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Inpatient psych PPS final rule: Blended payment until 2007

HIM Connection, January 25, 2005

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The Centers for Medicare & Medicaid Services (CMS) has finally published the long-awaited final rule on the new prospective payment system (PPS) for inpatient psychiatric care, which took effect January 1, 2005.

Preliminary regulations for inpatient PPS for psych came out in November 2003, and CMS hoped to adopt the system by January 1, 2004. "There was an uprising in response to certain aspects of the rule that weren't well thought out, and they went back to the drawing board," says Barry Libman, RHIA, CCS, CCS-P, principal of Barry Libman, Inc., a coding consulting firm based in Bedford, MA.

Mixed payments mean time
CMS published the final rule on the new payment system in the November 15, 2004, Federal Register. The rule spells out a three-year transition period during which inpatient psychiatric facilities (IPF) will receive both current payments based on costs and the federal per diem payment amount outlined in the rule. After the transition period, facilities will receive 100% proposed IPF prospective payment amounts for cost reporting periods beginning on or after July 1, 2007. This blended payment system "gives existing IPFs time to adjust their cost structures and integrate the effects of changing to the IPF PPS payment system," according to the rule.

Although this final rule takes effect immediately, fiscal intermediaries will not be able to process the claims until April 1, Libman says. "No one has any software with which to do it." Software will be updated over the next few months and there will be a retroactive adjustment on April 1 for claims submitted between January 1 and March 30.

Experience with PPS helps
This change affects both freestanding psychiatric facilities and acute care hospitals that have inpatient psych units. The latter are more likely to fare better with this change, says Libman, whose coding firm has about 25 coders working for facilities from Maine to Maryland.

Coders working at freestanding facilities haven't had much experience with inpatient prospective payment for Medicare, says Libman. "They've always operated on a per diem payment for their patients' stays." Coders working at facilities that have an inpatient psych unit are familiar with DRG coding, and "they have more of an awareness of what they need to do to prepare."

Recommended prep work
Reading the final rule is Libman's best advice to prepare for this new payment system. "It takes about an hour and a half to read, and it's time well spent." The rule addresses numerous topics that are slightly different from the traditional Medicare DRG system, he says. "There are variations based on the diagnosis, which are going to drop the patient into any one of 15 psych DRGs. There's additional reimbursement depending on the patient's age."

And comorbidities for psychiatric diagnoses will require research. According to the rule, "IPFs may only receive one adjustment factor for each comorbidity category. However, if a patient has multiple diagnoses in several categories, the adjustment factors for each applicable category are multiplied by the federal per diem base rate." All the comorbidities are different from medical/surgical cases, says Libman. "You'll have to learn a whole new set of comorbidities."

You'll receive additional reimbursement for electroconvulsive therapy, but you need to charge it to the UB92 because that is the only place where the number of units of electroconvulsive therapy appears.

The prospective payment moniker implies that you know ahead of time how much payment you will receive for the entire stay. This system, however, is really a per diem prospective payment. There are also different rates of payment depending on the length of the stay.

If this new rule already sounds confusing, look at your payer mix. After all, this rule affects only your Medicare population. Other payers may well follow suit, but probably not for at least a year, says Libman.

Meanwhile, he recommends talking to your psych staff about their documentation practices. It's important to clarify the principal diagnosis under this system, he says. Secondary diagnoses for psychiatric patients often come in the form of consultations. "My preference is to get [consultant reports] dictated and transcribed in the record so they're legible and [documented] in the record as soon as possible," he says.

This excerpt is adapted from Medical Records Briefing.

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