medicare inpatient hospital payment: what changes can your hospital expect?
TRANSCRIPT
![Page 1: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/1.jpg)
Medicare Inpatient Hospital Payment:
What Changes Can Your Hospital
Expect?
Medicare Inpatient Hospital Payment:
What Changes Can Your Hospital
Expect?
![Page 2: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/2.jpg)
Claudia SandersSr. Vice President Policy DevelopmentWSHA
PresentersPresenters
Caroline SteinbergVice PresidentTrends AnalysisAHA
Will CallicoatDirector Financial PolicyWSHA
![Page 3: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/3.jpg)
TopicsTopics
• Why are Hospitals Concerned?
• Background
• Severity Adjustment Systems
• Overall Impact
• Policy Options
• Impact on Washington Hospitals
• Questions
![Page 4: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/4.jpg)
Why Are Hospitals Concerned?
Why Are Hospitals Concerned?
![Page 5: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/5.jpg)
Why Are Hospitals Concerned?Why Are Hospitals Concerned?
• Medicare as major payer
• Specialty hospitals and proper payment– Prevent cream skimming
– Appropriate payment by service
• Predictability for future decisions
• Transitions
![Page 6: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/6.jpg)
Many Changes In Proposed RuleMany Changes In Proposed Rule
• Operating payment update
• Wage index
• New DRG system
• Cuts for Behavioral Offset
• Continuation of transition to cost based weights
• Capital cuts
• Quality requirements
![Page 7: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/7.jpg)
BackgroundBackground
![Page 8: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/8.jpg)
MedPAC Report to CongressMedPAC Report to Congress
• Opportunity for patient selection– Some services pay better than others– Current system doesn’t adequately
adjust for severity of illness Strong evidence physician-owned
limited-service hospitals benefit “Improving payment accuracy” will
make competition more equitable
![Page 9: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/9.jpg)
MedPAC RecommendationsMedPAC Recommendations
• Use hospital specific relative values to set DRG weights
• Use All Patient Refined DRGs (APR-DRGs)
• Base DRG weights on costs • Use DRG specific outlier offsets to
fund outlier pool
![Page 10: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/10.jpg)
Last Year’s Proposed RuleLast Year’s Proposed Rule
• New DRG Weights (FY 2007)– Cost-based weights vs. charge-based
weights
• New DRG Classifications (FY 2008 or earlier)– Consolidate severity-adjusted DRGs – Refine DRG weights based on
severity of illness
![Page 11: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/11.jpg)
Last Year’s Final RuleLast Year’s Final Rule
• New DRG weights (FY 2007)– Used cost-based weights – Altered methodology – Fixed mathematical errors– Three year transition
• Modest changes in DRG classifications (FY 2007)– Added 20 new DRGs, deleted 8,
and modified 32
![Page 12: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/12.jpg)
This Year’s (FY 2008) Proposed Rule This Year’s (FY 2008) Proposed Rule
• Continues transition to cost-based weights– Moves from 1/3 to 2/3 cost-based blend– No methodological changes
• Adopts Medicare Severity-adjusted DRGs (MS-DRGs)– Moves from 538 DRGs to 745 MS-DRGs
• Cuts base payment rate by 2.4% in FY 2008 and FY 2009 – “behavioral offset”– Eliminates effect of coding changes on case
mix
![Page 13: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/13.jpg)
Severity Adjustment Systems
Severity Adjustment Systems
![Page 14: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/14.jpg)
Severity Adjustment in the Current Payment SystemSeverity Adjustment in the Current Payment System
• Paired DRGs with and without complications and comorbidities (335 base/538 total)
• New DRGs added over time to capture greater complexity (e.g. bilateral hip replacement)
![Page 15: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/15.jpg)
What Alternatives Are Being Considered?What Alternatives Are Being Considered?
