Health Insurance and Reimbursement ch 2

Health Insurance and Reimbursement

Introduction
  • The US healthcare financing system is complex and inefficient compared to other developed countries.
  • The US must decide how to proceed with healthcare and health reform.
  • The Patient Protection and Affordable Care Act (ACA) in 2010 brought significant changes:
    • Largest Medicaid expansion in nearly 40 states.
    • Decreased rate of uninsured Americans.
    • Introduced new payment models:
      • Pay-for-performance.
      • Bundled Payments for Care Improvement (BPCI).
      • Hospital Readmissions Reduction Program (HRRP) in 2013.
  • The US spends almost 18% of its gross domestic product (GDP) on healthcare services, while other wealthy countries average 8.7%.
    • 17.7%17.7\% of GDP in 2019, up from 5% in 1960.
  • The US has the lowest rates for life expectancy and the highest rates of chronic disease, suicide, and obesity compared to European countries.
  • The fundamental principles of healthcare in the US are value, integration, and quality.
Funding Healthcare Services
  • In the US, healthcare funding comes from various sources:
    • Private insurance, employers, out-of-pocket payments, taxes, Medicare, Veterans Affairs, etc.
  • Money goes to various sources:
    • Private hospitals, government hospitals, military doctors, academic physicians, pharmaceuticals, home healthcare agencies, etc.
  • The US has a fragmented healthcare system.
  • Reimbursement is how entities get paid for providing healthcare services.
  • Reimbursement typically occurs through a third-party, an insurance company.
  • Historically, healthcare reimbursement was a fee-for-service exchange.
  • In the 1930s, employment-based health insurance programs began.
  • In the mid-1960s, Medicare and Medicaid were introduced.
  • In the 1970s, managed care entered the market to reduce healthcare expenditures by increasing cost-sharing.
  • The healthcare system has increasingly focused on value, holding providers accountable and adding incentives/disincentives based on value.
Components of Health Systems
  • Health systems have five components:
    • Financing mechanism.
    • Facilities.
    • Workforce.
    • Providers of healthcare therapeutics.
    • Educational and research institutions.
  • Doctor of Nursing Practice (DNP) programs form an integral part of the healthcare system.
  • There is no single national structure in America dedicated to paying for healthcare.
AACN Essentials Related to Reimbursement
  • The American Association of Colleges of Nursing (AACN) developed essential elements for nursing education.
  • Domain 7: Systems-based Practice pertains to organizational and systems leadership for quality improvement and systems thinking.
  • Knowledge of business and finance principles equips the DNP to collaborate on an interprofessional basis.
  • Knowledge of payers, documentation, billing and coding processes, and the prospective payment system (PPS) complements the DNP's clinical and scientific knowledge base.
Focus of the Chapter
  • Focuses on acute care settings, starting with the context in which health insurance operates.
  • Reviews relevant AACN Essentials.
  • Presents the view of executives in healthcare organizations and systems.
  • Discusses trends in healthcare as reimbursements have moved from volume-based to value-based models.
  • Details third-party collection in the diagnosis-related groups (DRGs) reimbursement framework for advanced practice nursing.
  • Covers essential aspects of value-based purchasing and pay-for-performance models.
  • Includes health insurance and reimbursement in nonacute care settings.
  • Includes a legislative update on healthcare reform.
  • Knowing where the money comes from and how it is paid equips the DNP graduate to appreciate the intricacies involved in transferring payment.
Health Insurance
  • Reimbursement varies by the source of payment, one of which is health insurance.
  • A health insurance policy is an agreement between a person and an insurance company.
  • The insurance company covers certain benefits, called covered services.
  • Treatment may or may not be covered by a specific insurance policy.
  • Insurance companies study populations and develop actuarial tables.
  • Healthcare is an imperfect economic market and does not conform to the conventional economic theory of supply and demand.
  • Arrow (1963) described differences as uncertainty, asymmetry of information, and nonmarketability of risks.
