FY 2014 Medicare Final Rule Summary of Major Provisions

1. FY 2014 Medicare Final RuleSummary of Major Provisions Effective October 1, 2013 Developed by: Annie Lee Sallee HTH Revenue Cycle Education Specialist annielee.sallee.hth@gmail.com

2. Learning Outcomes • At the end of this course, each participant should be able to: • Recall the major provisions of the final rule for FY 2014. • Recognize how each may impact your hospital. • Identify the necessary steps in order to respond or take action to comply with or prepare for the major provisions.

3. IPPS Payment Adjustments • The final rule increases payments to hospitals by 0.7%, accounting for market basket adjustment of 1.7% and a 0.8% documentation and coding “case mix” adjustment, and a 0.2% reduction in the standardized amount (and hospital-specific rates) to offset additional IPPS expenditures for the new inpatient admission criteria.

4. What affects the IPPS payment adjustment? • Documentation & Coding Adjustment - Between FY 2014 and FY 2017 Medicare plans to recoup funds due to past overpayments the government made to hospitals as the country transitioned to MS-DRGs (required by the American Taxpayer Relief Act of 2012 ). • Refinement of Relative Value Weight Calculation - This impact models payments to various hospital types using relative weights developed from 19 CCRs (Cost-to-Charge Ratio) which now include implantable devices, MRIs, CT scans and cardiac catheterization. • Revision of Hospital Market Baskets – fixed weight index to measure price changes; annual updates are required by Medicare law.

5. Changes to Programs and New or Revised Policies • Readmission Reduction Program • Hospital Value-Based Purchasing • Hospital Acquired-Condition Reduction Program • Direct GME Payments • DSH Payment Adjustments • Payment for Part B Inpatient Services • New Inpatient Admission Rule • Hospital Inpatient Quality Reporting Program • Changes to LTCH PPS • Inpatient Psych Facility Quality Reporting Program • CoP Changes

6. Readmission Reduction Program • CMS defines readmission as an admission to a subsection(d) hospital within 30 days of a discharge from the same or another subsection(d) hospital. • Requires a reduction (of no more than 2%) to an eligible hospital’s base operating DRG payment to account for excess readmissions of the selected applicable conditions: acute myocardial infarction, heart failure, and pneumonia. • Established additional exclusions to 3 measures to account for planned readmissions. • There are new discharge status codes to identify planned readmissions. For a list of the discharge status code updates please refer to pages 198-199 of the final rule.

7. Hospital Value-Based Purchasing • Value-based incentive payments are made to hospitals who meet certain performance standards within that fiscal year. • Ensure payment is made for quality and not quantity. • The 1.25% reduction to the base operating DRG payment amount is going to fund the value-based incentive payments.

8. Hospital Value-Based Purchasing • 17 measures for FY 2014, including the 12 clinical process of care measures and the HCAPS measure from FY 2013. FY 2014 adds 1 new clinical process of care measure and 3 mortality outcome measures. • For a complete list of the FY 2014 measures, please refer to page 721 of the final rule.

9. Hospital-Acquired Condition (HAC) Reduction Program • No payment impact for FY 2014. • Sets forth the requirements by which payments to “applicable hospitals” will be adjusted to account for HACs with respect to discharges occurring during FY 2015 or later (beginning Oct 1, 2014). • The amount of payment will be equal to 99% of the amount of payment that would otherwise apply to such discharges. • The payment adjustment would apply to an applicable hospital that ranks in the top quartile (25 percent) for medical errors or serious infections contracted while in the hospital. • Does not include hospitals and hospital units excluded from the IPPS, such as LTCHs, cancer hospitals, children’s hospitals, IRFs, IPFs, and CAHs. Top 25%, not a good thing

10. Direct GME Payments Labor & Delivery • In FY 2014, Medicare utilization calculation is to now include labor & delivery days as inpatient days. • A hospital may not claim full-time equivalent residents training at a CAH for Indirect Medical Education (IME) and/or direct GME purposes. However, if a CAH itself incurs the costs of training the full-time equivalent residents when these residents rotate to the CAH, the CAH may receive payment based on 101% of its Medicare reasonable costs.

