Prospective payment systems PDF
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Business & Management / Healthcare Financial Management & Leadership A B B The third book in the Healthcare Payment Systems series, Prospective Payment Systems E examines the various types of prospective payment systems (PPS) used by healthcare Y providers and third-party payers. Emphasizing the basic elements of PPS, it considers the many variations of payment for hospital inpatient and outpatient services, skilled nursing facilities, home health agencies, long-term hospital care, and rehabilitation facilities along with other providers. The book describes the anatomy of PPS, including cost reports, adjudication features and P processes, relative weights, and payment processes. It outlines the features and documentation R O requirements for Medicare Severity Diagnosis Related Groups (MS-DRGs), the Medicare S Ambulatory Payment Classifications (APCs), Medicare HHPPS, Medicare Skilled Nursing P Resource Utilization Groups (RUGs), and private third-party payers. E C T • Provides a framework for understanding and analyzing the characteristics of any PPS I V • Discusses Medicare prospective payment systems and approaches E • Includes specific references to helpful resources, both online and in print P A • Facilitates a clear understanding of the complexities related to PPS—covering specific Y topics at a high level and revisiting similar topics to reinforce understanding M E Complete with a detailed listing of the acronyms most commonly used in healthcare coding, N billing, and reimbursement, the book includes a series of case studies that illustrate key T concepts. It concludes with a discussion of the challenges with PPS—including compliance S and overpayment issues—to provide you with the real-world understanding needed to Y make sense of any PPS. S T E M S K13381 ISBN: 978-1-4398-7301-4 90000 www.crcpress.com 9 781439 873014 www.productivitypress.com K13381 cvr mech.indd 1 1/13/12 2:25 PM HEALTHCARE PAYMENT SYSTEMS Prospective Payment Systems HEALTHCARE PAYMENT SYSTEMS Prospective Payment Systems Duane C. Abbey CRC Press Taylor & Francis Group 6000 Broken Sound Parkway NW, Suite 300 Boca Raton, FL 33487-2742 © 2012 by Taylor & Francis Group, LLC CRC Press is an imprint of Taylor & Francis Group, an Informa business No claim to original U.S. Government works Version Date: 20120201 International Standard Book Number-13: 978-1-4398-7302-1 (eBook - PDF) This book contains information obtained from authentic and highly regarded sources. Reasonable efforts have been made to publish reliable data and information, but the author and publisher cannot assume responsibility for the validity of all materials or the consequences of their use. The authors and publishers have attempted to trace the copyright holders of all material repro- duced in this publication and apologize to copyright holders if permission to publish in this form has not been obtained. If any copyright material has not been acknowledged please write and let us know so we may rectify in any future reprint. Except as permitted under U.S. Copyright Law, no part of this book may be reprinted, reproduced, transmitted, or utilized in any form by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying, microfilming, and recording, or in any information storage or retrieval system, without written permission from the publishers. For permission to photocopy or use material electronically from this work, please access www.copyright.com (http://www.copy- right.com/) or contact the Copyright Clearance Center, Inc. (CCC), 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400. CCC is a not-for-profit organization that provides licenses and registration for a variety of users. For organizations that have been granted a photocopy license by the CCC, a separate system of payment has been arranged. Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identifica- tion and explanation without intent to infringe. Visit the Taylor & Francis Web site at http://www.taylorandfrancis.com and the CRC Press Web site at http://www.crcpress.com Dedication and Acknowledgments Everyone who receives a statement from a physician, clinic, hospital, or other healthcare pro- vider and later receives an explanation of benefits from an insurance carrier is often bewildered and befuddled. Attempting to determine what was charged and then how payment was, or was not, made can be convoluted. There may be multiple third-party payers involved, that is, second- ary and tertiary payers, which further complicates understanding this critical financial aspect of healthcare. This text is dedicated to those who want and need to know more about how healthcare services are charged and then paid. While a specific type of payment system is discussed—namely, pro- spective payment systems—many of the principles and concepts discussed will assist you in better understanding how prospective payment systems work and how these same features may appear in other payment systems, such as fee schedule payment systems. While this text has been designed to be accessible to a fairly wide audience, including inter- ested laypersons, there is enough technical detail for those who are directly involved in using these payment systems as employees, consultants, advisors, and attorneys to various healthcare providers. Keeping in mind that payment involves two parties, this text is also useful for those on the payer side of the equation. Insurance companies and other third-party payers must also understand and then design the way in which they will make payments for healthcare services. I wish to acknowledge all the students who have attended my workshops, both in person and through teleconferences. Studying and understanding healthcare payment systems require significant dedication. In today’s healthcare environment, another more sinister aspect of health- care payment is compliance. Most of the prospective payment systems discussed are used by the Medicare program. Because of the complexities of these payment processes, underpayments and overpayments do occur. Thus, simply knowing about a payment system process is not enough; a full understanding is necessary to ensure compliance. A redoubling of efforts is often required for those directly involved in healthcare payment systems in order to ensure compliance. I also wish to acknowledge the patience and understanding of my family in allowing me the time to prepare this text. Their support and encouragement are greatly appreciated. v Contents Preface...................................................................................................................................xi About.the.Author................................................................................................................xix 1 Introduction.to.Prospective.Payment.Systems..............................................................1 Preliminary Comments ......................................................................................................1 Overview of Healthcare Payment Systems ..........................................................................2 Claims Filing and Payment ................................................................................................4 Deductibles and Copayments .............................................................................................6 Overview of Medicare Prospective Payment Systems ..........................................................6 Private Third-Party Payer and Prospective Payment Systems ...............................................7 Payment System Interfaces .................................................................................................7 Healthcare Provider Use of