Pam Madole, Partner

1
Medicare Reimbursement Hot Topics

• Pam Madole, Partner
• Sherry Collins, Senior Manager
• pmadole_at_eidebailly.com
• sacollins_at_eidebailly.com

2
Medicare Hot Topics PPS and CAH

• Health Care Reform Update
• Low Volume Adjustment
• Medicare Dependent Hospital
• OP Cost Based Lab
• Market Basket Updates
• 340B Program
• DSH Update
• IPPS Update
• OPPS Update
• CRNA Pass Through
• Provider Based Status
• Clinics
• Hospital Reimbursement Methods

3
Low Volume HospitalFY 2011 and 2012 Improvements

• Expands program to provide a temporary adjustment
  to PPS hospitals that have lt 1600 Medicare
  discharges.
• Revised the distance requirements from 25 road
  miles to 15 road miles from another hospital
• 400K to 600K per year for two years

4
Medicare Dependent Hospitals

• The MDH program is extended for one year until
  October 1, 2012.

5
Rural HospitalsOutpatient Cost Based Lab

• Reinstates reasonable cost based payments for
  rural hospitals with lt 50 beds in qualifying
  counties
• Effective for cost report periods beginning on or
  after July 1, 2010 through June 30, 2011
• Overpayments could occur on interim basis due to
  overall CCR being higher than lab CCR

6
Market Basket Updates

• Productivity Adjustment inserted
• Equivalent to the 10-year moving average of
  changes in annual economy-wide private nonfarm
  business multi-factor productivity
• Projected by Secretary
• Most likely result will be a 0 to a - market
  basket adjustment

7
Market Basket Updates (contd)

• Effective dates
• Beginning in 2012 Inpatient and outpatient
  acute-care hospital services, skilled nursing
  facility (SNF) services, inpatient rehabilitation
  facility services, dialysis, ambulance services
  and clinical laboratory services
• Beginning in 2013 Hospice care
• Starting in 2012 Long-term care hospitals
  (LTAHs) and inpatient psychiatric hospitals (if
  base rates are subject to update)
• Beginning in 2015 Home health agency services

8
Market Basket Updates (contd)

• Starting in 2011 Ambulatory surgical center
  (ASC) services
• Beginning in 2011 Reduces consumer price
  index-based updates for durable medical equipment
  (DME) and other similarly based fee schedule
  updates
• Other market basket reductions planned

9
Market Basket Updates (contd)
10
340B Outpatient Drug Program

• Expanded eligibility for certain hospital types
• Critical Access Hospitals (CAHs)
• Free-standing Cancer Hospitals (DSH gt 11.75)
• Rural Referral Centers (DSH gt 8.00)
• Sole Community Hospitals (DSH gt 8.00)
• Childrens Hospitals (DSH gt 11.75)

11
Disproportionate Share Hospitals

• Payment Cuts
• 75 beginning in FY 2014
• Additional Payments
• Based on uncompensated care
• And uninsured individuals under 65
• New DSH Formula
• 25 based on the old formula
• Remaining 75 multiplied times a population
  factor
• Hospital-specific factor based on uncompensated
  care

12
IPPS Update

• FY 2011 Final Rule
• .1 reduction in payments for operating expenses
• 2.4 inflation
• (2.9) coding adjustment
• Budget neutrality and outlier adjustments
• Expansion of quality measures
• 43 measures for 2010
• 55 in 2011
• 2 cut for failure to report

13
IPPS Update

• FY 2011 Final Rule
• CAH Method II billing
• In the past facility was required to submit an
  annual request 30 days prior to the beginning of
  their cost reporting period
• Final rule eliminates requirement for annual
  request
• Current election remains in effect until
  terminated
• Cost report periods on or after 09/30/2010

14
IPPS Update

• FY 2011 Final Rule
• CAH Method II billing
• New election or termination still requires 30
  days prior to cost report period notice
• Requirement still exists to notify MAC of changes
  in physician reassignment

15
IPPS Update

• CRNA Pass Through Cost
• Previously providers in urban areas did not
  qualify
• Update allows for providers that have reclassed
  from urban to rural under 42 CFR 412.103 to
  qualify

16
IPPS Update

• IPPS Transfers to CAHs
• Previously these transfers were not included in
  IPPS transfer payment policy
• Update for 2011 included transfers to CAHs
• Only impacts IPPS facility
• Transfers to swing bed unaffected

17
OPPS Update

• Supervision requirement for outpatient
  therapeutic services (provided incident to the
  services of a physician)
• Services performed on campus
• Present on same campus
• Immediately available
• Services performed in off-campus setting
• Present in department
• Immediately available