• MedPAC: All-Patient Refined DRGs
• CMS (FY 2007 Proposed Rule): Consolidated Severity-adjusted DRGs
• CMS (FY 2008 Proposed Rule): Medicare Severity-adjusted DRGs
![Page 16: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/16.jpg)
APR-DRGs(MedPAC Recommendation)APR-DRGs(MedPAC Recommendation)
• 1258 All Patient Refined DRGs (APR-DRGs)– 270 base and 863 severity-adjusted
DRGs
• Up to four tiers of payment
• Complicated multi-step process for assigning APR-DRG assignment
![Page 17: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/17.jpg)
CS-DRGs: Last Year’s FY 2007 Proposed RuleCS-DRGs: Last Year’s FY 2007 Proposed Rule
• Starts with APR-DRGs
• Adapts to suit Medicare population
• Consolidates APR-DRGs by having 3 severity of illness subclasses off a base DRG and a single subclass off each major diagnostic category
• More aggressive consolidation where volumes are low
• Results in 861 CS-DRGs
![Page 18: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/18.jpg)
CS-DRGs: Issues Identified in CommentsCS-DRGs: Issues Identified in Comments
• Uses proprietary grouper– Logic is not transparent
– Logic is proprietary
• Does not build on current DRGs– Does not recognize recent refinements
of DRGs to capture complexity
![Page 19: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/19.jpg)
MS-DRGs: This Year’s FY 2008 Proposed RuleMS-DRGs: This Year’s FY 2008 Proposed Rule
• Rooted in current DRG system
• Up to three tiers of payments– A major complication or comorbidity
– A complication or comorbidity
– No complication or comorbidity
• 745 MS-DRGs
![Page 20: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/20.jpg)
Example: Current DRG AssignmentExample: Current DRG Assignment
Principal Principal DiagnosisDiagnosis
Simple Simple Pneumonia and Pneumonia and
PleurisyPleurisyAgeAge
Comorbidities Comorbidities and/or and/or
ComplicationsComplications
DRG 91DRG 91Simple Pneumonia & Simple Pneumonia & Pleurisy Age 0 - 17Pleurisy Age 0 - 17
17 and 17 and UnderUnder
18 and Over18 and Over
YesYes NoNo
DRG 90DRG 90Simple Pneumonia & Simple Pneumonia &
Pleurisy Age>17 Pleurisy Age>17 Without CCWithout CC
DRG 89DRG 89Simple Pneumonia & Simple Pneumonia & Pleurisy Age>17 With Pleurisy Age>17 With
CCCC
![Page 21: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/21.jpg)
Example: MS-DRG Assignment*Example: MS-DRG Assignment*Principal Principal DiagnosisDiagnosis
Simple Simple Pneumonia and Pneumonia and
PleurisyPleurisyComorbidities Comorbidities
and/or and/or ComplicationsComplications
MS-DRG 195MS-DRG 195Simple Pneumonia & Simple Pneumonia &
Pleurisy Pleurisy
Without CCWithout CC
YesYes NoNo
MS-DRG 194MS-DRG 194Simple Pneumonia & Simple Pneumonia &
PleurisyPleurisy
With CCWith CC
MS-DRG 193MS-DRG 193Simple Pneumonia & Simple Pneumonia & Pleurisy With MCCPleurisy With MCC
* Proposed for FY 2008
![Page 22: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/22.jpg)
Distribution of Cases by Severity Level
Distribution of Cases by Severity Level
62% 58%
22%
38%20%
Current DRGs MS-DRGs
Current vs. MS-DRGs
Not in a DRGw/CC
In a DRG w/CC
Not in a DRG w/CC or MCC
MS-DRG w/CC
MS- DRG w/MCC
Source: Moran Company
![Page 23: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/23.jpg)
Fixes Several Problems Identified with Last Year’s ProposalFixes Several Problems Identified with Last Year’s Proposal
• Builds on current DRG system rather than APR-DRGs– Easier to understand; transparent
– Benefits from past refinements to DRGs lost in CS-DRG system
– Captures complexity as well as severity
• Logic of MS-DRG grouper will be open to all
![Page 24: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/24.jpg)
Overall ImpactOverall Impact
![Page 25: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/25.jpg)
Impact of Severity AdjustmentImpact of Severity Adjustment
• Total dollars stay the same — money just shifts
• How an individual hospital does depends on its patients’ characteristics
• A hospital with the national average mix of severity levels would see no change in payment
![Page 26: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/26.jpg)
Impact of Severity AdjustmentImpact of Severity Adjustment
• Reductions for less severe cases• Increases for more severe cases• On average, payments:
– Decrease for small and rural hospitals– Increase for large, urban and teaching
hospitals
• Specific severity adjustment systems differ in the level of dollars redistributed
![Page 27: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/27.jpg)
Percent Change in Payment by Hospital Type
Percent Change in Payment by Hospital Type
La
rge
Urb
an
Oth
er
Urb
an
Ru
ral
Ma
jor
Te
ac
hin
g
50
-99
10
0-1
99
20
0-2
99
Un
de
r 2
5
25
-50
30
0-3
99
40
0-4
99
50
0+
By Bed Size
Change to MS-DRGs Only
Source: Moran Company analysis of MedPAR and cost report data. Uses 2/3 cost-based weights.
