Medicare Compliance & Reimbursement

Yet another class of health care providers will soon bid farewell to cost-based Medicare reimbursement.

The Centers for Medicare & Medicaid Services Nov. 19 unveiled a new proposed prospective payment system for inpatient psychiatric facilities. The proposal, also published in the Nov. 28 Federal Register, will affect 2,000 facilities nationwide, including freestanding psych hospitals and certified psychiatric units in general acute care hospitals.

The PPS will be rooted in a base per diem amount which is designed to cover nearly all costs for providing inpatient psychiatric care, including routine, ancillary and capital costs. The per diem won't cover bad debt and other costs that are paid separately.

The base per diem rate will be adjusted for a number of factors, including the following:

Specific facility characteristics that increase the cost of care. These include: adjustments to reflect geographic differences in wages; payment boosts for rural facilities; and increases for teaching facilities.

 Factors that play into the costs of individual patients' care, such as: the patients specific psychiatric condition - i.e., the applicable diagnosis related group familiar from the hospital inpatient PPS; medical and psychiatric comorbidities that can complicate treatment; the age of the patient; and how far along the patient is in his or her treatment. In particular, CMS will provide a higher per diem rate for the first 8 days of the stay to reflect the higher costs of care at admission and the first few days thereafter.

The proposal also contains provisions for outlier payments and policies for handling interrupted stays. CMS plans to implement the PPS over a three-year transition period.

Lesson Learned: Inpatient psychiatric facilities should prepare themselves for the advent of a new Medicare reimbursement scheme.