Corporate Compliance

Note from the Instructor: CMS Issues FY 2016 IPPS Proposed Rule for IPPS Hospitals

Medicare Insider, April 21, 2015

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This week’s note from the instructor is written by Kimberly Anderwood Hoy Baker, JD, regulatory specialist for HCPro.  
On Friday, April 17, CMS put on display the FY 2016 IPPS proposed rule. The proposed rule is normally put on display around the first of April. It is unclear why the rule was delayed this year. The proposed rule contains multiple changes to the various quality measures that apply to hospitals, in addition to the standard payment policy changes. Interestingly, although FY 2016 is the first year Medicare Severity Diagnosis Related Groups (MS-DRGs), and therefore payments, will be based on the ICD-10-CM/PCS, there is scarce mention of the transition in the accompanying Fact Sheet or the Executive Summary included in the proposed rule.
General Payment Provisions
CMS is proposing a market basket update of 2.7%. After applying other adjustments, this results in a 1.9%[1] update to the operating standardized rates used to calculate payments. The Electronic Health Record (EHR) Meaningful Use adjustment and the Inpatient Quality Reporting (IQR) adjustment are both applied to this update[2]
Readers who review and use the tables published with the rule to predict hospital-specific payment changes will notice one big change to the tables. The multiple wage index tables normally included are being consolidated into two new tables[3] organized by hospital provider number and Core Based Statistical Areas (CBSA). I really like the new organization and found the new tables much more helpful in finding both hospital-specific and CBSA-specific information. The counties that make up each CBSA (formerly Table 4E) have also been moved to a new “data file” on the separate data file page.
Disproportionate Share Hospital payments will continue to decrease as the portion CMS calculates for uncompensated care continues to decrease. CMS attributes the decrease to the declining rate of uninsured patients under the Affordable Care Act, which they are statutorily required to adjust for in their calculation of the uncompensated care amounts paid to hospitals. The reduction from FY 2015 to FY 2016 is $1.3 billion, making the total distributed in uncompensated care payments to hospitals $4.6 billion in FY 2016.
Other policy updates include a revised list of MS-DRGs subject to the payment reduction policy for cases implanting a device received without cost or with a credit. CMS also discussed the impact of the ICD-10 transition on the New Technology payment provisions. CMS is proposing to discontinue New Technology payments for Voraxaze®, Zenith® Fenestrated AAA Endovascular Grafts, and Zilver Peripheral Drug Eluting Stents. New Technology payment would continue for KcentraTM, Argus®II Retinal Prosthesis System, CardioMemsTM HF Monitoring System, MitraClip System, and the Responsive Neurostimulator (RNS® system). CMS also discussed applications for nine other new technologies in the proposed rule.
Transition to ICD-10 and Changes to the MS-DRGs
As part of the transition to ICD-10-CM/PCS, CMS is proposing to use ICD-10 CM/PCS MS-DRG Version 33. The volume of changes related to MS-DRG logic, complications and comorbidities (CC)/major complications and comorbidities (MCC) and other coding related changes is consistent with prior years, perhaps due to the fact we are still in a code freeze year. The following is a review of the changes to the MS-DRG logic from Version 32 discussed and proposed in the rule:
  • CMS considered a request related to endovascular embolization, but declined to make any changes to MS-DRGs 020–027.
  • CMS proposed two new MS-DRGs for percutaneous intracardiac procedures (within the heart chambers), distinguishing them from intracoronary procedures (within the coronary vessels): MS-DRG 273 and 274 (Percutaneous Intracardiac Procedures, w/ and w/o MCC).
  • CMS considered a request to add severity levels for MS-DRG 245 Automatic Implantable Cardioverter-Defibrillator (AICD) generator procedures and determined it qualified for severity levels based on FY 2014 data but not on FY 2013 data. CMS declined to make a change this year but they will reconsider in future years.
  • CMS considered and declined to create a new set of MS-DRGs for the Zilver peripheral drug eluting stent, which will also no longer receive New Technology payment in FY 2016.
  • CMS proposed to revise the logic related to ICD-10 PCS code 02UG3JZ (Supplemental Mitral Valve with Synthetic Substitute, percutaneous approach) to match its assignment under the ICD-9 MS-DRGs, Version 32.
  • CMS considered MS-DRG placement of the Zenith fenestrated abdominal aortic aneurysm graft, which resulted in a proposal to delete MS-DRGs 237 and 238 (Major Cardiovascular Procedures, w/ and w/o MCCs) replacing them with five new MS-DRGs: MS-DRGs 268 and 269 (Aortic and Heart Assist Procedures Except Pulsation Balloon, w/ and w/o MCC) and MS-DRGs 270–272 (Other Major Cardiovascular Procedures, w/MCC, w/CC, and w/o CC/MCC).
