CMS Issues Final FY 2008 IPPS Rule

Carol Male, Northeastern US Regional Cardiac Rhythm Disease Management, Healthcare Economics Manager, Medtronic, Inc.; Teresa Stamper-Strelitz, Southeastern US Regional Cardiac Rhythm Disease Management, Healthcare Economics Manager, Medtronic, Inc., Minneapolis, Minnesota
Carol Male, Northeastern US Regional Cardiac Rhythm Disease Management, Healthcare Economics Manager, Medtronic, Inc.; Teresa Stamper-Strelitz, Southeastern US Regional Cardiac Rhythm Disease Management, Healthcare Economics Manager, Medtronic, Inc., Minneapolis, Minnesota
This all sounds like good news! However, the detail of the FY08 IPPS rule includes the most significant change in the way hospital inpatient services are reimbursed since the adoption and implementation of the current DRG system in 1983, namely the adoption of the Medicare Severity DRG system (MS-DRGs). The MS-DRGs will be phased in over the next two years using a blended payment of the old and new systems. The Medicare Severity DRG system (MS-DRGs) Under the new system, the existing list of 538 DRGs will be replaced with 745 MS-DRGs that take into consideration the severity of each patient’s condition and the cost of treatment. To accomplish this change, the current list of Complications or Co-morbidities (CC) is revised to include the Major Complications or Co-morbidities (MCC) that allow the acute manifestation of the disease to be coded separately. This revision will result in DRG classifications based on the resources required to provide care. For example, under the old DRG system, if a patient has a discharge diagnosis of heart failure, the DRG would fall under DRG 127. Under the new system, heart failure diagnosis codes have been regrouped to MCCs and CCs to allow assignment to the MS-DRGs. Therefore, DRG 127 will now transition to three MS-DRGs: MS-DRG 291 Heart Failure and shock with MCC; MS-DRG 292 Heart Failure and shock with CC; or MS-DRG 293 Heart Failure and shock without CC/MCC. Failure to document and capture accurate and specific heart failure diagnoses may result in inappropriate grouping and will impact reimbursement. Thus, it becomes extremely important for hospitals to work with physicians and coders to ensure that accurate and specific documentation and coding occurs. For the cardiovascular service line, DRGs will be expanded according to Table 1. Note that the MS-DRGs for some of these services require one of the newly defined MCCs. CMS is planning to take a reduction in payment to account for the effects of coding or classification changes that might occur under the new severity system. DRG payment for both FY 2009 and FY 2010 will each reflect an additional 1.8% change, thereby effecting a total reduction of 4.8% over the three-year period. So far, we've discussed some of the changes with the DRG system restructuring. Now let's look more closely at the payment impact of the new MS-DRG implementation for FY08. Payment Impact of MS DRG implementation FY 08 The application of the case volume per CMS results in the following volume-adjusted payment changes. Pacemaker and cardiac resynchronization therapy pacemaker (CRT-P): 1.4% increase Pacemaker revisions (includes insertable loop recorder, ILR, Implant): -1.2% decrease Pacemaker or CRT-P device replacements: 3.7% increase Implantable Cardioverter Defibrillator (ICD) and CRT-D: 0.1% increase ICD or CRT-D lead or generator: 4.0% increase Heart Failure & Shock: 0.9% increase Syncope & Collapse, Insertable Loop Recorder Explants: 1.4% increase Drug-Eluting Stent: -4.1% decrease Bare Metal Stents & Percutaneous Transluminal Coronary Angioplasty (PTCA): -8.6% decrease PTCA w/o Stent Procedures: 10.3% increase Endovascular/Abdominal Aortic Aneurysm (AAA): 2.6% increase Peripheral Vascular: 0.0% increase Heart Valves: 1.4% increase Coronary Artery Bypass Graft (CABG): 1.2% increase Outlier payments to hospitals for particular cases that exceed the usual Medicare payment by a set threshold will be lowered for FY 2008. The outlier threshold is being lowered to $22,650 in FY08 from $24,485 in FY07, a decrease of approximately 7.6%. The expected impact of the MS-DRG system is a factor in the reduction of the outlier case threshold. In addition to the MS-DRG changes, there are several other aspects of the FY08 Final Rule that are important to the cardiovascular service line. These include: Partial Credit or No Cost Medical Devices Under the Final Rule, DRG payments for selected MS-DRGs will be reduced when a hospital receives a device at no cost or with a partial credit for a recalled or replacement device. A partial credit is defined as a credit equal to 50% or more of the implanted device cost. The presence of condition code 49 (credit) or 50 (no cost) on the claim will cause the discounting to occur. Hospitals must have a process in place to append the appropriate condition code to the claim. Quality Measures Hospitals are required to submit data on a total of 27 quality measures in order to receive the full update of 3.3% in FY08. This is an increase of six additional quality measures from FY07. The measures are divided into the following categories: heart attack, heart failure, pneumonia, surgical care improvement, mortality measures and patient’s satisfaction of care. Hospital-acquired Conditions The Final Rule includes provisions to address higher costs associated with hospital-acquired conditions. Under this rule, Medicare will make a lower payment for specific cases that include a hospital-acquired MCC or CC. For example, these may include air embolism, urinary tract infection or vascular catheter-associated infection. While the DRG payment adjustment for hospital-acquired conditions will begin in FY09, hospitals will begin reporting the present on admission (POA) diagnosis modifier on claims for FY08. Charge Compression Charge compression refers to the practice of assigning a lower markup to relatively high-cost items and a higher markup to lower-cost items. This practice affects the calculation of DRG relative weights. Although CMS has formally acknowledged that charge compression is an issue, they decided to delay consideration for charge compression solutions until transition to cost-based weights are fully implemented in 2009. In summary, there are several changes that will impact the cardiovascular service line, including: Adoption of the MS-DRG system, making it critical for hospitals to be knowledgeable about documentation and coding requirements. Reduction in payments to hospitals when an implantable device is provided at no cost or with a partial credit. Requirement to report quality measures in order to receive the full market basket increase Documentation of Present on Admission (POA) conditions. Details of the Final Rule can be found at: www.cms.hhs.gov/AcuteInpatient PPS/FFD/list.asp#TopOfPage The FY08 Final Rule was published in the August 22nd Federal Register. You can access this publication at the following website: www.gpoaccess.gov/fr/index.html. The authors can be contacted at rs.healthcareeconomics@medtronic.com