FY 2011 Medicare Inpatient PPS Interim Final Rule

1. FY 2011 Medicare Inpatient PPS Interim Final Rule August 16, 2010 Note: This presentation is posted at www.premierinc.com/advisorlive

2. Speaker Danielle Lloyd, M.P.H. Senior director Reimbursement Policy Premier

3. FY 2011 Interim Final Inpatient PPS Rule • Published in the August 16, Federal Register. • Market basket update of 2.6% reduced to 2.35% for hospitals reporting quality measures, or 0.6% reduced to 0.35% for those not reporting. • On average, a 0.4% drop ($440M) in operating payments compared to FY 10. • On average, a 0.5% drop ($21M) in capital payments compared to FY 10. • Behavioral offset of 2.9% to both operating an capital payments in FY 11 for changes in documentation and coding as a result of the implementation of MS-DRGs in FYs 08 and 09. Anticipates a 2.9% adjustment in FY 12. • Retires 1 and adds 10 quality measures (total of 55) for payment. Hospitals will begin reporting 2 additional measures in FY 2011 for payment determination in FY 2013: 1) AMI-10 Statin at Discharge, a chart-based measure; and 2) Central Line Associated Blood Stream Infection, which hospitals must report through the CDC’s NHSN. • Extends 72 hour bundling rule to non-diagnostic services starting June 25, 2010-- comments due September 28, 2010.

4. FY 2011 Interim Final Inpatient PPS Rule • Published in the August 16, Federal Register. • Market basket update • 2.6% reduced to 2.35% for hospitals reporting quality measures, or • 0.6% reduced to 0.35% for those not reporting. • On average, a 0.4% drop ($440M) in operating payments compared to FY 10. • On average, a 0.5% drop ($21M) in capital payments compared to FY 10. • Extends 72 hour bundling rule to non-diagnostic services starting June 25, 2010-- comments due September 28, 2010.

5. Behavioral offset • Payment reduction for changes in documentation and coding as a result of the MS-DRG implementation in FYs 08 and 09. • One-time recoupment of 2.9% in FY 2011 • Expected one-time recoupment of 2.9% in FY 2012. • Prospective correction of 3.9% still needed. • 2.9% prospective adjustment to the capital federal rate. • 2.9% offset to hospital-specific rates of Sole Community and Medicare Dependent Hospitals • Leaves 2.5% recoupment (for total of 5.4%) as SCHs/MDHs were not previously reduced by 1.5% as were the other hospitals.

6. FFY 2011 RHQDAPU Measure Requirements • Retires the claims-based AHRQ Mortality for Selected Surgical Procedures Composite • AHRQ issued guidance in June 2009 “the measure is not recommended for comparative reporting” • RHQDAPU remaining measures: • 27 Chart Abstracted measures (AMI, HF, PN and SCIP) • 14 Claims-based measures • 30-Day Mortality (AMI, HF, PN) • 30-Day Risk Standardized Readmission (AMI, HF, PN) • AHRQ PSI, IQIs and Composite • Nursing Sensitive/PSI Harmonized measure with PSI-4 • 3 Structural Measures – Participation in a Registry • Cardiac Surgery, Stroke and Nursing Sensitive Care

7. Finalized for FFY 2012 Payment • Retain the existing FY 2011 measures • Adopt the proposed10 claims-based measures • 2 AHRQ PSIs • PSI-11 Post-Operative Respiratory Failure • PSI-12 Post-Operative Pulmonary Embolism or DVT • 8 Hospital Acquired Condition (HACs) • Foreign Object Retained After Surgery • Air Embolism • Blood Incompatibility • Pressure Ulcer Stages III & IV • Falls and Trauma: • Vascular Catheter-Associated Infection • Catheter-Associated Urinary Tract Infection (UTI) • Manifestations of Poor Glycemic Control