11. DSH Payment Adjustment and Paymentfor Uncompensated Care 25% of What you would have received 75% Dispersed based on Care provided • In FY 2014, DSHs will receive 25% of the amount they previously would have received under the current statutory formula for Medicare DSH payments. The remaining amount, equal to 75% of what otherwise would have been paid as Medicare DSH payments, will be paid as additional payments after the amount is reduced for changes in the percentage of individuals that are uninsured. Each Medicare DSH hospital will receive its additional amount based on its share of the total amount of uncompensated care for all Medicare DSH hospitals for a given time period.

12. Payment of Part B Inpatient Services • Medicare will issue payment for all Part B services that would have been payable had the beneficiary originally been treated as an outpatient. • The new rule greatly expands what was previously a very limited set of inpatient services that could be billed under Part B. • The Ruling only applies to denials of claims for inpatient admissions that were not reasonable and necessary; it does not apply to any other circumstances in which there is no payment under Part A. • Includes CAHs. • For admissions after Oct 1, 2013, there will be a 12 month timely filing requirement based on date of service.

13. Inpatient AdmissionsA New Way of Admitting • Should improve clarity and consensus among providers, Medicare, and other stakeholders regarding the relationship between admissions decisions and appropriate Medicare payment. • Includes CAHs (Final Rule pg. 1645). • A physician certifies or recertifies “the need for continued hospitalization of the patient for medical treatment or medically required inpatient diagnostic study.” • CMS’ policy requires a physician order in order to justify inpatient hospitalization. • Documentation in the medical record must support a reasonable expectation of the need for the beneficiary to require a medically necessary stay lasting at least two midnights. If the inpatient admission lasts fewer than two midnights due to an unforeseen circumstance this also must be clearly documented in the medical record.

14. Inpatient Admissions – Expectation of Time • Inpatient admission is now based on the physician’s expectation that the patient will be in the hospital for at least 2 midnights. • CMS is going to provide further guidance related to medical necessity, but the standard is now based on time when deciding if a patient should be placed on observation or admitted as an inpatient. • If a beneficiary is expected to stay in the hospital to receive medical care then inpatient stay is warranted. CMS to publish more information on how clinical factors come into play; however, it is now based on expected LOS. • Admissions should now be approached differently than how a hospital handles admissions for commercial payers using Interqual or other criteria. BUT- remember this criteria only applies to admissions on or after Oct 1, 2013.

15. More on Two-Midnight Rule • Under the final rule CMS would expect the physician to document inpatient order ASAP, 1 day stays will be designated outpatient, but at the point of order, the patient is an inpatient. • Two midnight rule can include the first midnight that they were on observation status. If there is an expectation that the patient is going to stay an additional midnight, the physician needs to write the order as soon as they have this expectation before the 2nd night. (1st night will be outpatient, and 2nd night will be inpatient). • Date of admission HAS to be the date the order is written. Patient is not inpatient until there is an order. It is NOT retroactive.

16. More on Two-Midnight Rule • 2 midnights is a benchmark based on physician expectation, but if there is an unforeseen circumstance, then they shouldn’t have to use condition code 44 (IP admission changed to OP). Through internal audit, if UR believes 2 midnights wasn’t warranted, then you can’t bill as observation because the inpatient stay was already a fact. You could bill as Part B inpatient based on medical necessity. • CMS has not issued guidance as to whether “admit” or “admit to inpatient” is required. They are working on guidance to identify order as intended inpatient.