  • Uncertainty: Knowledge is exploding, yet understanding remains limited.
  • Asymmetry: Patients know more about their history, providers know more about disease processes.
  • Nonmarketability of risk (moral hazard): People behave differently when insured.
  • The financing mechanism in healthcare represents only one component of health systems.
  • The healthcare financing mechanism in the US is not centralized.
Sources of Health Insurance
  • Main sources of health insurance for Americans:
    • Federal government, state governments, commercial insurers, and self-insurance.
  • U.S. Census Bureau (2020) reported that 8% of people are uninsured.
  • Of those insured, 68% had private insurance and 34.1% had public insurance.
  • The vast majority of individuals with private insurance have an employment-based plan.
  • Of those individuals with public insurance, roughly half are covered by Medicare and the other half with Medicaid.
    • Some individuals are on both Medicare and Medicaid (dual-eligibles).
Health Insurance Terminology
  • Benefit: The amount the insurance company pays when the insured suffers a loss.
  • Premium: The amount paid by individuals, typically monthly, for their healthcare coverage.
  • Preapproval: A requirement set forth by an insurance company to approve certain care before it is provided.
  • Benefit Period: The amount of time involved in an individual claim.
    • In the case of hospitalization, this includes the first day of the hospital stay through the day of discharge, and often up to 60 days after release from the facility.
  • Cafeteria Plan: Offers a choice between two or more benefits or a choice between a benefit or cash.
  • Claim: A request to the insurance company to pay benefits for a loss.
  • Consolidated Omnibus Budget Reconciliation Act (COBRA): A federal law that allows employees to continue their coverage through self-pay after they leave employment.
  • Co-payment: A small charge the insured pays at the time service is received.
  • Deductible: The amount of covered expenses the insured must pay out of pocket before the insurance company pays.
  • Federal Poverty Level (FPL): Poverty thresholds used by the U.S. Census Bureau to determine poverty status.
    • In 2021, the FPL for one person is $12,880\$12,880 and for a family of four is $26,500\$26,500.
  • Health Maintenance Organization (HMO): A medical organization providing a wide range of services for a specified group of enrollees for a fixed, prepaid premium.
  • Managed Care: Coordination of financing and delivery of healthcare services to produce quality yet affordable healthcare coverage.
    • Managed care puts limits on the use of services and the charges of providers.
  • Out-of-Network Care: Medical services obtained by managed care plan members from noncontracted healthcare providers.
  • Preferred Provider Organization (PPO): Managed care arrangement consisting of a group of hospitals, physicians, and other providers contracted with an insurer, employer, or other group.
  • Denying the Claim: When an insurance company does not pay a bill because the service was not covered, or because preapproval or other conditions were not met.
Primary Types of Insurance
  • Federal: Medicare
    • Provides access to care for individuals 65 years of age and older, those younger than 65 with long-term disabilities, and those with end-stage renal disease.
    • Medicare has four parts:
      • Part A (Hospital Insurance): Covers hospital care, limited care in a skilled nursing facility (SNF), and hospice and home healthcare. Funded mostly by Social Security taxes.
      • Part B (Supplementary Medical Insurance): Covers physician and certain other health professional services, hospital outpatient care, and certain other services. Funded from general revenues and enrollee premium payments.
      • Part C (Medicare + Choice): Permits Medicare beneficiaries to enroll in managed care organizations.
      • Part D (Medicare Prescription Drug Coverage): Funded primarily through individual premiums.
  • State: Medicaid
    • Designed to meet the healthcare needs of low-income adults, children, pregnant women, elderly adults, and people with disabilities.
    • Managed by the individual states, serving 74.5 million people.
      • 17 million individuals enrolled as part of some states' Medicaid expansion through the ACA of 2010.
    • Jointly funded by the states (approximately 63%) and by the federal government.
Employer-Sponsored Private Health Insurance
  • Insurance offered by companies to their employees.
    • Examples: Blue Cross/Blue Shield, United Healthcare, Aetna, etc.
