Monday, 09 May 2016 05:30

IPPS Updates Offer Opportunities to Leverage Info for Process Improvements

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s routhierJust like birthdays, the Inpatient Prospective Payment System (IPPS) updates roll around once a year to provide us with revisions to the Medicare reimbursement system for inpatient hospitalizations. Since the early 1980s, one of the primary focuses of the IPPS updates issued by the Centers for Medicare & Medicaid Services (CMS) has been on the DRG (diagnosis-related groups) reimbursement methodology. Over the last several years, in CMS’s continued commitment to create a healthcare system that results in better care and smarter spending, the IPPS updates have included policies related to the quality and outcomes of care that continue to increasingly shift Medicare payments from volume to value. Acute-care hospitals need to consider the potential financial impact of the IPPS updates and evaluate the need to refocus their efforts in areas such as quality, case management, coding, and clinical documentation.

Published in the Federal Register on April 27, 2016 is the proposed rule for the 2017 fiscal year. The proposed rule (CMS-1655-P) with supporting data files and tables can be downloaded from CMS’s IPPS home page at: Summarized below are a few highlights of the proposed changes gleaned from this 378-page Federal Registry entry:  

  • Payment Rates
    • A 0.9-percent increase in operating payment rates for general acute-care hospitals that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program and are meaningful electronic health record (EHR).
    • A 1.5-percentage point reduction for documentation and coding overpayment related to the transition to the Medicare Severity DRGs (MS-DRGs) that began in 2008. This would be the last year of recoupment adjustments required by the American Taxpayer Relief Act of 2012.
    • An increase of approximately 0.8 percentage points to remove the adjustment to offset the estimated costs of the two-midnight policy.
    • The distribution of roughly $6 billion in uncompensated care payments to disproportionate share (DSH) hospitals based on their relative share of uncompensated care nationally. This is a decrease of $400 million from the 2016 amount. CMS is also proposing to use data from three cost reporting periods instead of one to limit fluctuations. The proposed 2017 DSH uncompensated care payment Factor 3 and projected DSH eligibility for providers is available on Table 18, which can be accessed on CMS IPPS home page link provided above.
  • MS-DRG Classification System
    • Continued refinement of MS-DRG groupings based on anomalies identified related to the conversion from ICD-9-CM to the ICD-10-CM/PCS classification system.
    • New and deleted ICD–10–CM diagnosis codes and ICD–10–PCS procedure codes, per recommendation of the Coordination and Maintenance Committee. Refer to Table 6 for proposed code-related changes.
    • Additions and deletions to complication and comorbidity (CC and MCC) statuses for diagnosis codes. Also, revisions to the CC exclusion list and list of principal diagnoses that can act as their own CC or MCC.
    • Changes to surgical hierarchies as well as changes in the status of procedure codes from operating room (OR) procedures to non-OR procedures.
    • Refinement and recalibration of MS-DRG relative weights. The proposed relative weights are included in Table 5.
  • Quality and Value-Based Purchasing
    • The Hospital Acquired Conditions (HAC) Reduction Program creates an incentive for hospitals to reduce the incidence of hospital-acquired conditions. Payment adjustments are made to hospitals that are in the worst-performing quartile for prevalence of hospital-acquired conditions. CMS is proposing to make five changes to existing HAC reduction program policies, including a change to a continuous scoring methodology.
    • The Hospital Readmissions Reduction Program (HRRP) requires a reduction to a hospital’s base operating DRG payment to account for excess readmissions associated with acute myocardial infarction (AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary disease (COPD), and total hip arthroplasty/total knee arthroplasty (THA/TKA). Readmissions related to coronary artery bypass graft (CABG) will be effective for 2017 based on previous rulemaking. While CMS is not proposing any changes to the HRRP measures in the 2017 IPPS rule, it is proposing to update the public reporting policy so that excess readmission rates will be posted to the Hospital Compare website ( as soon as feasible following the hospitals’ preview period. The proposed 2017 proxy readmissions adjustment factors can be located in Table 15 for each CMS certification number (CCN).
    • The Hospital Inpatient Quality Reporting (IQR) Program is a pay-for-reporting program established by the Medicare Prescription Drug, Improvement, and Modernization Act. CMS is proposing the addition of four new claims-based measures and the removal of 15 measures for 2019. Of the 15 measures targeted for removal, 13 are electronic clinical quality measures (eCQMs).
    • The Hospital Value-Based Purchasing (VBP) Program adjusts payments to hospitals for inpatient services based on their performance on an announced set of measures. CMS proposes to expand the cohort used to calculate the 30-day pneumonia mortality measure beginning with the 2021 program year. CMS also proposes to add two condition-specific payment measures (one for acute myocardial infarction and one for heart failure) beginning with the 2021 program year and a 30-day mortality measure following CABG surgery starting with the 2022 program year. The proposed proxy hospital inpatient VBP program adjustment factors for 2017 for each CCN can be located in Table 16.
  • Other Proposals
    • Medicare Outpatient Observation Notice (MOON): Hospitals and critical access hospitals (CAHs) would be required to furnish a new CMS-developed standardized notice for Medicare beneficiaries who have been receiving observation services as an outpatient for more than 24 hours.
    • New Technology Add-On Payment (NTAP): Nine applications (five devices and four drugs) were received for consideration for approval for special add-on payments above the regular MS-DRG payment for cases that involve the use of these new technologies or medical services. Seven previously-approved NTAPs were evaluated for continuation or discontinuation of the add-on payment.

CMS is also proposing to establish new or revised requirements for quality reporting by specific providers other than acute-care hospitals, such as:

  • PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
  • Long-Term Care Hospital (LTCH) Quality Reporting Program (LTCH QRP)
  • Inpatient Psychiatric Facility (IPF) Quality Reporting Quality Reporting (IPFQR) Program
  • Critical assess hospitals (CAHs) participating in the Electronic Health Record (EHR) Incentive Program.

CMS will accept comments on the proposed rule until June 17 and will respond to these comments in a final rule to be issued by Aug. 1, 2016. Comments may be submitted electronically via this link to the Federal Register webpage:!docketDetail;D=CMS-2016-0053. The final rule will go into effect on Oct. 1, 2016.

About the Author

Sandy has 30 years of experience in health information management, revenue cycle, coding, clinical documentation improvement, and project management and information systems. In her role as an independent health information management (HIM) and coding consultant, Sandy performs inpatient MS-DRG validation and coding audits verifying the quality of coded data and supporting clinical documentation and making recommendations for improvements. Sandy provides education to coding professionals, CDI staff, and physicians. Additional responsibilities include assisting hospitals with operational improvements, ICD-10 training and preparations, and appeals to third-party payor denials, including those from Recovery Auditors (RAs).

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Latest from Sandy Routhier, RHIA, CCS, CDIP, AHIMA-Approved ICD-10-CM/PCS Trainer