  • CMS proposed to revise the logic for MS-DRGs 466–468 (Revision of Hip or Knee Replacements) to more closely match the assignment to the MS-DRGs of ICD-10 PCS codes related to removal of a spacer prior to insertion of a new joint prosthesis to those under ICD-9 Vol. 3.
  • CMS proposed to change the title for MS-DRGs for spinal fusions from 9+ fusions to “extensive fusions” to reflect terminology in ICD-10 PCS.
  • CMS removed several codes from the list of Operating Room (OR) procedures related to introduction of substances, such as cervical ripening gel, during pregnancy and delivery with normal delivery.
  • CMS considered a request for a new MS-DRG for cases using CroFab anti-venom, but determined the small number of cases (19) did not warrant a new MS-DRG.
  • CMS considered a request for a new severity level for burn cases assigned to MS-DRG 927 (Extensive Burns or Full Thickness Burns with Mechanical Ventilation 96+ Hours with Skin Graft) for cases using dermal regenerative grafts but declined to make any change.
The Deficit Reduction Act (DRA) Hospital-Acquired Condition (HAC) provision prevents increases to an MS-DRG based on specified reported HACs. CMS did not propose to add or remove any conditions from the current list of DRA HACs. The conditions were formerly identified by ICD-9-CM codes posted on the CMS website. CMS directs readers to the ICD-10-CM/PCS MS-DRG v33 Definitions Manual, Appendix I for the new ICD-10 codes to be used in FY 2016.
Solicitation of Comments and Other Commentary
The proposed rule solicits comments on the potential expansion of bundled care models under the Bundled Payments for Care Improvement (BPCI) initiative. Since 2011, CMS has been developing and testing payment models under the BPCI that make a single payment for a bundle of care. There are currently four models consisting of various bundles that may include care such as post-acute care and even physician professional services. The proposed rule reviews the four models and requests comments on their potential expansion and specific topics such as episode definition, the role of organizations and relationships, and setting payment.
CMS also included a short section in which they discussed the feedback they have received on short inpatient hospital stays and long outpatient observation stays, including the audit activity around these stays. CMS reviewed the steps they have taken that they believe have mitigated some of the issues, including limiting the auditing of cases subject to the 2-Midnight Rule under the Probe and Educate program and multiple improvements to the Recovery Audit Program. They did not further address any of the concerns expressed by providers, but rather deferred to the CY 2016 OPPS rule to be published in August. They indicated at that time they would further discuss these issues, including the negative 0.2% adjustment enacted with the 2-Midnight Rule to recoup anticipated increased inpatient volume under the rule. 
Long Term Care Hospitals
One proposal of note for Long Term Care Hospitals (LTCH) is a new site neutral payment for certain payments that do not meet clinical criteria to qualify for the standard LTCH payment rate. This payment provision will reduce payments to LTCH by 4.6% or $250 million in FY 2016. Even though the industry will experience an overall decrease in payment, cases meeting the clinical criteria to receive the higher LTCH rates will receive a 1.9% payment increase.
Overall, the rule is consistent with prior years and contains few surprises. Perhaps the biggest surprise is the rather small amount of information on the implementation of the ICD-10 coding system for payments beginning with FY 2016, though this is perhaps due to the work done over the prior years developing parallel ICD-9/ICD-10 versions of the MS-DRG definitions. Nevertheless, I had the impression the rule would contain more information about the transition. The rule also leaves us wanting more on both the BPCI and the short inpatient/long outpatient stay discussion, but we will have to wait until later in the summer for both.

[1] The Fact Sheet accompanying the proposed rule states the increase for hospitals is 1.1%, which includes an additional 0.8% decrease for the mandatory documentation and coding adjustment related to the implementation of the MS-DRG payment system.
[2] The EHR reduction/adjustment is equal to 50% of the market basket or -1.35%, resulting in an update of just 0.55% for hospitals failing to meet Meaningful Use standards. The IQR reduction/adjustment is equal to 25% of the market basket or - 0.675%, resulting in an update of just 1.225%. Failure to meet the requirements of either program will result in loss of 75% of the market basket or -2.025%, resulting in a negative update of -0.125%.
[3] New Table 2 is organized by CMS Certification Number (CCN, also known as the provider number) and will contain the information formerly in Tables 2, 4J, 9A, and 9C. New Table 3 is organized by CBSA (i.e. geographical region) and will contain the information formerly in Tables 3A, 3B, 4A, 4B, 4C, 4D, and 4F.

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