Inpatient Facility Coding & Compliance Alert

Hospitals give a lukewarm response to the IPPS increase of 0.9 percent, LTCHs seethe at 6.9 percent dip, and more…

The long awaited Hospital Inpatient Prospective Payment System (IPPS) and Long Term Acute Care Hospital (LTCH) Proposed Rule for fiscal year (FY) 2017 is here. This rule would affect the discharges occurring from 3330 acute care hospitals and 430 LTCHs from Oct. 1, 2016, onward.

“The Federal Registers (proposed and final) for IPPS, MPFS, and OPPS are enormously long,” says Duane C. Abbey, PhD, president of Abbey and Abbey Consultants Inc., in Ames, IA. “The only thing that hospitals (physicians and others) can do is to follow the key issues and then depend upon professional organizations to analyze, question and comments to the proposals. For IPPS this is basically the American Hospital Association.”

Keep reading to learn how these updates might affect you.

Know the Red Hot Highlights

CMS has estimated that all in all, Medicare expenditures on inpatient services will supposedly increase up to $539 million by FY 2017. Further, CMS has proposed to increase the operating payment rates by 0.9 percent for the general acute care hospitals under IPPS. To reap these benefits, hospitals should be meaningful electronic health record (EHR) users and should have successfully complied with the Hospital Inpatient Quality Reporting (IQR) Program.

Background

-CMS pays acute care hospitals for inpatients under IPPS
-Long-term hospitals are under LTCH PPS
-CMS sets payment rates based on a patient’s diagnosis and severity of illness
-Hospitals receive a single payment based on the MS-DRG payment classification
-IPPS updated annually to account for changes in cost of goods and services

Comply or pay dearly: Hospitals that were not able to participate in the Hospital IQR program successfully (or were not able to submit their requisite quality data) will have to face the music with one-fourth reduction to their market basket update. Furthermore, as per the law, hospitals who happen not to be meaningful EHR users will face a whopping three-fourth reduction in their market basket update next year!

The two midnight rule’s inpatient cut is dropped: The decision to undo the proposed inpatient cut came on the heels of a court case in September 2015. The hospitals had questioned a 0.2 percent reduction for inpatient claims, to adjust for the expected increase in Medicare costs associated with the two-midnight rule. According to this rule, a hospital stay spanning two midnights or more can be billed as an inpatient stay. CMS’s intention behind the 0.2 percent annual reduction was to discourage an increase in observation stays. Later, CMS decided to undo this annual reduction policy.

Explaining this complex interplay of policy versus reimbursement issues is not easy.

“CMS happens to think in terms of overall national statistics,” analyses Abbey. “Hospitals tend to think at a much more local level, that is, what impact is there on a given individual hospital. This dichotomy comes out in many different forms. Thus, the impact of a change such as the 2-midnight rule may have a significant impact (or not) on a given hospital, but from CMS’s perspective on a national basis, everything averages out on a statistical basis.” Of course, it is not possible for CMS to assess individual hospital impacts, and it is the national overall impact that guides CMS’s course of actions.

LTCH payments to dip: Long-term-care hospitals need to tread cautiously, as the CMS proposes a reduce payments by 6.9 percent, translating to a cumulative amount of $355 million next year, based on a new site-neutral policy for less crucial cases. There’s still hope, as CMS further proposes to streamline the 25 percent threshold policy. This policy refers to the payment adjustment CMS imposes on an LTCH, when the number of cases an LTCH admits from a single hospital shoots higher than a threshold of 25 percent.

There are many more new measures and programs listed in the rule.

The Hospital readmissions reduction program (HRRP): This program aims to decrease a hospital’s base operating DRG payment, in case there are excess readmissions observed within a three year observation window, for conditions including:

• Pneumonia, heart failure (HF),
• Total hip arthroplasty/total knee arthroplasty (THA/TKA),
• Acute myocardial infarction (AMI),
• Chronic Obstructive Pulmonary Disease (COPD).
• A fifth condition Coronary Artery Bypass Graft (CABG) which adds up in the list from 2017.

The Hospital IQR Program: Further, we have four new claims based measures for The Hospital IQR Program, and removal of 15 existing measures, for FY 2019. The Hospital Value-Based Purchasing (VBP) Program is in for expansion of the number of measure in near future.

Medicare Outpatient Observation Notice (MOON): Furthermore, within the Federal Register entry there is the proposed regulation for the Notice of Observation Treatment and Implication for Care Eligibility Act (NOTICE Act). Within this act, the hospitals and CAHs should be providing a notice, known as Medicare Outpatient Observation Notice (MOON), to a Medicare enrollee undergoing outpatient treatment in the hospital for more than 24 hours; informing them of their outpatient status with oral explanation, and cost implications as well.

Final takeaway: “The volume of the proposed changes is almost overwhelming,” says Abbey. “There are many different issues and we will have to await any changes that may occur in the final rule that may be different from that which was proposed. Most of the issues stem from overall payment, and thus financial projections are in order at the individual hospital level. Some of the changes will affect operations for documentation and provision of care. Thus, hospitals will need to prepare to accommodate requirements in order to forestall any payment reductions. As appropriate, hospitals should be prepared to comment to the proposals in the IPPS update Federal Register, particularly those that are most egregious to them.”