18
OPPS Update

• Supervision requirement for outpatient
  therapeutic services (provided incident to the
  services of a physician)
• Good news On-campus supervision
• Supervising physician or NPP may be physically
  located in private office or medical office
  building located on campus
• Bad news Off-campus supervision
• Supervising physician or NPP must be physically
  present

19
OPPS Update

• Delayed enforcement of supervision for CAHs
• Extends notice of non-enforcement for CAHs
  through 2011
• Expanded to apply to small rural hospitals
• lt 100 beds and
• Geographically located in rural area or paid
  under PPS with rural wage index

20
CRNA Pass Through

• Issue
• Rural providers with less than 800 procedures
  requiring the use of anesthesia services may be
  eligible for cost based reimbursement for these
  services
• CMS has taken the position that the cost for
  on-call associated with these services is subject
  to offset

21
CRNA Pass Through

• Potential impact is significant
• MACs use various methodologies to determine
  offset
• Look to contract first
• May assume 8,760 hours of on-call
• Uses average hourly rate
• Estimates time per case from Operating Room
  records

22
CRNA Pass Through

• Example
• 24/7 CRNA on-call
• 300 procedures per year
• Average of 1 hour per case
• MAC assumption of 1additional hour per case
  before and after procedure
• CRNA costs of 150,000
• 40 Medicare utilization in CRNA cost center

23
CRNA Pass Through

• Example
• 600 hours of direct patient time
• 8,160 hours of on-call
• 17.12 per hour
• 139,700 cost offset
• 55,880 impact on Medicare reimbursement

24
CRNA Pass Through

• Example 2 (2 hours per procedure)
• 900 hours of direct patient time
• 7,860 hours of on-call
• 17.12 per hour
• 134,600 cost offset
• 53,800 impact on Medicare reimbursement

25
CRNA Pass Through

• Strategies
• CMS appears to only impute on-call costs to
  contracted providers
• Could change relationship with CRNA provider(s)
  to employment based
• Could create issues with agencies
• Specifically identify cost for on-call services
• Based on Fair Market Value
• Little experience with how CMS will treat

26
Provider Based Status

• OIG focus on whether facility meets definition as
  found in 42 CFR 413.65
• Common Licensure
• Clinical Services---Integration
• Financial Integration
• Public Awareness
• Fulfillment of Obligations
• Off Site Locations
• Ownership and Control
• Administration and Supervision
• Location

27
Clinics

• Free-Standing Clinics
• Free-Standing Rural Health Clinics
• Provider-Based Rural Health Clinics
• Provider-Based Clinics

28
Free-Standing Clinics

• Free-standing clinics describe the traditional
  physician clinic model
• Typically stand alone entity
• Physician owned
• Reimbursed by Medicare under the Medicare
  Physician Fee Schedule (MPFS)
• Billing processed on the CMS-1500

29
Free-Standing Clinics

• MPFS typically provides the lowest possible total
  reimbursement for clinic services
• Example Level 3 Established Patient (CPT 99213)
• 65.73
• Usually provides for the easiest claims
  processing

30
Free-Standing Rural Health Clinics

• Cost per visit reimbursement methodology
• Medicare
• Medicaid
• Cost per visit limit for free-standing
• 78.07 Medicare cost per visit effective January
  1, 2011

31
Free-Standing Rural Health Clinics

• Cost per visit reimbursement applies to the
  following services
• Clinic
• Nursing Home (Part A and Part B)
• Swing Bed
• Home
• Reimbursement for inpatient and outpatient
  hospital visits remains under the MPFS

32
Free-Standing Rural Health Clinics

• Rural Health Clinic (RHC) services reported on
  UB-04 for Medicare and Medicaid
• Services to other payors continue to be reported
  on CMS-1500
• Non-RHC services are reported on CMS-1500

33
Free-Standing Rural Health Clinics

• Cost per visit reimbursement calculation includes
  an application of productivity standards
• 4,200 visits per physician FTE
• 2,100 visits per mid-level FTE
• Practices with lower productivity may experience
  reduction in the cost per visit
• Under Arrangements
• Does not automatically include contracted
  physicians
• Intended for locums replacing normal physician

34
Provider-Based Rural Health Clinics

• Owned and operated by hospital, nursing home or
  home health agency
• Cost per visit does not apply if RHC is a part of
  a hospital with less than 50 available beds
• Cost per visit varies
• 80 - 200 common

35
Provider Based RHC

• Productivity Standards
• 4,200 per FTE physician
• 2,100 per FTE mid-level
• Under Arrangements
• Does not automatically include contracted
  physicians
• Intended for locums replacing normal physician

36
Rural Health Clinics General

• Opportunity to enhance reimbursement from
  Medicare and Medicaid
• Reimbursement potential is greatest for clinics
  with greater productivity