17. Hospital Inpatient Quality Reporting (IQR) Program • CMS is making several changes to: (1) the measure set, including the removal of some measures, the suspension of one measure, the refinement of some measures, and the adoption of several new measures; (2) the administrative processes; and (3) the validation methodologies. • Option to electronically submit CY 2014 measures and records for validation for the FY 2016 payment determination. • For resources related to the Hospital IQR program including important dates & deadlines refer to https://www.qualitynet.org/dcs/ContentServer?cid=1138115987129&pagename=QnetPublic%2FPage%2FQnetTier2

18. Changes to LTCH PPS • Result in an increase in estimated payments from FY 2013 of approximately $72 million (or 1.3 percent). • No major changes to the way the MS‐LTC‐DRG payment weights are calculated for FFY 2014. • In addition, under the LTCH Quality Reporting (LTCHQR) Program, the annual update to the standard Federal rate will be reduced by 2 percentage points for LTCHs that fail to submit data for FY 2014 on specific measures under section 3004 of the Affordable Care Act.

19. Changes to LTCH PPS Attention to referrals • Moratoria on the full implementation of the “25-percent threshold” payment adjustment policy will expire for certain LTCHs for cost reporting periods beginning on or after October 1, 2013. Under the 25-percent patient threshold payment adjustment policy, if an LTCH admits more than 25 percent of its patients from a single acute care hospital, Medicare will pay at a rate comparable to IPPS hospitals for those patients above the 25-percent threshold. • CMS believes that certain LTCH are acting as step-down units for referring acute care hospitals, and therefore should be treated as one episode of care.

20. Inpatient Psych Facility Quality Reporting (IPFQR) Program • An annual reduction of 2.0 percentage points will be made on discharges for any inpatient psychiatric hospital or psychiatric unit that does not comply with quality data submission requirements with respect to an applicable rate year. • Applies to those paid under Medicare’s IPF PPS. • Same measures are used for FY14 that were used in FY13 related to Patient Safety, Clinical Quality of Care, & Care Coordination (refer to pg 1573 of the Final Rule). • One more year to ramp up recordkeeping and improve quality of care on existing measures.

21. CAHs changes to CoP • Provided clarification that a CAH must provide inpatient acute care services on site. • Require a CAH to furnish health care services in accordance with appropriate written policies. Among other items, the CAH must describe its procedures for emergency medical services and its procedures for inpatient services. CMS explained that they would expect CAHs to be appropriately prepared to provide the services described in their policies and procedures.

22. Medicare CoP – change with administration of pneumococcal vaccines (Minor clarification) • Change would allow for the inclusion of all pneumococcal vaccines approved for use now and in the future. • Delete the term “polysaccharide”.

23. Critical Take-Aways • Review new discharge status codes for planned readmissions. • View HTHU’s course on Value-Based Purchasing to understand what you can do to improve your hospital’s VBP score. • View HTHU’s course on DSH payments and how the revised payment plan will affect your hospital. • Review/revise how you admit Medicare inpatients. Ensure physicians understand new Two-Midnight rule starting 10/1/2013. Ensure UR is fully aware of the new rule and how your hospital is going to efficiently obtain the physician order. • LTCH & IP Psych Facilities must comply with quality data submissions.

24. Learning Outcomes • Now that you have viewed this presentation, you should be able to: • Recall the major provisions of the final rule for FY 2014. • Recognize how each may impact your hospital. • Identify the necessary steps in order to respond or take action to comply with or prepare for the major provisions.

25. Resources • Fact Sheet: http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-Sheets/2013-Fact-Sheets-Items/2013-08-02-2.html • Press Release: http://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-Releases/2013-Press-Releases-Items/2013-08-02.html?DLPage=1&DLSort=0&DLSortDir=descending • Final Rule: http://www.ofr.gov/OFRUpload/OFRData/2013-18956_PI.pdf

26. FY 2014 Medicare Final RuleSummary of Major Provisions Effective October 1, 2013 Developed by: Annie Lee Sallee HTH Revenue Cycle Education Specialist annielee.sallee.hth@gmail.com