Medicare and Medicaid Reimbursement

1. Medicare and Medicaid Reimbursement Joyce Mohler System Director, Reimbursement Summa Health System mohlerj@summahealth.org 330-996-8532

2. Introduction and Objectives • Introduction • CGS/Palmetto • “NEW” Wage index – Pension expense • HIT Payments • Overview of Medicare and Medicaid reimbursement principles • Introduction to online resources

3. Terms APC – Ambulatory Payment Classification IME – Indirect Medical Education CCR – Cost-to-Charge Ratio IPF – Inpatient Psych Facility CMG – Case Mix Group IRF – Inpatient Rehab Facility CMS – Center for Medicare & Medicaid Services LIP – Low Income Patient Adj DSH – Disproportionate Share Hospital PPS – Prospective Payment System GME (DGME) – Graduate Medical Education RUG- SNF Resource Utilization -or Direct Medical Education Group HCAP – Hospital Care Assurance Program http://www.cms.gov/apps/acronyms/ http://www.cms.gov/apps/glossary/

4. CGS/Palmetto

5. CGS/Palmetto • Contacts per CGS Website • All CGS Outlook email accounts will be moved from CIGNA to BCBSSC after close of business on Friday, January 13, 2012. • Email addresses will be converted to a new @cgsadmin.com domain suffix. Email addresses formerly firstname.lastname@cigna.com will become firstname.lastname@cgsadmin.com. • After 1/31/2012 old e-mail addresses will reject as invalid

6. Pension expense for Wage Index 2 parts to Defined Benefit Pension adjustment: Current expense allowed = 3 year average of prior year, current year and subsequent year cash payments to fund Prefunding – 2002 forward accrual 1/10th of prefunding payments. Start with year of first positive but can not exclude negative years after a positive year that is counted.

7. Medicare Eligibility Qualifications Federal Insurance for the elderly and disabled • Must be at least 65, disabled, or have End Stage Renal Disease to qualify • Must be a legal resident or citizen • Either you or your spouse must have worked in Medicare-covered employment for at least 10 years. http://www.medicare.gov/MedicareEligibility/home.asp

8. Medicaid Eligibility Qualifications State Insurance for the poor • Eligibility administered at the County level; can be difficult and bureaucratic • Certain counties are have “mandatory” Medicaid managed care enrollment (must have at least 3 managed care plans) • Certain classifications of individuals are NOT required to enroll in Medicaid managed care plans • http://jfs.ohio.gov/ohp/bmhc/index.stm

9. What’s Covered - Medicare • Part A (think Inpatient) is usually is premium free, helps cover hospitalization, skilled nursing, home health and hospice care. • Part B (think Outpatient) is usually with a very low premium, helps cover doctor visits, outpatient care and medical services. • Part C – refers to Medicare Advantage (HMO); benefits vary by plan but are often comprehensive • Part D – Prescription Drugs

10. Inpatient: Per Discharge – DRG Per Diem % of Charge Bundled (mom & baby - commercial Outpatient: APC Fee Schedule % of Charge Payment Systems Overview

11. Inpatient PPS • PPS = Prospective Payment System • Payment is Based on Diagnosis of Patient • http://www.cms.hhs.gov/AcuteInpatientPPS/FFD • No Additional “Settlement” on PPS Portion of Payment

12. Medicare Inpatient • PPS = Prospective Payment System • What you get is final • DRG = Diagnosis Related Groups • MS-DRG began in 2008 • – 745 MSDRG’s in 2011 (+ 2 ungroupable) • Heavily dependent on physician documentation • Capital for equipment, buildings – Federal rate • Some small hospital add-on for IME, DSH (no 15% threshold if > 100 beds) • Small settlement on cost report

13. Medicare Inpatient Included in patient payment but settled on cost report Hospital specific values • Indirect Medical Education Add-on %. • Incidental costs of training interns and residents • Settled on cost report • Will be paid IME on Medicare Managed Care if you bill Medicare a shadow bill or ghost bill. Mandatory for IRF and IPF now. • Look at Report 118 of your PS&R to verify billings • Disproportionate Share Add-on • for high SSI/Medicaid days • http://www.cms.gov/MLNProducts/downloads/Disproportionate_Share_Hospital.pdf

14. Medicare Inpatient Not included in patient payment - settled on cost report (Pass – thru payments every 2 weeks based on history) • GME • Paid based on Medicare and Medicare managed care days • Must “shadow bill ” Medicare for Medicare HMO days to receive credit for GME on final cost report settlement • Look on PS&R reports 118 for Days/Discharges • Pre-transplant costs • Testing of potential donors and recipients to determine if match • Allied Health costs • EMT, Pharmacy Resident, Pastoral Resident, Lab or Rad Tech • Medicare Bad Debt • Currently at 70%

15. Medicare Payment Componets of the DRG Payment • DRG Rate • Labor & Non-Labor portion of the rate – federal rate • Wage index – Area specific X Labor Portion • Case Weight for Each DRG – federal rate • CMI • Case weight of 2 is paid twice as much as a case weight of 1

16. Inpatient PPS Methodologies • Capital (Medicare, Medicaid) • Medicare – federal rate, CMI adjusted • Medicaid – hospital specific rate, settled on cost report. Per D/C, not case weight adjusted • Cost of our buildings and equipment • Cost of leasing buildings and equipment • All building and equipment leases are reclassified to capital • Make sure invoices are coded to actual expense not to where you have money left in your budget.