  • The cost of the premium is typically shared between the employee and employer.
  • Some companies self-insure, but generally, these plans are administered by a health insurance company.
  • Average annual premiums for 2020 were $7,470\$7,470 for single coverage and $21,342\$21,342 for families.
The Uninsured
  • The percentage of those who are uninsured in America dropped significantly after passage of the Affordable Care Act.
    • From a high of 17.8% in 2010 to 10.9% in 2019.
  • The uninsured are typically nonelderly adults and members of working families.
    • Unable to afford coverage.
    • Do not have coverage offered through their employer.
    • Younger than 65 and thus not eligible for Medicare.
    • Above the income thresholds for Medicaid eligibility.
Reimbursement: Healthcare Dollars
  • In 2019, the United States spent approximately $3.8\$3.8 trillion on health services.
    • About 18% of the national GDP.
    • Up from 5 cents from every dollar in 1960.
  • Unlike countries with a single-payer system, in the United States, all the money paid for health services comes from the general population.
  • Three pathways for money to travel from the population to those providing health services:
    • Via government.
    • Via insurance and managed care companies.
    • Direct out-of-pocket payment.
  • In 2019, from the total healthcare expenditures in the United States:
    • Approximately 31% went to hospitals.
    • 20% to physicians and clinics.
    • 10% went to prescription drugs.
  • Medicare spending grew 6.7% to $799.4\$799.4 billion.
  • Expenditures for acute care hospital costs increased 6.2% to $1.2\$1.2 billion.
  • The United States pays more for sick care than preventive care.
    • Only 8% of adults over the age of 35 receiving all recommended preventive services in 2015.
    • More than 75% of all healthcare expenditures in the United States going toward people with chronic conditions.
Influence of Government in Healthcare
  • Federal, state, and local governments participate in financing in three ways:
    • Direct payment for its own programs.
      • Department of Veterans Affairs.
      • Department of Defense Military Health System.
      • Municipal hospitals serving the poor.
      • The U.S. DHHS operates more than 100 different programs in 11 divisions.
      • The Centers for Medicare & Medicaid Services (CMS) is one of the DHHS's 11 divisions.
    • Payment for grants and contracts for biomedical research and medical education.
      • National Institutes of Health.
      • Health Resources and Services Administration.
    • Payment for delivering care to patients.
      • Medicare and Medicaid.
  • CMS, including both Medicare and Medicaid, accounts for 37% of total healthcare spending in the United States.
Types of Provider Payment: Reimbursement Models
  • Five basic types of payments made to providers:
    • Cost/Cost Plus
    • Fee for Service
    • Fixed Price
    • Capitation
    • Value
  • Cost/Cost Plus: The provider organization is reimbursed for actual costs plus an additional percentage of those costs to generate a margin.
  • Fee for Service: A set fee is billed at the risk of needing additional services at the time of treatment.
    • The local market drives the rates that patients are willing to pay.
    • Becoming less frequent as value-based systems of reimbursement become more common.
  • Fixed Price: Charging a fixed price for treating a certain disease condition.
    • The DRG system falls into this category.
    • The provider is rewarded for efficiency.
    • Dangers include fraudulent "up-coding," seeking healthier patients, and giving prevention low priority.
  • Capitation: The provider is paid a fixed amount per member of a health plan per month.
    • This is the common way of paying for Veterans Affairs hospitals, state mental hospitals, and local health department clinics.
  • Value: The organization providing the services is rewarded for the value delivered.
    • The federal government is increasingly defining value in terms of quality and safety.
    • Hospitals will not be reimbursed for care resulting from avoidable falls, errors, infections, and other adverse events such as readmissions for the same diagnosis within 30 days of discharge.
Diagnosis Related Group-Based Reimbursement
  • The traditional payment system used in the United States today is the prospective payment system (PPS).
  • The PPS operates based on DRGs.
  • Financing refers to funding source, whereas payment refers to the method used to move money from consumers to providers.
  • The payment system is prospective in that defined reimbursement for services is set forth first, before the services are provided.