Prospective Payment Systems to Set Charges............................9 Summary and Conclusion .................................................................................................10 2 Healthcare.Provider.Concepts.....................................................................................11 Introduction......................................................................................................................11 Physicians ..............................................................................................................12 Non-Physician Practitioners and Providers ...............................................12 Clinics ...............................................................................................................................14 Hospitals ...........................................................................................................................15 Special Hospitals with Specialized Prospective Payment Systems .......................................17 Hospitals and Integrated Delivery Systems ........................................................................18 Special Provider Organizations ..........................................................................................19 DME Suppliers .......................................................................................................19 Skilled Nursing Facilities ........................................................................................20 Home Health Agencies ..........................................................................................20 Independent Diagnostic Testing Facilities ...............................................................21 Comprehensive Outpatient Rehabilitation Facilities ..............................................22 Clinical Laboratories ..............................................................................................22 Ambulatory Surgical Centers .................................................................................22 Summary and Conclusion ................................................................................................23 3 Anatomy.of.a.Prospective.Payment.System.................................................................25 Introduction......................................................................................................................25 vii viii ◾ Contents Necessary Elements ..........................................................................................................29 PPS Coverage ........................................................................................................29 PPS Unit of Service .................................................................................................31 PPS Classification Systems ......................................................................................33 Developing Categories or Groups ..........................................................................34 Determining Payment Amounts .............................................................................35 Unusual Circumstances for Additional Payments ...................................................36 Special Incentives/Constraints ................................................................................37 Coding for PPSs ...............................................................................................................38 Cost Reports ....................................................................................................................39 Hospital Chargemasters ...................................................................................................40 Relative Weights ...............................................................................................................42 Conversion Factor ............................................................................................................46 Chapter Summary .............................................................................................................47 4 Medicare.Severity.Diagnosis.Related.Groups.(MS-DRGs).........................................49 Introduction.....................................................................................................................49 Terminology .....................................................................................................................49 Historical Background .....................................................................................................50 MS-DRG Design Features ...............................................................................................50 Coverage .................................................................................................................51 Unit of Service ........................................................................................................51 Classification System ...............................................................................................52 MS-DRG Categories..............................................................................................54 MS-DRG Grouping ...............................................................................................56 MS-DRG Relative Weights .....................................................................................57 Case-Mix Index (CMI) .............................................................................58 ICD-10 Coding: The Key for Optimizing MS-DRG Reimbursement .......59 Conversion of M-DRGs to MS-DRGs .............................................................................62 Payment Process ...............................................................................................................63 Transfers .................................................................................................................65 Cost Outliers ..........................................................................................................67 Special Types and Designations of Hospitals ..........................................................68 Documentation Features ..................................................................................................70 Additional Features for MS-DRGs ...................................................................................71 Three-Day Preadmission Window ..........................................................................71 Post-Acute Care Transfer .........................................................................................74 Present on Admission (POA) .................................................................................75 Updating Process for MS-DRGs .......................................................................................76 Variations of DRGs ..........................................................................................................77 Compliance Considerations .............................................................................................79 Quality Initiatives and Electronic Health Records .............................................................81 Summary and Conclusion .................................................................................................81 5 Ambulatory.Payment.Classifications.(APCs)..............................................................83 Introduction.....................................................................................................................83 Historical Background .....................................................................................................83
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