Medical Billing Module 9: Part 2

CMS Reimbursement Methodologies

All-Patient diagnosis-related groups (AP-DRGs)

DRG system adapted for use by third-party payers to reimburse hospitals for inpatient care provided to non-Medicare beneficiaries (e.g., BlueCross BlueShield, commercial health plans, TRICARE); DRG assignment is based on intensity of resources.

All-Patient Refined diagnosis-related groups (APR-DRGs)

system that classifies patients according to reason for admission, severity of illness (SOI), and risk of mortality (ROM).

ambulance fee schedule

payment system for ambulance services provided to Medicare beneficiaries.

ambulatory payment classifications (APCs)

prospective payment system used to calculate reimbursement for outpatient care according to similar clinical characteristics and in terms of resources required.

ambulatory surgical center (ASC)

is a state-licensed, Medicare-certified supplier (not provider) of surgical health care services that must accept assignment on Medicare claims. An ASC must be a separate entity distinguishable from any other entity or facility, and it must have its own employer identifier number (EIN) as well as processes for Accreditation, Administrative functions, Clinical services, Financial and accounting systems, Governance (of medical staff), Professional supervision, Recordkeeping and State licensure.

ambulatory surgical center payment system

uses the outpatient prospective payment system’s relative payment weights as a guide for reimbursing ambulatory surgery centers.

bundled payment

predetermined payment amount for all services provided during an episode of care.

Capitation

a single payment to a provider that covers for the provision of patient health care services during a specified period of time (e.g., annually, monthly), and it is typically associated with managed care.

case mix

the types and categories of patients treated by a health care facility or provider.

case-mix index

relative weight assigned for a facility’s patient population; it is used in a formula to calculate health care reimbursement.

case-mix management

allows health care facilities and providers to determine anticipated health care needs by reviewing data analytics about types and/or categories of patients treated.

case rate

predetermined payment for an encounter, regardless of the number of services provided or length of encounter.

clinical laboratory fee schedule

data set based on local fee schedules (for outpatient clinical diagnostic laboratory services).

comorbidities

coexisting conditions treated during hospitalization

complications

undesirable effect of disease or treatment that can change the patient’s outcome and may require additional treatment

conversion factor

dollar multiplier that converts relative value units (RVUs) into payments as part of the Medicare physician fee schedule (MPFS) calculation formula.

diagnosis-related groups (DRGs)

reimburses hospitals for inpatient stays and is based on the patient’s principal and secondary diagnoses (including comorbidities and complications) as well as surgical and other procedures (if performed).

disproportionate share hospital (DSH) adjustment

policy in which hospitals that treat a high percentage of patients with low incomes receive increased Medicare payments.

durable medical equipment, prosthetics/orthotics, and supplies (DMEPOS) fee schedule

Medicare reimburses DMEPOS dealers according to either 80 percent of the actual charge for the item or the fee schedule amount, whichever is lower.

End-Stage Renal Disease prospective payment system (ESRD PPS)

provides a single, per-treatment payment to ESRD facilities that covers all resources used in providing outpatient dialysis treatments

episode of care

period of time during which care is provided for a particular condition.

Federally Qualified Health Centers Prospective Payment System (FQHC PPS

national encounter-based rate with geographic and other adjustments; established by the Affordable Care Act and implemented in 2014; FQHCs include a payment code on claims submitted for payment and are paid 80 percent of the lesser of charges, based on FQHC payment codes or the FQHC PPS rate.

fiscal year

for the federal government, October 1 of one year to September 30 of the next.

global payment

one payment that covers all services rendered by multiple providers during an episode of care.

grouper software

determines appropriate group (e.g., diagnosis-related group, home health resource group, and so on) to classify a patient after data about the patient is input.

health insurance prospective payment system (HIPPS) code set

five-digit alphanumeric codes that represent case-mix groups about which payment determinations are made, such as for the HH PPS.