  • The hospital receives a preset flat rate for the DRG, regardless of the volume or type of services provided to the patient.
  • More than 13,000 diagnostic codes have been developed by CMS.
  • In 2009, the United States' (U.S.) Department of Health and Human Services (DHHS) released a final rule calling for the adoption of a new edition of the International Statistical Classification of Diseases and Related Health Problems (ICD) standards known as the ICD-10, which uses Clinical Modifications (CM) and the Procedure Coding System (PCS).
  • ICD-10-PCS codes are strictly intended for use by hospitals to report inpatient procedures; these are not used for outpatient or physician billing.
Documentation, Billing and Coding
  • To bill for services, insurance companies require the use of specific medical documentation guidelines, classifications, reimbursement codes, and evidence of current credentials.
  • A standard language is used to record and classify care:
    • The evaluation and management (E&M) services guidelines, which have seven components (nature of presenting problem, history, physical examination, medical decision-making, counseling, coordination of care, and time).
    • ICD-10-CM codes.
    • The Current Procedural Terminology (CPT) codes are used for outpatient procedures.
  • ICD-10 codes consist of three to seven characters for coding diagnoses and seven alphanumeric characters for coding procedures.
  • ICD-10-CM codes are used for all inpatient and outpatient diagnoses.
  • ICD-10-PCS codes are used for the hospital inpatient setting only.
  • Example of ICD-10 diagnostic code: S12-9XX A
    • S12 = Category
    • 9XX = Etiology, anatomic site, severity
    • A = Added code extension (seventh character) for obstetrics, injuries, and external causes of injury
  • Example of ICD-10-PCS structured format procedure code (medical/surgery): 1234567
    • 1 = Section
    • 2 = Body system
    • 3 = Root operation
    • 4 = Body part
    • 5 = Approach
    • 6 = Device
    • 7 = Qualifier
Technology
  • Payers recognize the need for data to inform them if levels of quality and cost are in an acceptable range.
  • The electronic health record contains such information, but its use is not pervasive in the United States.
  • DNPs serve an important role in helping design and implement these systems, in using the systems for data collection to answer empirical questions, and improving the interface between the systems and the people who use them.
Value-Based Reimbursement Options
  • Fee for value is a collective term.
  • Healthcare systems will experiment with a combination of these models depending on their specific markets.
  • Healthcare systems and providers have many value-based models to choose from:
    • Pay-for-performance (P4P).
    • Shared savings.
    • Bundled payments.
    • Shared risk.
    • Global capitation.
    • Provider-sponsored health plans (PSHPs).
  • CMS has introduced multiple pay-for-performance or value-based care-purchasing models to promote quality and safety of patient care while improving efficiency and clinical outcomes to Medicare patients.
  • Purchasers and payers of healthcare services, to include CMS, have embraced P4P/VBP strategies to improve the quality and cost-effectiveness of care while achieving high value for their healthcare dollars.
  • Meaningful improvements in patient outcomes and quality of care have not been achieved and some safety-net hospitals may be negatively impacted by these programs.
Hospital Value-Based Purchasing for Reimbursement
  • The hospital-based VPB (HVBP) program has three primary aims:
    • Improve the quality of patient care.
    • Improve efficiency of care and the services provided.
    • Improve patient experience and safety of care.
  • Compliance with these goals is achieved through a process of incentives and disincentives to inpatient hospital reimbursements based on quality and patient satisfaction scores.
  • These scores are compared on two levels:
    • Performance as it relates to established internal benchmarks.
    • Hospital performance as it relates to the performance of all other hospitals.
  • Hospitals must strive to develop an innovative culture of continuous quality improvement focused on:
    • Eliminating or reducing adverse events.
    • Adopting evidence-based care standards and protocols to obtain the best outcomes.
    • Incentivizing hospitals to improve patient experience.
    • Increasing the transparency of care quality for consumers, clinicians, and others.
    • Recognizing hospitals that provide high-quality care at a lower cost to Medicare.
