CMS IPPS Policy Detailed

On July 30, CMS issued the inpatient prospective payment system (IPPS) final rule to update policies and rates for fiscal year (FY) 2011, which maintains long-standing CMS policy and implements some provisions of the Patient Protection and Affordable Care Act (PPACA).

CMS updated acute care hospital rates by 2.35%. This update reflects a market basket increase of 2.6% for inflation, which is a slight increase over the FY 2010 inflation rate. The final rule reduces the 2.6% inflation update by 0.25%, as required by PPACA.

CMS finalizes 2.9% DCA to offset overpayments

Despite strong opposition from the hospital community, CMS also finalized its proposed documentation and coding adjustment (DCA) of -2.9% to offset overpayments that resulted from documentation and coding practices under the new Medicare severity DRG (MS-DRG) system that in their opinion, did not reflect actual increases in patient severity. CMS states in the final rule:

Under legislation passed in 2007, CMS is required to recoup the entire amount of FY 2008 and 2009 excess spending due to changes in hospital coding practices no later than FY 2012. CMS has determined that a -5.8% adjustment is necessary to recoup these overpayments. The -2.9% adjustment for FY 2011 is one-half of this amount.

But many in the provider community argued that the increased payments were actually a product of faulty calculations by CMS and, indeed, the severity of illness of the patients did increase.

“The truth is that the overpayment of hospitals is really related to inappropriate definitions of codes and inappropriate advice on how to use and sequence ICD-9 codes for DRG assignments. This has led to a massive maximization of DRGs with MCCs [major complications and comorbidities] at the expense of the DRGs that really reflected what was wrong with the patient,” says Robert S. Gold, MD, CEO of DCBA Inc., in Atlanta.

As recently as last week, in a letter to CMS, the American Hospital Association (AHA), the Federation of American Hospitals, and the Association of American Medical Colleges cited two independent studies that underscore their concerns about CMS’ methodology for determining the effect changes in documentation and coding have had on the Medicare patient case mix index.

“Obviously, I am saddened by the enormity of the documentation and coding adjustment, however CMS has been forthright with their promise to implement this, even though I do not agree with their methodology,” says James S. Kennedy, MD, CCS, managing director at FTI Healthcare in Atlanta.

The American Hospital Association expressed its disappointment with the finalized DCA in Friday’s AHA News Now daily report.

"America’s hospitals strongly disagree with the Centers for Medicare & Medicaid Services' final inpatient rule," said AHA President and CEO Rich Umbdenstock. "In issuing its final rule, CMS failed to listen to concerns from members of Congress . . . CMS also failed to acknowledge independent studies that show CMS' methodology does not take into account what we all know: hospital patients are increasingly sicker.”

This DCA creates a challenge for hospitals, which will need to focus additional efforts on documentation and coding specificity, says Gloryanne Bryant, RHIA, CCS, CCDS, regional managing director of HIM for NCAL revenue cycle at Kaiser Foundation Health Plan Inc. & Hospitals in Oakland, CA.

“I was disappointed to see not only that [CMS] continues to use [DCA methodology] but that the DCA was as much as it was,” Bryant says. “I think this will present struggles and challenges to hospitals, including documentation and coding improvement that is valid and accurate.”

Provider community reacts to downgrade of acute renal failure

CMS also finalized a provision to downgrade acute kidney failure or injury (ICD-9-CM code 584.9) from an MCC to a complication and comorbidity (CC), a troubling move to many in the provider community. The downgrade comes as a result of over-reporting of ICD-9-CM code 584.9 in cases where patients do not meet the criteria.

“Renal failure is the only acute organ failure that is not an MCC,” says Gold. “It’s this over-reporting that has diluted the risk factors for patients who really do have significant renal damage by adding patients who don’t.”

Many providers have advocated for a revision of ICD-9-CM code category 584 to better reflect the stages of acute kidney injury.

“I’m very disappointed in CMS’ discussion and approach to the acute kidney injury issue, especially their lack of taking responsibility as a member of the ICD-9 Cooperating Parties for the inadequacies of the ICD-9 code set referable to this issue,” Kennedy says.

“Those hospitals that have CDI [clinical documentation improvement] programs and don’t have over-reporting are getting hit with the DCA penalty just as much as the hospitals who caused it, and that’s not fair,” Gold adds. "This is not saying that all CDI programs are falsely reporting AKI at all. But some are.

Inadequate code definitions and sequencing guidelines have led to some hospitals resequencing codes for a higher-paying DRG when it probably was inappropriate to do so, says Gold. He adds that it’s imperative that CMS consult interested parties (e.g., AHA, American Health Information Management Association, National Center for Health Statistics, and Association for Clinical Documentation Improvement Specialists) along with physician specialty leadership who can provide the needed clinical insights to come to a consensus on appropriate definitions.

“[All of these groups] need to come to a reconciliation of what the true definitions of these conditions are that deserve these codes and how they should be sequenced properly so people cannot possibly miscode for dollars,” Gold says.