0.9% 1.1%
0.2%
-0.7%
-4.6%
-3.8%
-2.6%
-0.6%
0.2%0.6% 0.5%
0.9%
-2.6%
-0.4%
Min
or
Te
ac
hin
g
No
n-
tea
ch
ing
![Page 28: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/28.jpg)
Percent of U.S. Hospitals by Range in Gain or LossPercent of U.S. Hospitals by Range in Gain or Loss
Lose 10% or MoreGain 5-9.9%
Roughly theSame27%
Hospitals with Gains
22%
Hospitals With Losses
51%
Change to MS-DRGs Only
Lose5-9.9%
Lose 1-4.9%
Gain or Lose Less than 1%
Gain 1-4.9%
![Page 29: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/29.jpg)
Percent of Washington State Hospitals by Range in Gain or Loss
Percent of Washington State Hospitals by Range in Gain or Loss
Roughly theSame35%
Hospitals With Gains
8%
Hospitals With Losses
57%
Change to MS-DRGs Only
Lose 5-9.9%
Lose 1-4.9% Gain or Lose Less than 1%
Gain 5-9.9%
Gain 1-4.9%
![Page 30: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/30.jpg)
Policy OptionsPolicy Options
![Page 31: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/31.jpg)
As Good as It’s Going to Get?As Good as It’s Going to Get?
• CMS likely to implement a severity-adjusted system
• MS-DRGs fix several issues identified with last year’s CS-DRGs
• Additional refinement poses risks– Greater levels of redistribution– More complexity
• Arguments against “behavioral offset” stronger with this system
![Page 32: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/32.jpg)
Policy OptionsPolicy Options
• Oppose severity adjustment
• Delay and develop alternative
• Support MS-DRGs with:– Delay
– Transition
– Protection from losses
• Support immediate implementation
![Page 33: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/33.jpg)
AHA Position AHA Position
• AHA strongly against “behavioral offset”– A cut of $24 billion over 5 years
• Advocacy steps to date:– Impact data sent to all members
– HALO letter to CMS opposing cut
– “Dear Colleague” letter circulating
• Workgroup of state association executives to look at MS-DRGs
![Page 34: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/34.jpg)
Impact on Washington Hospitals
Impact on Washington Hospitals
![Page 35: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/35.jpg)
Hospital Specific Impact AnalysisHospital Specific Impact Analysis
• An impact analysis was e-mailed to CFOs on April 26, 2007
• New impact forthcoming
• Includes all changes, including MS- DRGs
• Contact Will at [email protected] or 206-216-2533 if you would like a copy
![Page 36: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/36.jpg)
![Page 37: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/37.jpg)
![Page 38: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/38.jpg)
![Page 39: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/39.jpg)
![Page 40: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/40.jpg)
Change in Case MixChange in Case Mix
• Increase/decrease was affected by: – Increase in cost based weights (now
67% based on costs and 33% on charges)
– Change to MS-DRGs
• WSHA is sending a breakdown showing changes related to each variable
![Page 41: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/41.jpg)
![Page 42: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/42.jpg)
![Page 43: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/43.jpg)
Next Steps and Future Next Steps and Future
• Need advocacy on cuts for capital and behavioral offset
• WSHA will send additional information on impacts
• Final rule in August and new system in October
• Impact on service lines or specialty hospitals?
![Page 44: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/44.jpg)
Questions?Questions?
![Page 45: Medicare Inpatient Hospital Payment: What Changes Can Your Hospital Expect?](https://reader033.vdocument.in/reader033/viewer/2022061617/56649cae5503460f94970915/html5/thumbnails/45.jpg)
Thank you for participating!
Please fill out the evaluation.
Thank you for participating!
Please fill out the evaluation.