Hospital Readmissions Reduction Program
  • The Hospital Readmissions Reduction Program (HRRP) of 2013 is a CMS value-based purchasing program.
  • Links payment to the quality of the hospital care provided and encourages improvement to the patient discharge process through incentives and disincentives.
  • The aim of the program is to reduce avoidable readmissions to the hospital through improved communication processes and care coordination that engages the patient and caregiver at discharge.
  • The CMS includes the following six conditions or procedure-specific 30-day risk-standardized unplanned readmission measures in the program:
    • Acute myocardial infarction (AMI).
    • Chronic obstructive pulmonary disease (COPD).
    • Heart failure (HF).
    • Pneumonia (PN).
    • Coronary artery bypass graft (CABG) surgery.
    • Elective primary total hip arthroplasty and/or total knee arthroplasty (THA/TKA).
Hospital-Acquired Conditions Program
  • The Hospital Acquired Conditions (HAC) Reduction Program is a CMS pay-for-performance program.
  • Links quality of inpatient care to payment or reimbursements.
  • The HAC Reduction Program encourages hospitals to implement evidence-based best practices to reduce their rates of hospital-acquired (iatrogenic) conditions and improve patient safety.
  • Avoidable hospital-acquired conditions were no longer reimbursed for payment by CMS as of October 2008.
  • Each year CMS will evaluate the overall performance of the hospital by calculating a Total HAC Score for each hospital.
  • Hospitals with a Total HAC Score in the worst-performing 25% of all Total HAC Scores will be subject to a 1% payment reduction.
  • CMS uses the Total HAC Score to determine the worst performing 25% of all hospitals based on data for six quality measures:
  • One claims-based composite measure of patient safety:
    • CMS Patient Safety and Adverse Events Composite (CMS PSI 90)
  • PSI 03: Pressure Ulcer Rate
  • PSI 06: Iatrogenic Pneumothorax Rate
  • PSI 08: In Hospital Fall with Hip Fracture Rate
  • PSI 09: Perioperative Hemorrhage or Hematoma Rate
  • PSI 10: Postoperative Acute Kidney Injury Requiring Dialysis Rate
  • PSI 11: Postoperative Respiratory Failure Rate
  • PSI 12: Perioperative Pulmonary Embolism or Deep Vein Thrombosis Rate
  • PSI 13: Postoperative Sepsis Rate
  • PSI 14: Postoperative Wound Dehiscence Rate
  • PSI 15: Unrecognized Abdominopelvic Accidental Puncture/Laceration Rate
  • Five chart-abstracted measures of healthcare-associated infections (HAIs) submitted to the Centers for Disease Control and Prevention's National Healthcare Safety Network:
    • Catheter-associated urinary tract infection (CAUTI)
    • Central line-associated bloodstream infection (CLABSI)
    • Surgical-site infection (SSI) for abdominal hysterectomy and colon procedures
    • Methicillin-resistant Staphylococcus aureus (MRSA) bacteremia
    • Clostridium difficile infection (CDI)
Never Events
  • According to the National Quality Forum (NQF), never events are errors in medical care that are clearly identifiable, preventable, and serious in their consequences for patients.
  • CMS no longer reimburses hospitals for never events of the associated costs of consequences associated with the event.
  • Examples of never events include surgery on the wrong body part, foreign body left in a patient after surgery, mismatched blood transfusion, major medication error, severe pressure ulcer acquired in the hospital, and preventable postoperative deaths.
Optimizing and Calculating Reimbursements (Payments)
  • The Inpatient Prospective Payment System (IPPS) is the CMS program that manages in-patient hospital reimbursements based on FY discharged patients.
  • Under the IPPS, each case is categorized into a DRG.
  • Each DRG has a payment weight assigned to it, based on the average resources used to treat Medicare patients in that DRG.
  • Reimbursements to hospitals are calculated using the DRG weight, the wage index for the labor market, and organizational Total Performance Scores (TPS) across a rolling 3-year performance period.
