Neither Both SG 2.97
Neither Either SH 2.06
Neither Neither SI 1.28
Both Either SK 2.96
Both Neither SL 2.63
Either Both SM 2.62
Either Either SN 2.22
Either Neither SO 1.70
Neither Both SP 1.91
Neither Either SQ 1.38
Neither Neither SR 0.61
2. SLP related comorbidity or moderate to severe cognitive impairment
Aphasia Laryngeal Cancer
Hemiplegia or Hemiparesis Dysphagia
Traumatic Brain Injury ALS
Ventilator (while Resident) Speech and Language Deficits
SLP Related Comorbidities
from Advance Notice of Proposed Rulemaking: CMS-1686-ANPRM
Nursing Case-Mix Classification Groups and CMI Weights
GROUP RUG-IV RCS GROUP RUG-IV RCS
ES3 3.58 3.84 CD1 1.38 1.51
ES2 2.67 2.90 CC2 1.29 1.49
ES1 2.32 2.77 CC1 1.15 1.30
HE2 2.22 2.27 CB2 1.15 1.37
HE1 1.74 2.02 CB1 1.02 1.19
HD2 2.04 2.08 CA2 0.88 1.03
HD1 1.60 1.86 CA1 0.78 0.89
HC2 1.89 2.06 BB2 0.97 1.05
HC1 1.48 1.84 BB1 0.90 0.97
HB2 1.86 1.88 BA2 0.70 0.74
HB1 1.46 1.67 BA1 0.64 0.68
LE2 1.96 1.88 PE2 1.50 1.60
LE1 1.54 1.68 PE1 1.40 1.47
LD2 1.86 1.84 PD2 1.38 1.48
LD1 1.46 1.64 PD1 1.28 1.36
LC2 1.56 1.55 PC2 1.10 1.23
LC1 1.22 1.39 PC1 1.02 1.13
LB2 1.45 1.48 PB2 0.84 0.98
LB1 1.14 1.32 PB1 0.78 0.90
CE2 1.68 1.84 PA2 0.59 0.68
CE1 1.50 1.60 PA1 0.54 0.63
CD2 1.56 1.74
from Advance Notice of Proposed Rulemaking: CMS-1686-ANPRM
Non-Therapy Ancillary Scoring / Groups
HIV/AIDS SNF Claim Ultra-High 8
Parenteral/IV Feeding - High (> 50% of cal) MDS Item K0510A2 Very-High 7
Parenteral/IV Feeding - Low (25-50% of cal) MDS Item K0710A2, K0710B2 High 5
Average fluid intake by IV or tube feeding of at least 501cc per day
IV Medication MDS Item O0100H2 High 5
Ventilator / Respirator MDS Item O0100F2 High 5
Transfusion MDS Item O0100I2 Medium 2
Kidney Transplant Status MDS Item I8000 Medium 2
Opportunistic Infections MDS Item I8000 Medium 2
Infection with multi-resistant organisms MDS Item I1700 Medium 2
Cystic Fibrosis MDS Item I8000 Medium 2
Multiple Sclerosis (MS) MDS Item I5200 Medium 2
Major Organ Transplant Status MDS Item I8000 Medium 2
Tracheostomy MDS Item O0100E2 Medium 2
Asthma, COPD, Chronic Lung Disease MDS Item I6200 Medium 2
Chemotherapy MDS Item O0100A2 Medium 2
Diabetes Mellitus (DM) MDS Item I2900 Medium 2
End-Stage Liver Disease MDS Item I8000 Low 1
Wound Infection (other than foot) MDS Item I2500 Low 1
Transplant MDS Item I8000 Low 1
Infection Isolation MDS Item O0100M2 Low 1
MRSA MDS Item I8000 Low 1
Radiation MDS Item O0100B2 Low 1
Diabetic Foot Ulcer MDS Item M1040B Low 1
Bone / Joint / Muscle Infections / Necrosis MDS Item I8000 Low 1
Highest Ulcer Stage is Stage 4 MDS Item M300D1 Low 1
Osteomyelitis and Endocarditis MDS Item I8000 Low 1
Suctioning MDS Item O0100D2 Low 1
DVT / Pulmonary Embolism MDS Item I8000 Low 1
Range Group CMI
11+ NA 3.33
from Advance Notice of Proposed Rulemaking: CMS-1686-ANPRM
Variable Per Diem Adjustment & Base Rates
Day Factor Day Factor
18 - 20 0.98
21 - 23 0.97
24 - 26 0.96
27 - 29 0.95
30 - 32 0.94
39 - 41 0.91 SLP $24.14
42 - 44 0.90 Nursing $100.91
45 - 47 0.89 NTA $76.12
48 - 50 0.88 Non-Case Mix $90.35
51 - 53 0.87
54 - 56 0.86
63 - 65 0.83 SLP $31.06
66 - 68 0.82 Nursing $96.40
69 - 71 0.81 NTA $72.72
72 - 74 0.80 Non-Case Mix $92.02
75 - 77 0.79
78 - 80 0.78
81 - 83 0.77
84 - 86 0.76
87 - 89 0.75
90 - 92 0.74
93 - 95 0.73
96 - 98 0.72
99 - 100 0.71
PT / OT NTA