37
Provider-Based Clinic

• A provider-based clinic is a clinic that meets
  the Medicare definitions of a provider-based
  department of the hospital
• Should not be confused with provider-based RHC
• Different requirements
• Different billing processes
• Different payment levels

38
Why Provider-Based Clinic Status?

• To be appropriately paid for the operations of
  the clinics
• The Medicare Physician Fee Schedule (MPFS) is not
  designed to pay for the costs typically found in
  provider-based or hospital owned clinics
• Overhead
• Billing
• Life-Safety Code

39
How Does It Work? Provider-based Department

• The clinic becomes an outpatient department of
  the hospital and is no longer a free-standing
  clinic
• Clinic services move from being reimbursed one
  payment for clinic service to being reimbursed
  two payments for each visit to the clinic or
  outpatient department

40
How Does It Work? Provider-based Department
(contd)

• A Medicare Part A payment is received for the
  non-professional costs of operating the facility,
  including appropriate overhead allocations
• Building
• Utilities
• Housekeeping
• Laundry
• Nursing
• Medical Records
• Administrative and General

41
How Does It Work? Provider-based Department
(contd)

• A Medicare Part B payment is received for the
  professional services of physicians and mid-level
  practitioners
• This payment is reduced because payment for a
  portion of the Practice Expense RVUs will be made
  to the hospital under the hospitals payment
  provisions
• Ranges from 8 23 for established office
  visits

42
Payment Example EM Codes (PPS)
CAH impact will vary by facility. Each facility
should perform analysis of impact as potential
impact varies by practice.
43
Hospital Designations and Medicare Reimbursement

• PPS Hospitals
• Critical Access Hospitals
• Sole Community Hospitals
• Medicare Dependent Hospitals

44
PPS Hospitals Medicare Reimbursement

• Inpatient
• DRGs
• Wage Index DRGs wage adjusted
• FFY 2011
• OKC - 88.57
• Tulsa - 88.65
• Lawton - 85.74
• Rural - 80.21
• .

45
PPS Hospitals Medicare Reimbursement

• Occupational Mix Adjustment wage index
• Public Law 106-554 mandates an occupational mix
  adjustment to the wage index
• Requires the collection of data every 3 years
• Controls the effect of hospitals employment
  choices on the wage index

46
PPS Hospitals Medicare Reimbursement

• Last survey based on pay periods ending between
  07/01/2007 and 06/30/2008
• FFYs 2010, 2011 and 2012
• Next survey based on pay periods ending between
  01/01/2010 and 12/31/2010
• Due 07/01/2011
• FFYs 2013, 2014 and 2015

47
PPS Hospitals Medicare Reimbursement

• Outpatient
• Ambulatory Payment Classifications (APCs)
• Fee Schedules Clinical lab, PT, OT, Speech and
  Ambulance
• Cost Based reimbursement
• Some rural hospitals with fewer than 50 beds may
  qualify to receive cost based reimbursement for
  clinical lab test
• Certified Registered Nurse Anesthetists (CRNAs)

48
Critical Access Hospitals Medicare Reimbursement

• Cost based reimbursed 101 of reasonable costs
• Clinical lab based on fee schedule
• Method II billing 115 of Medicare fee schedule

49
Sole Community Hospitals Medicare Reimbursement

• Inpatient paid the greater of
• The Federal rate applicable to the hospital
  (includes DRG, Outliers, GME, IME and DSH)
• The updated hospital-specific rate based on the
  FY 1982, FY 1987, FY 1996 or FY 2006. FY 2006
  effective for cost reporting periods beginning on
  or after January 1, 2009. (The hospital specific
  rates excludes additional payments for Outliers,
  GME, IME and DSH)
• Hospital-specific rate can eliminate negative
  impact of transfer DRGs

50
Sole Community Hospitals Medicare Reimbursement

• Low volume adjustment
• Decrease of 5 or more in its total discharges
• Inpatient operating cost exceed total DRG
  operating payments
• Current year cost cannot exceed prior year cost
• Must submit request no later than 180 days after
  the Notice of Program Reimbursement (NPR)

51
Sole Community Hospitals Medicare Reimbursement

• Outpatient
• APCs increased payment of 7.1
• Clinical Lab increased payment of 3.3

52
Medicare Dependent Hospital Medicare
Reimbursement

• Inpatient
• Receive the higher of either the Federal payment
  rate or the Federal payment rate plus 75 of the
  difference between the Federal payment rate and
  the hospital specific rate
• Hospitals may use their FY 1982, 1987 or 2002 for
  their hospital specific rate
• Removes the 12 cap on DSH payments
• Can also qualify for a low volume adjustment

53
Questions?
Pam Madole, Partner Sherry Collins, Senior
Manager pmadole_at_eidebailly.com sacollins_at_eidebaill
y.com