8. FFY 2012 RHQDAPU Proposals Not Finalized • CMS will revisit in a future rule making process • Submission of all-patient data to allow CMS to calculate the patient volume for the 55 MS-DRGs relating to the APU measures • CMS determine this submission as proposed, would be burdensome to hospitals. • Retirement of measures • No measures are currently planned for retirement in FFY 2012

9. Finalized for FFY 2013 Payment • Retain the existing FY 2012 measures • Add one new chart abstracted measure • AMI-10 Statin at Discharge, a chart-based measure • Data collection begins with January 1, 2011 discharges • Add one new Healthcare-Associated Infection (HAI) • Central Line Associated Blood Stream Infection (NQF #0139) • Via National Healthcare Safety Network (NHSN) • Data collection begins with January 1, 2011 discharges • Registry-Based Measures • CMS will revisit the proposal to require hospitals to use registries to report measures in future rule making

10. Finalized for FY 2014 Payment • Retain the existing FY 2013 measures • Add 5 new measures • Data collection begins with January 1, 2012 discharges • ED Throughput – Admit Decision Time to ED Departure for admitted patients • ED Throughput – Median time from ED Arrival to ED Departure for admitted patients • Global Flu Immunization • Global Pneumonia Immunization • HAI measure – Surgical Site Infection • Data collection via NHSN • Retire PN-2 and PN-7 Pneumonia population specific measures to accommodate Global Immunization measures

11. Additional RHQDAPU Changes • Synchronize APU Data Submission and Validation • CMS aligns the quarterly discharge periods within the calendar year • Effective with FY 2013 payment decision • Data must be submitted in all 4 calendar quarters of 2011 • Data Validation will use 4 quarters of data • 4th qtr of CY that occurs 2 years before payment determination and the first 3 calendar quarters of the following year • Example 2013 validation • 4th calendar quarter 2010 through 3rd calendar quarter 2011

12. EHRs and RHQDAPU • EHR quality measures reporting for Meaningful Use • Per the HITECH Act, CMS finalized an EHR incentive program that uses quality measure reporting to demonstrate meaningful use of a certified EHR • HITECH Act requires that preference be given to quality measures used in RHQDAPU • EHR Incentive Program and RHQDAPU are two separate programs that will overlap with reporting of quality measures • If a measure is submitted for EHR and used in RHQDAPU hospitals will submit once for both programs

13. Hospital-acquired conditions Hospitals will not qualify for higher payment for the following HACs: • Object left in during surgery (acute reaction to foreign substance) • Air embolism • Blood incompatibility replaces code with 5 new codes in 2011 • Catheter-associated urinary tract infections • Pressure ulcers (Stages III/IV) • Surgical site infections (e.g., Mediastinitis after CABG, certain orthopedic and Bariatric surgeries ) expanded in 2009 • Vascular catheter-associated infections (e.g. blood stream infection) • Hospital-acquired falls leading to injuries (including fractures, dislocations, intracranial injury, crushing injury and burns) - two new codes in 2010 • DVT/PE after hip and knee replacement* - new in 2009 • Poor glycemic control (Ketoacidosis & Coma- hypoglycemic & hyporosmolar) new in 2009 • *There is no payment ramification for PE

14. Low-cost Counties • Hospitals located in counties with the lowest Medicare Part A and B spending (bottom quartile) will receive a bonus. • Spending adjusted by age, sex and race similarly to Medicare Advantage. • $400M apportioned based on 2009 spending (not budget neutral) • $150M in FY 11 • $250M in FY 12. • 276 counties with 416 qualifying hospitals.

15. Wage Index • Wage index floor of 1.00 for hospitals located in “frontier” states: Wyoming, Montana, North Dakota, and South Dakota. • Restores wage comparison for reclassifications to 84% for urban, 82% for rural, and 85% for groups • Calculates rural and imputed floors budget neutrality on a national basis

16. Cost Reports and Transfer Policy CMS Cost Report • Finalizes proposal to adopt new standard cost centers for CT scanning, MRIs, and cardiac catherization. • to improve the accuracy of cost estimations. Transfer Policy • Expands the post-acute transfer policy related to transfers from an IPPS hospital to: • hospitals that do not have an agreement to participate with Medicare under the IPPS, and • Critical Access Hospitals (CAHs). • No material impact on Medicare payments.

