Health Information Management

Dangers of reporting costs improperly

APCs Insider, May 31, 2013

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By Michelle A. Leppert, CPC

Providers setting charges based on an understanding of their costs is not a new concept, says Jugna Shah, MPH, president and founder of Nimitt Consulting. But if providers are struggling with this or fail to do it correctly, then they stand to deteriorate their future payment rates since CMS relies on provider data to set payment rates not only for inpatient and outpatient services, but also for laboratory services.
Commenting to CMS about payment rates can and has benefited providers over the years. For example, in 2011 the AMA released combination CPT ® codes for CT of the pelvis and abdomen and since CMS felt it had no historical data upon which to base payments for what it considered “new services” since there were new codes, it simply assigned them to the existing APCs with payment rates that only reflected the single CT and not the combined resulting in payment rates far too low to cover the costs of providing two services.
The codes were new but not the services says Shah and that’s why providers were successful in getting CMS to use the historical data on the predecessor codes to set payment rates for these combined services for 2012 resulting in much better payment rates.
CMS agreed and for 2012, it reassigned the new combined codes to higher paying APCs. “Had it not been for the loud and clear comments from the provider community CMS may not have realized the mistake it had made nor would it have overturned the low payments,” Shah says. “So provider comments absolutely matter and they carry more weight when hard data and information is used to frame the ‘ask’.”
At the same time CMS listened to providers and increased payment rates for the new combined CT codes, it instructed providers to make sure they set their charges for the new codes such that they reflected their costs. In other words, the charge for the combined service should probably have been some multiple of the single services. CMS did not tell providers how to set charges but it did caution them that 2011 provider claims data would be used to set rates for 2013.
Unfortunately, most providers did not set their charges appropriately for the new combined CT codes to reflect multiple scans being provided instead of a single scan. So it may be that the old charge was left in the Charge Description Master even though the new code was added resulting in CMS receiving charge data that likely only reflected one scan and not two but CMS used this data as promised and it resulted in very low payment rates for these services for 2013, Shah says.
“The bottom line is that CMS listens to provider comments to drive policy and future payment rates but it also uses provider data so both are critical,” Shah says.
Why talk about this now? What happened with low charges impacting future reimbursement rates for combined CT services could also happen to future molecular pathology payment rates. In the past, laboratories used stacking codes to report molecular pathology tests. They charged a certain dollar amount for each component of the test. Now, they have to set a charge based on knowledge of their costs for the complete test since new single test CPT codes have replaced the stacked codes.
By now hospitals and independent laboratories should have set the new molecular pathology CPT codes in their chargemasters since these have been in effect since January 1 but it may have been a struggle. Some facilities may still be struggling with making the charge conversion from individual charges for the previously used stacked codes to the now single all-inclusive codes, Shah says.
Providers should ask these questions, Shah says:
  • Do we understand our stacked code costs and the tests associated with those stacked codes so we can set accurate charges now for the new codes?
  • Did we simply estimate or amalgamate the stacked code charges and make a best guess for setting charges for the new codes? 
  • Do we have a sense of our true molecular pathology costs and can we provide this data to CMS?
“I’m a little worried that hospitals and labs may have quickly set their charges for the new molecular pathology codes at the start of the year because time was short but hopefully they have gone back to evaluate their charge setting methodology and have a handle on their costs. For those that do, they should weigh in now since CMS is asking for comments on the gapfill rates recently released,” she adds.
Weighing in now and again this fall will be the main opportunities hospitals have to influence molecular pathology rates for the near future.

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