Home Assessment Validation and Entry (HAVEN)

data entry software used to collect OASIS assessment data for transmission to state databases.

home health prospective payment system (HH PPS)

reimbursement methodology for home health agencies that uses a classification system called home health patient-driven groupings model (PDGM), which establishes a predetermined rate for health care services provided to patients for each 60-day episode of home health care.

hospital-acquired conditions (HACs)

medical conditions or complications that patients develop during inpatient hospital stays and that were not present at admission (e.g., pressure ulcers, hospital-acquired infections, pulmonary emboli). HACs are categorized as those that are high cost, high volume, or both; result in the assignment of a case to a MS-DRG that has a higher payment when present as a secondary diagnosis; and could reasonably have been prevented through the application of evidence-based guidelines.

incident to billing

office visit services provided by nonphysician practitioners may be reported to Medicare when supervised by a physician who is present in the office.

indirect medical education (IME) adjustment

approved teaching hospitals receive increased Medicare payments, which are adjusted depending on the ratio of residents-to-beds (to calculate operating costs) and residents-to-average daily census (to calculate capital costs).

inpatient prospective payment system (IPPS)

system in which Medicare reimburses hospitals for inpatient hospital services according to a predetermined rate upon patient discharge.

Inpatient Psychiatric Facility Prospective Payment System (IPF PPS)

system in which Medicare reimburses inpatient psychiatric facilities according to a patient classification system that reflects differences in patient resource use and costs; it replaces the cost-based payment system with a per diem IPF PPS.

Inpatient Rehabilitation Facility Prospective Payment System (IRF PPS)

implemented as a result of the BBA of 1997; utilizes information from a patient assessment instrument to classify patients into distinct groups based on clinical characteristics and expected resource needs.

Inpatient Rehabilitation Validation and Entry (IRVEN)

software used as the computerized data entry system by inpatient rehabilitation facilities to create a file in a standard format that can be electronically transmitted to a national database; data collected is used to assess the clinical characteristics of patients in rehabilitation hospitals and rehabilitation units in acute care hospitals, and provide agencies and facilities with a means to objectively measure and compare facility performance and quality; data also provides researchers with information to support the development of improved standards.

intensity of resources (IR)

relative volume and types of diagnostic, therapeutic, and inpatient bed services used to manage an inpatient disease.

intensity of services (IS)

determining whether provided services are appropriate for patient’s current or proposed level of care (e.g., IV medications, heart monitoring, surgery).

IPPS 3-day payment window

requires that outpatient preadmission services provided by a hospital for a period of up to three days prior to a patient’s inpatient admission be covered by the IPPS DRG payment for diagnostic services (e.g., lab testing) and therapeutic services when the inpatient principal diagnosis code (ICD-10-CM) exactly matches that for preadmission services.

IPPS 72-hour rule

see IPPS 3-day payment window: requires that outpatient preadmission services provided by a hospital for a period of up to three days prior to a patient’s inpatient admission be covered by the IPPS DRG payment for diagnostic services (e.g., lab testing) and therapeutic services when the inpatient principal diagnosis code (ICD-10-CM) exactly matches that for preadmission services.

IPPS transfer rule

any patient with a diagnosis from one of ten CMS-determined DRGs, who is discharged to a post acute provider, is treated as a transfer case; this means hospitals are paid a graduated per diem rate for each day of the patient’s stay, not to exceed the prospective payment DRG rate.

limiting charge

maximum fee a nonparticipating provider (nonPAR) who does not accept assignment may bill Medicare patients for procedures and services provided.

long-term (acute) care hospital prospective payment system (LTCH PPS)

classifies patients according to long-term (acute) care DRGs, which are based on patients’ clinical characteristics and expected resource needs; replaced the reasonable cost-based payment system.

major diagnostic category (MDC)

organizes diagnosis- related groups (DRGs) into mutually exclusive categories, which are loosely based on body systems (e.g., nervous system).

Medicare code editor (MCE)

software program used to detect and report errors in ICD-10-CM/PCS coded data during processing of inpatient hospital Medicare claims.

Medicare integrated outpatient code editor (I/OCE)

software that reviews outpatient claims submitted by hospitals, community mental health centers, comprehensive outpatient rehabilitation facilities, and home health agencies for coding validity and coverage, resulting in a disposition (e.g., rejection, denial).

Medicare physician fee schedule (MPFS) payment system

payment system that reimburses providers for services and procedures by classifying services according to relative value units (RVUs); previously known as Resource-Based Relative Value Scale (RBRVS) system.

Medicare severity diagnosis-related groups (MS-DRGs)

adopted by Medicare in 2008 to improve recognition of severity of illness and resource consumption and reduce cost variation among DRGs; bases DRG relative weights on hospital costs and greatly expanded the number of DRGs; reevaluated complications/comorbidities (CC) list to assign all ICD-10-CM codes as non-CC status (conditions that should not be treated as CCs for specific clinical conditions), CC status, or major CC status; handles diagnoses closely associated with patient mortality differently depending on whether the patient lived or expired.