17. Disproportionate Share Hospital (DSH) Payments • DSH adjustment is calculated using Supplemental Security Income (SSI) fraction, and Medicaid fraction. • Data drawn from CMS Medicare Provider Analysis and Review (MedPAR) and SSI eligibility data provided by the Social Security Administration. • SSI is determined by CMS matching Medicare records and SSI eligibility records for each patient. • CMS revises data matching process for FY 2011 and beyond. • Uncertain of impact on providers • Clarifies Medicare Advantage patients are “eligible” for Part A services

18. Direct graduate medical education • Hospitals may submit their Medicare GME affiliation agreements to CMS electronically. • Clarifies definition of residents in approved medical residency programs for the purpose of receiving Medicare IME and direct GME payments. Specifically: • Chief residents who have completed an approved medical residency program and satisfied their minimum requirements for board certification should not be considered as residents • Individuals who extend their training beyond the length of the approved residency program should bill for services under PFS • To include as a resident ask: Does the resident need the training for board certification in that specialty and is s/he is a formal program?

19. New technology add-on payments • FY 2010 technologies: • CardioWest™ Temporary Total Artificial Heart System (continuation) • Spiration® IBV® valve system to limit airflow into leaking lung (continuation) • FY 2011 applications: • AutoLitt™ laser for brain tumor removal (approved) • LipiScan™ coronary imaging system (denied) • LipiScan™ coronary imaging system with Intravascular Ultrasound (denied)

20. Outliers • To qualify for outlier payments in FY 11, the cost of the case must be more than the DRG, including add-ons, plus the fixed-loss threshold of $23,075 for CMS to then cover 80% of the balance. • This is down from the FY 10 threshold of $23,140.

21. Rural Provisions • Medicare Dependent Hospitals • Extends program for FY 11. • Clarifies that patients who have exhausted Part A are in counted in the 60% calculation . • Low-volume adjustment • Provides an add-on payment for low volume hospitals, FYs 2011 and 2012 determined by using a sliding scale.

22. CRNA pass through • Certified Registered Nurse Anesthetists (CRNA) services are paid based on reasonable costs for certain rural and critical access hospitals (CAHs). • Effective for cost-reporting periods beginning on or after October 1, 2010 urban hospitals, including CAHs, that have reclassified as rural will be made eligible for CRNA cost-based reimbursement. • Hospitals, including CAHs, located in Lugar counties will not be made eligible for CRNA cost-based reimbursement.

23. Critical Access Hospitals (CAHs) • Once a CAH elects to receive payments under Method II, it will remain until terminated in writing • Reinforces 101% of costs for all outpatient services regardless of billing method • Clarifies when provider taxes are allowable • Medicare contractors will make case-by-case determinations as to whether a reduction is necessary to account for payments associated with the assessed tax.

24. Practical implications to think about? • Payment cuts due to behavioral offset in FY 11 forward • Payment cuts due to PPACA market basket reduction • Increase in payments due “low-cost counties” bonus? • Increase in payments due to reversed AWI policies? • Additional burden associated with new quality measures reporting requirements • Additional resources to support data submisison to CDC’s NHSN? • Staff/systems/costs to test EHR submission of measures? • Increase in DSH payments? • Increase in payments for CRNA services? • Compliance with changes to cost-reporting changes?

25. Contact information Danielle A. Lloyd, MPH Senior Director, Reimbursement Policy Premier Inc. 444 N. Capitol St, NW, Suite 625 Washington, DC 20001-1511 Phone: 202.879.8002 Fax: 202.393.0864 E-mail: danielle_lloyd@premierinc.com Web site: http://www.premierinc.com/