Introduction to Medical Management – PPS and DRGs

1. Introduction to Medical Management – PPS and DRGs ISE 468 ETM 568 Spring 2015 Prospective Payment System Diagnosis-Related Groups

2. Medical Management Coding/Payment Terms 1 • Prospective Payment System (PPS) • A method of reimbursement in which Medicare payment is made based on a predetermined, fixed amount • ICD-9-CM - International Classification of Diseases 9th Revision  • Official system of assigning codes to diagnoses and procedures associated with hospital utilization in the United States. • The classifications are based on disease conditions followed by modifiers added for more specificity which may or may not have an effect on the diagnosis. • ICD-9-CM codes may be composed of codes of three, four, or five digits. • Principal Diagnosis • Condition established after record review to be chiefly responsible for admission of the patient to the hospital for care. • Secondary Diagnoses • All conditions that coexist at the time of admission, that develop subsequently, or that affect the treatment received and/or the length of stay (LOS). ISE 468 ETM 568 Dr. Joan Burtner

3. Medical Management Coding/Payment Terms 2 • Centers for Medicare & Medicaid Services(CMS) • formerly HCFA (Health Care Financing Administration) • Diagnosis-Related Groups (DRGs) • A classification system for hospitalized patients. By design, DRGs are categories that consist of similar care processes and a predictable range of services. • Comorbidities • A disease or condition that coexists with a primary disease but also stands separately as a specific disease or condition. • Length of Stay (LOS) • Number of days the patient is in the hospital from day of admission until discharged. Day of discharge is not calculated in the length of stay. • Geometric Mean Length of Stay (GMLOS) per DRG • Average length of stay assigned to the DRG • Unfunded Days • Number of days occurring between the GMLOS and the days to outlier. During this time, the patient continues to utilize their Medicare days. ISE 468 ETM 568 Dr. Joan Burtner

4. CMS Legislation Long-Term Care Hospital PPS 1 • “The Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554) provide for payment for both the operating and capital-related costs of hospital inpatient stays in long-term care hospitals (LTCHs) under Medicare Part A based on prospectively set rates. The Medicare prospective payment system (PPS) for LTCHs applies to hospitals described in section 1886(d)(1)(B)(iv) of the Social Security Act (the Act), effective for cost reporting periods beginning on or after October 1, 2002. Section 1886(d)(1)(B)(iv)(I) of the Act defines a LTCH as "a hospital which has an average inpatient length of stay (as determined by the Secretary of Health and Human Services (the Secretary)) of greater than 25 days.” Section 1886(d)(1)(B)(iv)(II) of the Act also provides an alternative definition of LTCHs.” www.cms.gov accessed Feb 11 2015 ISE 468 ETM 568 Dr. Joan Burtner

5. CMS Legislation Long-Term Care Hospital PPS 2 • “Section 123 of the BBRA requires the PPS for LTCHs to be a per discharge system with a diagnosis-related group (DRG) based patient classification system that reflects the differences in patient resources and costs in LTCHs while maintaining budget neutrality. Section 307(b)(1) of BIPA, among other things, mandates that the Secretary shall examine, and may provide for, adjustments to payments under the LTCH PPS, including adjustments to DRG weights, area wage adjustments, geographic reclassification, outliers, updates, and a disproportionate share adjustment.” www.cms.gov accessed Feb 11 2015 ISE 468 ETM 568 Dr. Joan Burtner