Medicare Summary Notice (MSN)

notifies Medicare beneficiaries of actions taken on claims.

Never Events

medical errors that should never occur (e.g., wrong-site surgery) and adverse events that are unambiguous (clearly identifiable and measurable), serious (resulting in death or significant disability), and usually preventable.

new technology add-on payment (NTAP)

provided for certain new medical services and technologies under the inpatient prospective payment system according to criteria that must be met for additional payment eligibility.

Outcomes and Assessment Information Set (OASIS)

group of data elements that represent core items of a comprehensive assessment for an adult home care patient and form the basis for measuring patient outcomes for purposes of outcome-based quality improvement.

outlier

hospitals that treat unusually costly cases receive increased Medicare payments; the additional payment is designed to protect hospitals from large financial losses due to unusually expensive cases.

outpatient encounter

includes all outpatient procedures and services (e.g., same-day surgery, x-rays, laboratory tests, and so on) provided during one day to the same patient.

outpatient prospective payment system (OPPS)

uses ambulatory payment classifications (APCs) to calculate reimbursement; was implemented for billing of hospital-based Medicare outpatient claims.

patient-driven payment model (PDPM)

case-mix reimbursement system that connects payment to patients’ conditions and care needs instead of the volume of services provided; impacts intermediate care facilities, long-term acute care facilities, and skilled nursing facilities.

payment system

reimbursement method the federal government uses to compensate providers for patient care.

per diem

Latin term meaning “for each day,” which is how retrospective cost-based rates were determined; payments were issued based on daily rates.

present on admission (POA)

condition that exists at the time an order for inpatient hospital admission occurs; when a condition develops during an outpatient encounter, including emergency department services, observation care, or outpatient surgery, and the patient is admitted as a hospital inpatient, such conditions are considered present on admission.

price transparency

federal government requirement costs of health care items and services are available to patients prior to provision.

prospective cost-based rates

rates established in advance, but based on reported health care costs (charges) from which a prospective per diem rate is determined.

prospective payment system (PPS)

issues predetermined payment for services, such as bundled payments, capitation, case rates, and global payments.

prospective price-based rates

rates associated with a particular category of patient (e.g., hospital inpatients) and established by the payer (e.g., Medicare) prior to the provision of health care procedures and services.

relative value units (RVUs)

standardized measures used to determine MPFS pricing amounts that are adjusted to reflect the variation of practice costs from area to area; the standardized measures include physician work, practice expense, and malpractice expense.

Resident Assessment Validation and Entry (jRAVEN)

java-based data entry system used to enter MDS data about SNF patients and transmit those assessments in CMS-standard format to individual state or national databases.

retrospective reasonable cost system

reimbursement system in which providers reported actual charges for care after each encounter, and payers provided reimbursement according to a fee schedule, a percentage of billed charges, or a per diem basis.

retrospective reimbursement methodology

see retrospective reasonable cost system: reimbursement system in which providers reported actual charges for care after each encounter, and payers provided reimbursement according to a fee schedule, a percentage of billed charges, or a per diem basis.

risk of mortality (ROM)

likelihood of dying.

Root cause analysis (RCA)

is a structured method used to analyze serious adverse events, with the goal of identifying what happened, why it happened, and how to prevent it from happening again

severity of illness (SOI)

extent of physiological decompensation or organ system loss of function.

Skilled Nursing Facility Prospective Payment System (SNF PPS)

implemented to cover all costs (routine, ancillary, and capital) related to services furnished to Medicare Part A beneficiaries and generating per diem case-mix adjusted payments for each admission as part of a patient-driven payment model (PDPM) using a minimum data set and relative weights developed from staff time data.

split or shared E/M visit billing

hospital or skilled nursing facility services reported to Medicare when provided by a physician and nonphysician practitioners (NPP) who are members of the same group; office visits are excluded because Medicare’s incident-to billing applies; the visit is billed by the physician or NPP who provides the substantive portion of the visit, defined as more than half of the total time spent during the encounter, and modifier -FS is reported.

wage index

adjusts payments to account for geographic variations in hospitals’ labor costs.