17. Inpatient PPS Methodologies

18. Inpatient PPS Methodologies • DSH continued • Since patients have to be eligible for Medicaid, registering Medicaid account correctly is important • For every patient fail to enroll or register properly – you could lose between $350- $500

19. Inpatient PPS Methodologies Medical Education • Indirect Medical Education • Payments made to the hospital to cover additional indirect costs due to interns training. Example: additional tests. • Direct/Graduate Medical Education • Pays for direct expenses to run program • Intern salary & fringes, Teachers, Program employees

20. Medicare DRG calculation IME calculation • Medicare Formula: • ((((1+(Interns/Available Beds))^0.0405)-1)*1.35 • Ratio based on last audited Medicare Cost Report • Settle final payment with current Medicare Cost Report • Intern/Available Bed ratio – lower of current year or prior year used • Less beds available, higher the % will be

21. Medicare DRG Calculation Federal Specific from the Federal Register Labor Portion $3230.04 X wage index .8892 Adjusted Labor Portion 2872.15 Non-labor Portion 1979.70 DRG Rate before add-ons $4851.85 Capital 461.92 Hosptial Specific IME (15.5081%) 752.43 DSH (9.340%) 453.16 Total DRG for CMI of 1 $6519.36

22. MS-DRG’s • Highly dependent on physician documentation • Medical record coding guidelines require specific words or phrases in physician progress notes in order to use higher paying MS-DRGs • “Query” physicians to clarify arrive at the correct MS- DRG • Correct coding important for: • Appropriate Reimbursement • Quality Reporting (i.e. Health Grades) • Future “Pay for Performance” initiatives

23. MSDRG Example

24. Inpatient PPS Methodologies • Outliers • Day outliers (Medicaid) • Cost outliers (Medicare, Medicaid) • Managed Care outliers determined by contract

25. Inpatient PPS - Outliers Day Outliers (Medicaid) • Length of Stay over Threshold • Threshold Depends on DRG • Paid “Calculated Daily Rate” X Outlier Days • If patient qualifies for both Day and Cost – Medicaid pays based on the “cost” outlier calculation

26. Inpatient PPS - Outliers • Cost Outliers (Medicare, Medicaid, Managed Care) • Charges over threshold • Medicaid - Charges over threshold X Cost/Charge Ratio • Medicare – Charges over threshold X CCR X 80% • Managed Care – Based on what is contracted

27. Inpatient PPS - Outliers Cost Outlier Example – Medicaid DRG 1XX Payment $5,000 Charge Threshold $50,000 Billed Charges = $80,000 Outlier Payment would be $10,800 $80,000 - $50,000 = $30,000 X 36% (CCR) = $10,800 Total payment = $15,800 ($5,000 + $10,800)

28. Inpatient PPS - Outliers Cost Outlier Example – Medicaid What you can do…. • All payor cost outlier reimbursement is based on Gross charges – Medicare, Medicaid, Managed Care • If charges are not accumulated and billed potential reimbursement is lost • No matter who the payor is – Gross charges are IMPORTANT….. EVEN SELF PAY, CHARITY

29. Non-acute Inpatient Methodologies • Rehab • Rehab PPS methodology based on CMG’s (similar to DRG’s) • Must meet so-called “60% rule” to be paid under Rehab CMG’s; otherwise would be paid under inpatient DRG’s (significantly less than Rehab CMG’s) • Psych • DRG’s with certain per-diem adjustments for age, days hospitalized, if hospital has an ER, Medicare Education, specific ICD-9 condition codes • Skilled Nursing (SNF) • Per-diem PPS methodology based on RUG’s

30. Medicare Outpatient PPS - APC APC = Ambulatory payment classification • Similar to inpatient DRG (but different) • Based on CPT codes • Adjusted for Wage Index (60% of the national rate adjusted for wage index) • Grouped into categories that are discounted or multiplied depending on what other services are billed • Example: Get full APC for first item/procedure and ½ for each additional on the bill • Only get paid for the first item/procedure • If you bill APC X with APC W you get nothing for X • There is an outlier system in APC, but there is a high threshold that has to be met

31. Outpatient PPS - APC • Addendum A shows lists APC’s • Addendum B shows how CPT codes map to APC’s • Need to adjust 60% of APC amount by the wage index • http://www.cms.hhs.gov/HospitalOutpatientPPS/AU/list.asp#TopOfPage

32. Outpatient PPS - APC • New technology/drugs • CMS will sometimes break out payments for new costs for a couple of years to give them time to calculate costs • Incorporate it into new APC rates in later years • To get payment must bill specific HCSPCS/CPT codes • Extremely important to keep up on CPT changes as they occur throughout the year applicable to your department(s) and review items sent by Charge master people • http://www.cms.gov/HospitalOutpatientPPS/04_passthrough_payment.asp

33. Other Outpatient Methodologies • Medicare Fee Schedules • Lab • Durable Medical Equipment • Ambulance • PT / OT / Mammography (Physician Non-Fac) • http://www.cms.hhs.gov/home/medicare.asp • Medicaid Fee Schedules • Based on CPT code • http://jfs.ohio.gov/OHP/bhpp/FeeSchdRates.stm • Be familiar with rates for services provided by your department(s)!