Kennedy urges the hospital community to take note that CMS plans to target encephalopathy next year. “It’s very important that the coded data set actually reflects severity of illness if hospitals or providers are to prevail in their discussions with CMS,” he says.

CMS clarifies three-day rule

CMS used the final rule to clarify its three-day payment window, or three-day rule, and implement new legislative provisions under the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010. Under the three-day rule, a hospital must include on the claim for a Medicare beneficiary’s inpatient stay the charges for all outpatient diagnostic services and admission-related nondiagnostic services provided during the payment window. Many in the provider community felt that clarification of the three-day rule was long overdue.

There had been some confusion and there were possibly a couple of loopholes in the three-day rule, so this clarification tightens up the rule,” Bryant says. “It’s not a 72-hour rule, for one thing. The rule is specific to three calendar days.”

The IPPS final rule fact sheet states:

The Medicare law requires hospitals to include diagnostic services and most admission-related non-diagnostic services provided in the hospital outpatient department on the day of admission or 3 calendar days prior to admission (one day for hospital not paid under the IPPS) as part of the inpatient stay. The policy protects Medicare and the beneficiary from paying separately under Medicare Part B for services that should be included in the Part A payment for the inpatient stay.

This will require that hospitals devote some additional attention in the compliance arena for the three-day rule, particularly for bill processing and claims submission, Bryant says.

CMS addressed the question of whether a nondiagnostic service was related or unrelated to the reason for the inpatient admission. Legislative changes prompted CMS to revisit the previous relationship, defined by an exact diagnosis code match. CMS will implement a new process, using a new condition code, modifier, or some other identifier, for hospitals to mark nondiagnostic services that are clinically unrelated to the inpatient admission, and therefore eligible for payment under the OPPS.

“It’s very important for hospital management and specific departments to read the final rule carefully so that implementation can be achieved successfully,” Bryant says.

CMS makes MS-DRG changes

There are several noteworthy MS-DRG changes in the final rule. For example, CMS split MS-DRG 9 (Bone marrow transplant) into two new MS-DRGs, given the wide variation in costs:

• MS-DRG 14 (Allogenic bone marrow transplant), with a relative weight of 11.5947
• MS-DRG 15 (Autologous bone marrow transplant), with a relative weight of 5.9504

CMS also allowed the inclusion of ICD-9-CM code 251.3 (postsurgical hypoinsulinemia) as an acceptable principal diagnosis for MS-DRG 8 (Simultaneous kidney/pancreas transplant) and MS-DRG 10 (Pancreas transplant). Note the following five MS-DRGs with relative weight reductions:

• 622 (Skin grafts and wound debridement for endocrine, nutritional and metabolic disorders with MCC), -19.2%
• 855 (Infectious and parasitic diseases with operative room procedure without CC/MCC), -19.0%
• 10 (Pancreas transplant), -11.5%
• 420 (Hepatobiliary diagnostic procedures with MCC), -11.5%
• 624 (Skin grafts and wound debridement for endocrine, nutritional and metabolic disorders without CC/MCC), -10.5%

In addition, consider the following five MS-DRGs with relative weight increases:

• 770 (Abortion with dilation and curettage, aspiration curettage, or hysterotomy), 30.8%
• 585 (Breast biopsy, local excision and other breast procedures without CC/MCC), 21.2%
• 779 (Abortion without dilation and curettage), 21.1%
• 725 (Benign prostatic hypertrophy with MCC), 19.3%
• 686 (Kidney and urinary tract neoplasms with MCC), 18.7%

CMS adds 12 new quality indicators

CMS added 12 items to the measures set for the reporting hospital quality data for annual payment update (RHQDAPU) program, and retired one current measure, mortality for selected surgical procedures (composite).

However, CMS will consider only 10 of the new measures, including rates of occurrence for eight of 10 categories of conditions that are subject to the hospital-acquired conditions (HAC) policy, in determining a hospital’s FY 2012 update. Specifically, CMS is adding the following eight categories of conditions included on the HAC list:

• Foreign object retained after surgery
• Air embolism
• Blood incompatibility
• Pressure ulcer stages III and IV
• Falls and trauma (including fracture, dislocation, intracranial injury, crushing injury, burn, and electric shock)
• Vascular catheter-associated infection
• Catheter-associated urinary tract infection
• Manifestations of poor glycemic control

The other two measures are two additional patient safety Indicators, postoperative respiratory failure and postoperative pulmonary embolism or deep vein thrombosis.

“If you look at the list of those indicators, good documentation will be needed to support and validate them,” Bryant says.

Editor’s note: For more in-depth analysis on the final rule, listen to the September 23 audio conference, “2011 IPPS MS-DRG Update: Analyze the Rule and Understand the Impact.”

Click here to view a press release on the release of the final rule.

Doreen Bentley can be reached at dbentley@hcpro.com