Cost and Payment for Health Care

1. Cost and Payment forHealth Care Conceptual Framework and Resources

2. What is “cost” in health care? • Cost to provider? (hospital, physician, home health agency) • Cost to whoever pays the bill? (government, commercial insurer, foundation, self-pay) • Cost to society? (long-term economic impact) • Each of these involves different information sources.

3. How will the info be used? “I want to explore how much money in emergency department fees can be saved by a charitable foundation that pays for health care for the medically indigent, if the foundation can increase the number of patients receiving preventive care and reduce the number of ER visits.” “Can a hospital increase its profit margin for MS-DRG 237 if it only performs a CT scan when certain factors are present, instead of on all patients?”

4. Who is the population of interest? • Children under the age of 18 • Medicare beneficiaries • People with COPD living in Baltimore City • Pregnant women with income below the poverty line • Patients with diagnosis code XYZ

5. More Detail onInsurance Payment

6. What is the setting? • Acute care hospital inpatient • Physician’s office • Emergency department • Hospital outpatient • Ambulatory Surgery Center (ASC) • Home care

7. Who is/are the payer(s)? • Medicare • Medicaid • Commercial Insurance • Self-Pay • HMO • Other?

8. Payments may have components • Technical/Facility fee • Professional/Physician fee • Global payment (technical + professional)

9. Payments may be adjusted for: • State or region • Urban or rural • Local wage levels • Teaching facility • Multiple procedures in one visit (ASC) • Variations of a procedure or diagnosis (e.g., with or without contrast CT)

10. The problem ofcommercial insurance • Amounts paid not publicly available • Depends on contract between insurer and each provider • Depends on company and its provider and payment models • May be subject to group/consortium/hospital system discounts

11. The problem of Medicaid • Rates set by individual states • Info sometimes not available • Often payments are LESS THAN cost

12. “True Cost”

13. “True” cost considerations • Provider vs. societal cost • With former, can do resource consumption study (very facility-specific) • With latter, best to search the academic literature, especially in the field of medical economics—though even here, studies are scarce • Issue of full vs. incrementalcost

14. Medicare Payment as Proxy for Cost • Often used by researchers, because… • True “accountant’s” cost difficult to determine • Only for services Medicare pays for • Limited to the payer’s basis for payment (hospital stay, 60 days of home health care, outpatient surgical procedure)

15. Other Sources of Cost Info • Search the Business & Medicine core literature databases for relevant articles. • Search the web—You’ll sometimes find definitive sources, studies, etc. • Search the research of charitable foundations such as Kaiser Family Foundation and The Commonwealth Fund. • Search the website of the federal Agency for Healthcare Research and Quality (AHRQ)

16. Summary of what I’d like to know • The goal of the initiative in words • The researcher’s/student’s definition of cost • Target patient population • Location/venue of service • Physician fee, facility fee, or both?

17. Procedure & Diagnosis Codes The Key to Payment Amounts

18. Hospital Inpatient • Those famous DRG groupings, now called MS-DRGs by Medicare/Medicaid Grouper

19. Hospital Outpatient • Medicare’s “Outpatient Prospective Payment System” (OPPS) • Uses APGs

20. Ambulatory Surgery Center (ASC) • ASC procedure codes (APCs), which are in turn based on APGs APG? ASC? ABC?

21. Physician Services • CPTs (procedure codes) and HCPCS (Medicare version of CPTs) • Payment is different if in a facility or in a doctor’s office. • Many procedures are only reimbursable in one or the other location, others can be done in multiple locations and be paid for.

22. So Where Do I Find All This?

23. The Health Care Reimbursement Guide Find it in: • Business Research Guide • Business of Health Care Tab

24. Health Care Reimbursement Guide

25. Health Care Reimbursement Guide

26. Health Care Reimbursement Guide

27. An Example • Laparoscopic Cholecystectomy with Cholangiography • On the “Medicare” tab, click on “Ambulatory Surgical Center (ASC) Fee Schedule Explained” to read about how ASC payments are calculated and made. • From the “Reimbursement Toolkit,” use AMA Website to look up CPT code (47563) and payment ($771.45 in facility) for physician component. • Also in the“Reimbursement Toolkit,” click on “Ambulatory Procedure Classifications.” • At the IRP website, click on “APC/HCPCS Assignment” • Find the APC code equivalent to the CPT code above (00131). • Still at the IRP website, click on “APC Payment Rates” and find the facility payment for this procedure ($3,487.15). • 2 + 6 = Total payment ($4,258.60).

28. Questions?