Spring Conference 2015: Board Breakout
Rural Factors Affecting Reimbursement – Getting Paid 101
KATHY WHITMIRE | APRIL 15, 2015
Rural Factors Affecting Reimbursement
Reimbursement complexity growing due to:
Effects of ACA – Medicare value‐based adjustments
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Medicare Cost‐based reimbursement eroding with 30%+ going to Medicare Advantage plans
Growing Complexity with 25+ payer platforms Commercial Payers implementing value‐based incentives and penalties for poor performance.
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Quality – HCAHPS – Readmissions – HAC’s
Narrow networks exclude poor performing providers
Self Pay / No pay growing – mainly due to high deductible health plans with $5000 deductibles.
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Spring Conference 2015: Board Breakout
Rural Factors – 30% reduction of Medicare
Cost Reimbursement due to Part C growth
Medicare advantage plans account for 30% of total Medicare spending – diluting cost‐based reimbursement
file:///C:/Users/H/Documents/Medicare/Medicare%20Advantage/2052-18-medicare-advantage%20(1).pdf
How are hospitals paid?
• Inpatient –
CAH ‐ Per diem, PPS ‐ MS‐DRG • Outpatient ‐ CAH ‐% of Charges, CCR
PPS ‐ APC’s, Fee Schedule
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Spring Conference 2015: Board Breakout
So how are rural hospitals reimbursed?
Critical Access Hospitals – CAH • 25 beds or less – Paid 101% of Cost
• Inpatient ‐ Per diem (based on previous year’s total cost divided by number of Medicare days) • Outpatient ‐% of Charges (based on % of cost to charges – Cost to Charge Ratio ‐ CCR
So how are rural hospitals reimbursed?
Perspective Payment System – PPS • 26+ beds –
• Inpatient ‐ DRG – Diagnosis Related Group
(based on severity‐level – bundled payment for all charges related to Admitting diagnosis) • Outpatient ‐ APC – Ambulatory Payment Classification ‐ (based on type of service –
bundled payment for outpatient procedures)
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Spring Conference 2015: Board Breakout
How DRG Payments are Calculated
The Inpatient Perspective Payment System (PPS) is a complex calculation in which begins with each case being categorized into a diagnosis‐related group (DRG). Each DRG has a payment weight assigned to it. Payment weights are affected by factors such as:
• Acuity/Severity Level of the case
• Geographic location (cost of living adjustment factor), – Area Wage Index (AWI)‐ 42 Rural hospitals .75
» Compared to MSA ‐ Metro Atlanta at .94
• the number of low‐income patients (DSH adjustment – going away under ACA ),
• whether that facility is a teaching facility (IME adjustment), APC Payment Calculation
• APC payments are determined by multiplying an annually updated ʺrelative weightʺ for a given service by an annually updated ʺConversion Factorʺ. • CMS publishes the annual updates to ʺrelative weightsʺ (including adjustment factors) and the ʺconversion factorʺ in the November ʺFederal Registerʺ. • The 2014 APC BASE RATE is $71.313. (same in 2015)
• For example, to calculate the APC payment for APC 006 (includes Incision & Drainage of simple abscess—CPT 10060):
• Relative Weight for APC 006 = 1.7592 Conversion Factor for 2014= $71.313
• 1.7592 X $71.313 = $125.45 payment for APC 006 for year 2014 (for the ʺaverage US hospital)ʺ.
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GO TO: http://www.irpsys.com/fedregs/apcwt130101.htm
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Spring Conference 2015: Board Breakout
Hospital Remittance Advice
Net Reimbursement 1001.93
Less Pat Resp – 287.59
Less 2% Sequestration Cut (CARC 223)-20.04
Net Payment = 693.30
CLEAR AS MUD
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Spring Conference 2015: Board Breakout
ACA driving Volume‐based care
to Value‐based healthcare
From an interview with consultant and health care futurist Ian Morrison, Ph.D . . . • Weʹre in this shift, but thereʹs not much agreement and clarity about the exact pace of change. • Thatʹs because when youʹre a volume‐based business, youʹre trying to fill a hospital; in the population health‐based model, youʹre trying to empty it. • When people confront the financial and clinical realities of what that means, they say, ʺWait a second!”
# 1 Rural Challenge with Value‐based care
First, rural hospitals struggle with clinical integration —
bringing doctors on board and building a culture of accountability for performance
—Accountable Care ‐being held accountable for performance based on quality and economic efficiency.
‐ reluctance to implement Electronic Health records (EHR) – Meaningful Use
‐ ICD‐10 –push back by physicians to document with specificity in order to code and be paid accurately
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Spring Conference 2015: Board Breakout
PPACA Payment Reform –
puts safety net hospitals at higher risk In order to achieve $716 Billion in Cuts:  Value‐Based Purchasing ‐ VBP is a payment methodology that rewards quality of care through payment incentives earned from a 1.5% pot contributed by all hospitals.  Readmission Penalty – up to 3% for readmissions for same Dx within 30 days.
 Hospital Acquired Conditions – top 25th percentile will receive a 1% penalty on all Medicare payments
 Meaningful Use – EHR – Hospitals/Physicians that have not achieved Stage 1 MU will receive a 1% penalty each year up to 5%
ACA initiatives mandate potential of 11% in
Cuts to Medicare Reimbursement over 5 years
ACA – Billions in Cuts, Complexity of Value‐Based Care, = Rural Hospital Closures
+ SEQUESTRATION 2%
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Spring Conference 2015: Board Breakout
IN SUMMARY:
What Does All This Mean?
• As many as 10‐15 Rural Hospital may close in next 24 months
• Access to rural citizens will be devastated.
• Telemedicine and tele‐monitoring (I‐phone I[ad e.g.) will become alternative access site
• Mid Levels will become a “standard of care” and customary way of doing business in view of major physician shortages
What Does All This Mean?
• Reimbursement complexity will get even worse as insurers use precertification’s and denials and narrow networks
• Employed physicians will approach a majority of physicians for the 42% currently employed
• This will influence access as networks are narrowed
• Insufficient physicians available to support ACA increased Medicaid coverage this overrunning the rural hospital ER’s as an alternate for primary care thus more closures
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Spring Conference 2015: Board Breakout
What is the role of HomeTown Health to help Rural Hospitals Survive:
EDUCATION – EDUCATION ‐ EDUCATION
•Advocacy ‐ Grass Roots – Local County Support
•Hospital Authority / Board Education on Reimbursement.
•Monthly Medicaid & Medicare Webinars providing hospitals with updates & training. •HTHU.net – Online university to educate rural staff on new regulations – 7000 students across rural America •Board Education Opportunities like today!
THANK YOU!
Questions?
Jimmy Lewis, CEO
[email protected]
770-363-7453
Kathy Whitmire, Managing Director
[email protected]
706-491-3493
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