34. Cost Reporting Overview • Similar to Tax Return • Starts with Hospital Expenses and Revenues • Adjust for Medicare non-allowable items • Advertising, Alcohol, Taxes, Non-patient related expenses • Statistical Data – Days, Discharges, Beds, Interns • Calculating Add – on payments • Calculation for wage index • Important to report high-cost labor (dollars and hours) • Settlement data (DSH, GME, IME, Bad Debt) • How much we should have received vs. how much we did receive • Payment due with filing

35. HCAP HCAP = Hospital Care Assurance Program • State of Ohio program to distribute federal DSH funding (State DSH) • All Ohio hospitals are required to participate • By rule, 10% of hospitals must be “economic contributors” – pay into system • Our reimbursement is directly tied to identifying these patients properly: • Patients below the federal poverty level (FPL) • Patients above the FPL but qualifying for charity • Bad Debts • % of Medicaid population – OBRA survey • Insured vs. Uninsured (Cap on what you receive)

36. HCAP • New for 2010 • Must file Disability IP and OP by Cost report line on Sch F1 • Must File UC < 100% FPL on Sch F2 • Must File UC > 100% FLP on Sch F3 • Each Schedule broken out between IP and OP, insured and uninsured • Due when you file 2011 Medicaid Cost Report • 2011 details are due when you file 2011 Medicaid Cost Report too. • Get 2010 done so you can get 2011 data finalized , audited and reported by Cost Report Line.

37. HCAP Model • Assessments • Based on Operating Expenses • Two tiered • 1.35% of the first $235 Million • 1% of costs above $235 Million • Matching Federal Dollars • State utilizes the assessments to receive matching funds • Redistributes the money based on the HCAP Model • Economic contributors • Assessments > HCAP distribution • 10% of hospitals must be economic contributors (20 hospitals)

38. Preliminary 2009 Uncompensated Care Data: 2009 HCAP Distribution Model (handout) http://www.ohanet.org/Issue/HCAP HCAP

39. HCAP HCAP Reimbursement Model • High DSH hospitals paid first – OBRA Survey • Disability and Care Assurance • Paid at approx. 70% of cost in 2009 • Charity and Bad Debt • Paid at approx. 6% of cost in 2009 • Medicaid shortfall • Timing – 2011 distribution based on 2009 data

40. Other Reimbursement Hot Topics • Transfer DRG Reductions • Verify patients qualified. Sometimes the reduction is better than keeping patient • Never Events – began 10/1/08; currently 73 conditions • Hospital Acquired Conditions – began 10/1/08 • Recovery Audit Contractors – (RAC) • Medicare Contracting Reform – creation of MACs • Significant because many rules are defined locally • Cigna takes over Ohio 10/17/2011 instead of NGS • National Healthcare Reform –multi-faceted reductions in Medicare reimbursement to offset cost of covering uninsured • Medicaid assessments fees (tax)

41. Recap of What’s Important In no particular order . . . • Pay attention when using high priced contract labor so it is captured and accounted for in the Wage Index calculation. • Correctly categorize all capital-related costs including leases as this is cost-reimbursed for Medicaid. • Must capture accurate information in the pre-registration / registration processes • Be familiar with the applicable CPT codes for your department(s) including how they are paid by Medicare and Medicaid • Capture all patient charges regardless of patient’s insurance • Physician documentation to code the medical properly

42. Online References • CMS: http://www.cms.hhs.gov/ • Medicare Eligibility: http://www.medicare.gov/MedicareEligibility • Medicaid Eligibility: http://jfs.ohio.gov/ohp/bmhc/index.stm • Medicare DRGs:http://www.cms.hhs.gov/AcuteInpatientPPS/FFD • Medicare Outpatient PPS Addendums A and B: http://www.cms.hhs.gov/HospitalOutpatientPPS/AU/list.asp#TopOfPage • Medicare Fee Schedules: http://www.cms.hhs.gov/home/medicare.asp • Medicaid - Ohio Dept Job & Family Services: http://jfs.ohio.gov/OHP/provider.stm • Medicaid Fee Schedules: http://jfs.ohio.gov/OHP/bhpp/FeeSchdRates.stm • HCAP Info: http://www.ohanet.org/Issue/HCAP

43. Medicare & Medicaid Reimbursement Questions ???