copyright © 2008 delmar learning. all rights reserved. chapter 9 cms reimbursement methodologies

Chapter 9

Reimbursement Methodologies

Federal Health Care Programs

• CHAMPVA

• Indian Health Service

• Medicaid

• Medicare

• TRICARE

• Workers’ Compensation

Ambulance Fee Schedule

• Ambulance suppliers to accept Medicare assignment

• Reporting of HCPCS codes on claims for ambulance services

• Revision of the verification requirements for coverage of nonemergency ambulance services

Ambulatory Surgical Center

• Surgical health care services that must accept assignment on Medicare claim

• Must be a separate entity distinguishable from any other entity or facility– Must have its own employer identifier

number as well as processes for:

Ambulatory Surgical Center

• Accreditation • Administrative function• Clinical services • Financial and accounting systems• Governance • Professional supervision• Recordkeeping • State licensure

Clinical Laboratory Fee Schedule

• Data set based on a local fee schedule

• Deficit Reduction Act of 1984 – Established the Medicare Clinical

laboratory fee schedule

• Medicare reimburses laboratory services according to the:

– Submitted charge– National limitation amount– Local fee schedule amount

• Whichever one of these is the lowest

• CMS divided ESRD items and services into two different groups for the purposes of payment

• These two groups are:

• Dialysis and associated routine services are reimbursed according to a composite rate.

– Paying according to a composite rate is a common form of Medicare payment– Known as bundling

• Injectable drugs and certain laboratory tests that were not routine or not available in 1983 when Medicare implemented the ESRD composite rate

– Reimbursed separately according to a per-service basis

• Each diagnosis-related group (DRG) has a fee weight given to it– Based on the average resources used to

treat Medicare patients in that DRG

• Repayment rate can be adjusted according to the following guidelines: – Disproportionate share hospital adjustment – Indirect medical education adjustment– Outliers

• Several DRG systems were developed for use in the United States, including:

• Diagnosis-related groups: – Original system used by CMS to reimburse

hospitals for inpatient care provided to Medicare beneficiaries

• Diagnosis-related groups: – Based on intensity of resources, which is

the relative volume and types of diagnostic, therapeutic, and inpatient bed services used to manage an inpatient disease

– Replaced in 2008 by all patient refined DRGs

• All patient diagnosis-related groups – Original DRG system adapted for use by

third party payers to reimburse hospitals for inpatient care provided to non-Medicare beneficiaries.

– Based on intensity of resources

• All patient refined diagnosis-related groups – Adopted by Medicare in 2008 to reimburse

hospital for inpatient care provided to Medicare beneficiaries

• All patient refined diagnosis-related groups – Expanded original DRG system to add two

subclasses to each DRG that adjusts Medicare inpatient hospital reimbursement rates for severity of illness

• Each subclass, in turn, is subdivided into four areas:

1. Minor

2. Moderate

3. Major

4. Extreme

• IPPS three day payment window entails outpatient pre-admission services given by a hospital, up to three days earlier to a patient’s inpatient admission– To be covered by the IPPS DRG payment

• Diagnostic services

• Therapeutic services for which the inpatient principal diagnosis code exactly matches that for preadmission services

• All the procedures and services are included in a outpatient encounter that was provided on the same day

Inpatient Psychiatric Facility Prospective Payment System

• Implemented as a result of Medicare, Medicaid, and SCHOP Balanced Budget Refinement Act of 1999

Elements of the IPFPPS

• Minimum date set for post acute care

• Case mix groups

• CMG relative weights

• CMG payment rates

Elements of the IPFPPS

• BBRA of 1999 authorized implementation of a per-discharge DRG long-term care hospital prospective payment system for cost reporting periods beginning on or after October 1, 2002

Major Elements of LTCHPPS

• Patient classification system

• Relative weights

• Payment rate

Skilled Nursing Facility Prospective Payment System

• Modified repayment for Medicare Part A skilled nursing facility services

• Starting 1998– SNFs were no longer paid on a reasonable

cost basis but rather on the basis of a prospective payment system

Major Elements of SNFPPS

• Payment rate

• Case mix adjustment

• Geographic adjustment

• Adjustments

Medicare Physician Fee Schedule

• As of 1992, medical doctors’ services and procedures are:– Paid back according to a payment system

identified as the Resource-Based Relative Value Scale

Medicare Physician Fee Schedule

• System is currently known as” Medicare physician fee schedule”– Reimburses providers according to pre-

determined rates assigned to services– Improved by CMS annually

Payment Components

• Physician work– Physician’s time and intensity in providing

the service

• Practice expense– Overhead costs involved in providing a

service

• Malpractice expense

Payment Components

• Medicare physician fee schedule is used to determine payment for Medicare Part B services– Other services, such as anesthesia,

pathology/laboratory, and radiology, require special consideration

Payment Components

• Anesthesia services payments– Based on the actual time an

anesthesiologist spends with a patient and the American Society of Anesthesiologists’ relative value system

Payment Components

• Radiology services payments vary according to place of service

Payment Components

• Pathology services payment vary according to number of patients served:– Includes clinical laboratory management and

supervision of technologists covered and paid as hospital services.

– Directed to an individual patient in a hospital setting and are paid under physician fee schedule

Nonparticipating Physicians

• Nonparticipating providers who don’t accept assignment from Medicare, which means the amount Medicare pays back for services presented– Subject to a five percent decrease of the

Medicare physician fee schedule

Medicare Secondary Payer

• Automobile medical or no-fault insurance

• Disabled individual covered by a large group health plan or who has coverage under the LCHP of a family member who is currently employed

• End-stage renal disease program

• Federal black-lung program

• Other liability insurance

• Veteran Administration benefits

• Working group health plan maintained by an employer, or an individual age 65 or older who is covered by a working spouse’s EGHP

• Upon claims submission, amount of secondary benefits payable is the lowest of:– Actual charges by physician or supplier

minus amount paid by primary payer

• Amount Medicare would pay if services were not covered by the primary payer– Higher of the Medicare physician fee

schedule minus the amount actually paid by the primary payer

• To calculate amount of Medicare secondary benefits payable on a given claim, the following information is required:– Amount paid by primary payer – Primary payer’s allowable charge

Chargemaster

• Computer generated list of procedures, services, and supplies with charges for each: – Department code– Service codes – Service description – Revenue code – Charge amount – Relative value units

Claims Submission

• Ambulance companies

• Ambulatory surgery centers

• Home health care agencies

• Hospice organizations

Claims Submission

• Hospitals

• Psychiatric drug/alcohol treatment facilities

• Skilled nursing facilities

• Sub-acute facilities

• Stand-alone clinical/laboratory facilities

• Walk-in clinics

copyright © 2008 delmar learning. all rights reserved. chapter 9 cms reimbursement methodologies

delmar learning

laboratory services

drg slide

fee weight

bundling slide

lowest slide

service basis slide

certain laboratory tests

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