  • CMS calculates a value-based incentive payment adjustment factor that is applied to the base-operating DRG payment amount for each discharge on a per-claim basis.
  • The TPS for hospitals in FY 2021 will be determined by their comparative performance on performance standards in each of the domains of care.
  • Each domain contributes 25% toward the TPS:
    • Clinical outcomes (25%)
      • Mortality and complications
    • Patient Safety Indicator (PSI; 25%)
      • Healthcare-associated infections
    • Person and community engagement (PCE; 25%)
      • Patient's perception of the experience
      • Measured through Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey
    • Efficiency and cost (25%)
      • Medicare spending per beneficiary
  • The hospital's TPS is then compared to their previous baseline performance scores (organizational benchmark) to determine performance improvement achievements over baseline.
  • Hospitals are rewarded or penalized based on how they compare both internally and externally.
  • Payment reductions are applied to all underperforming hospitals.
  • The total amount of these reductions is then used to fund value-based incentive payments to top-performing hospitals based on their performance in the comparison group.
Clinical Outcomes Domain
  • The focus of the clinical outcomes domain is to establish evidence-based care standards and protocols that result in the best possible outcomes for the most patients.
  • FY 2023 clinical outcomes domain consists of three mortality measures and one surgical complication measure.
  • Baseline measures: July 1, 2013 through June 30, 2016.
  • Performance period: July 1, 2018 through June 30, 2021.
    • AMI: 30-day mortality rate
    • CABG surgery: 30-day mortality rate
    • HF: 30-day mortality rate
    • PN: 30-day mortality rate
    • COPD: 30-day mortality rate
Patient Safety Domain
  • The patient safety domain is weighted 25% and is focused on the goal of eliminating or reducing the occurrence of adverse events (healthcare errors resulting in patient harm).
  • For FY 2023 the patient safety domain consists of a composite patient safety score "Patient Safety and Adverse Events Composite" and five HAI measures.
  • Baseline period: October 1, 2015 through June 30, 2017.
  • Performance period: July 1, 2019 through June 30, 2021.
  • Benchmark for HAI's is zero.
    • CLABSI
    • CAUTI
    • CDI
    • MRSA
    • SSI
    • Colon resection
Person and Community Engagement Domain
  • The PCE domain is weighted 25% and is focused on the CMS goal of re-engineering hospital processes to improve patients' experiences of care and increasing the transparency of care for consumers.
  • CMS has launched two broad initiatives: HCAHPS and Hospital Compare.
  • The baseline period: January 1, 2019 through December 31, 2021.
  • Performance period: January 1, 2021 through December 31, 2021.
  • HCAHPS is the first standardized, publicly reported national survey of patients' perspectives of their hospital experience.
  • The survey is the basis for the PCE domain, which accounts for 25% of the hospital's TPS.
  • It is a 29-item instrument and data-collection tool that captures the patient's experience across eight dimensions of care with one general-perception query related to the hospital rating.
  • The dimensions are as follows:
    • Six HCAHPS composite measures
      • Communication with nurses
      • Communication with doctors
      • Staff responsiveness
      • Communication about medicines
      • Discharge information
      • Care transition
    • A dimension that combines the cleanliness and quietness items
    • One global item (Overall Hospital Rating)
  • The survey is typically mailed to a random sampling of adult patients between 2 and 42 days after discharge from the hospital.
  • The PCE domain score is based on the percentage of discharged patients who chose the most positive, or "top-box" survey response.
  • The validity and reliability of the instrument and its methodology have allowed for valid comparisons of patient responses to be made across all hospitals both locally and nationally.
Efficiency and Cost Domain
  • The efficiency and cost domain is weighted 25%.
  • This domain is focused on the goal of improving the efficiency of healthcare services and recognizing those hospitals that are involved in the provision of high-quality care at a lower cost to Medicare.
  • The FY 2023 efficiency and cost domain is measured by one spending measure and is calculated based on annual spending per Medicare beneficiary.