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Rev Cycle Leaders Under Pressure As Over 700 Hospitals Face Payment Cuts

Analysis  |  By Amanda Norris  
   February 16, 2022

Strategizing across departments will be a crucial step in avoiding these penalties as directors within the middle revenue cycle can take the lead on education.

CMS recently announced that 764 hospitals will face Medicare payment cuts in fiscal year 2022 under Medicare's Hospital-Acquired Condition Reduction Program.

Under the program, CMS reduces overall Medicare payments for hospitals that rank in the worst-performing quartile of all hospitals on measures of hospital-acquired conditions.

Every year, the facilities in the lowest-performing 25% are penalized by losing 1% of their Medicare payments. This payment adjustment applies to all Medicare discharges for the applicable fiscal program year when CMS pays hospital claims.

For fiscal year 2022, 764 hospitals will have their Medicare payment rates reduced for having high infection rates and other patient complications from mid-2018 to 2019. In response to the 2019 COVID-19 public health emergency, CMS excluded all calendar year 2020 data from this year's hospital-acquired condition program calculations and plans to do so indefinitely.

What can revenue cycle leaders do to avoid these penalties?

Reporting hospital-acquired conditions has been required by CMS since 2007 as legislated by the Deficit Reduction Act of 2005.

Hospital-acquired conditions are reported by HHS to identify high-cost and high-volume cases. These conditions result in the assignment of a case to a Medicare-severity diagnosis-related group that has a higher payment when present as a secondary diagnosis and could reasonably have been prevented through the application of evidence‑based guidelines.

Looping in middle revenue cycle directors, such as a coding director, is a crucial step in avoiding these penalties.

Having staff regularly review the basics of reporting hospital-acquired-conditions, preparing for unanticipated coding situations, and focusing on correctly identifying conditions that are present-on-admission will ensure your organization can submit claims with the utmost accuracy.

When a hospital-acquired condition occurs during a hospital stay, additional reimbursement isn't provided to the hospital for the avoidable condition.

Because of this, when working with your coding, clinical documentation integrity, or other middle revenue cycle directors, it’s also useful to have them pay particular attention to present-on-admission indicator reporting, as these indicators can have a large impact on reimbursement.  

Educating middle revenue cycle staff and monitoring their use of present-on-admission indicators is critical for an organization since conditions reported as present-on-admission will not tie your organization to a hospital-acquired condition, thus avoiding the penalty.

Also, leaders could consider auditing present-on-admission indicators. While this isn't a typical coding audit, results would be of large value to the organization in avoiding penalties.

The hospital-acquired condition payment provision only applies to inpatient hospitals. The following list of organizations are exempt from that provision:

  • Cancer hospitals
  • Children's inpatient facilities
  • Critical access hospitals
  • Inpatient psychiatric hospitals
  • Inpatient rehabilitation facilities
  • Long-term care hospitals
  • Maryland waiver hospitals
  • Religious non-medical healthcare institutions
  • Veterans administration/department of defense hospitals

Amanda Norris is the Revenue Cycle Editor for HealthLeaders.


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