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California Medical Bill Reviewer Certification

California Medical Bill Reviewer Certification. Unit 4: Hospital Guidelines Module 1: Inpatient Hospital Guidelines. Overview. In this module, you will learn about current hospital inpatient billing practices, how fees are determined and how services are billed.

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California Medical Bill Reviewer Certification

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  1. California Medical Bill Reviewer Certification Unit 4: Hospital Guidelines Module 1: Inpatient Hospital Guidelines

  2. Overview In this module, you will learn about current hospital inpatient billing practices, how fees are determined and how services are billed. Let’s start by discussing what inpatient services are and how they are determined. Inpatient Hospital Guidelines… • What Inpatient Hospital Services Are • How Inpatient Fees are Determined • Definition of Payment • Billing Examples • How Transfers are Billed • Exceptions to the Inpatient Fee Schedule Inpatient Hospital Guidelines… • What Inpatient Hospital Services Are • How Inpatient Fees are Determined

  3. History In 2003, the State of California revised the payment composition of the Inpatient Hospital Fee Schedule. The changes became effective for discharge services on or after January 1, 2004. California State Capitol Building Sacramento, CA Let’s take a look…

  4. A hospital bill is considered “inpatient” when a patient is admitted to a hospital, skilled nursing facility, or immediate care facility for bed occupancy, for the purposes of receiving inpatient services. If in doubt, remember… if the patient occupied a bed at midnight, it is an inpatient stay! What are inpatient services? Place holder

  5. When formally admitted as an inpatient, with the expectation of remaining at least overnight and occupying a bed, even though it later develops that the patient can be discharged or transferred to another facility and did not actually use a bed overnight. A person is considered “inpatient”…

  6. Determining Inpatient Fees Each hospital is given unique payment factors to determine reimbursement for specific procedures, rated in terms of cost and intensity, such as… Medicare ID Number (5 digit) Composite Factor Outlier Thresholds Cost-to-Charge Ratios and these factors are part of the Medicare Severity Diagnosis-Related Group (MS-DRG) system.

  7. Diagnosis-Related Group The Diagnosis-Related Group (DRG) system is used nation-wide to“group” related diagnosis and principle procedures performed. It helps us classify patients based on principal diagnosis, surgical procedure, age, the presence of morbidities, complications and other pertinent data. Basic fee + Hospital-specific Outlier Threshold = DRG Relative Values… DRG Weight Outlier Threshold The weighting factor for a diagnosis-related group assigned by CMS for the purpose of determining payment under Medicare. Geometric Mean Length of Stay

  8. Operating cost Capital cost Operating cost Capital cost DRGWeight OutlierPayment New Technology Payment Composite Factor The Composite Factor is calculated by adding the prospective operating cost and the prospective capital cost for the health facility. • While excluding… • DRG weight, • Any applicable outlier, and • New technology payment

  9. Maximum Payment The Maximum payment for inpatient medical services is also known as the “Basic Fee”. The Basic Fee for inpatient medical services shall be determined by multiplying 1.20 by the product of the health facility's composite factor and the applicable DRG weight. Basic Fee = 1.20 x (Composite Factor x DRG wt.)

  10. California Compensation Factor Since health care in California is more expensive than the average state, the California Workers’ Compensation system applies a “factor” of 1.20 to Medicare values to compensate for this expense in the Golden State. You’ll see this used in many of the calculations that follow. And now you’ll know why! 1.20

  11. Check Point Alright… now that you have some concepts down, let’s take a look at how they can be applied with a few examples! Inpatient Hospital Guidelines… • What Inpatient Hospital Services Are • How Inpatient Fees are Determined • Definition of Payment • Billing Examples • How Transfers are Billed • Exceptions to the Inpatient Fee Schedule • Billing Examples

  12. Example of a Basic Fee This is a bill for inpatient fees from St Rose Hospital. You’ll see the items highlighted here factored into the calculation of the examples that follow.

  13. Relative Weight The average Length of Stay in days for a procedure is listed this way. You can identify the DRG using this column. Look at 456. It shows up in an example later. Relative Weight is a factor that compares a service’s time and difficulty to all other services. The more difficult and costly, the higher the weight. This information is found in the Fee Schedule.

  14. Hospital Composite Factors See how these components appear in the Fee Schedule. We’ll be using St. Rose as an example.

  15. MEDICARE PROVIDER NO. NAME Composite Hospital Specific Outlier Threshold Cost-to- Charge Ratio 050002 ST ROSE HOSPITAL $10,897.56 $ 27,895.08 0.234 050009 QUEEN OF THE VALLEY $ 7,009.97 $ 30,106.62 0.289 050015 NORTHERN INYO HOSPITAL $ 5,891.61 $ 25,309.48 0.775 050017 MERCY GENERAL HOSPITAL $ 7,381.89 $ 28,444.31 0.215 050018 PACIFIC ALLIANCE MEDICAL CENTER $10,569.18 $ 26,543.75 0.548 050022 RIVERSIDE COMMUNITY HOSPITAL $ 6,725.23 $ 25,726.74 0.261 050024 PARADISE VALLEY HOSPITAL $ 8,749.08 $ 25,910.07 0.229 050025 UNIV OF CALIFORNIA SAN DIEGO MED CTR $ 8,605.70 $ 25,906.72 0.335 Example of a Basic Fee Basic Fee Calculation Example for the St. Rose Spinal Fusion DRG456Weight (8.4910) x Hospital Composite Factor ($10,897.56) x 1.20 = $102,007.85 • As you can see, the Basic Fee is • calculated by... • Multiplying, the DRG Weight by the Hospital Composite Factor, and then • Multiplying, the result by 1.20 Now that you’ve seen how a Basic Fee is calculated, we’ll build on what you’ve learned.

  16. Cost-to-Charge Ratio Cost-to-Charge Ratio is a value given to each hospital that compares their true cost to what they charge. Notice that this is the same table we used to show Hospital Composite Factor. Let’s take a look…

  17. Cost Admission cost are the total billed charges for an admission multiplied by the hospital's total cost-to-charge ratio. Cost = Billed Charges x Cost-to-Charge Ratio • A patient’s admission cost do not include non-medical charges such as… • Television and Telephone, • Durable Medical Equipment • for in-home use, • Implantable Medical Devices, and/or • Reimbursed Instrumentation

  18. Basic Fee + Cost Basic Fee DRG456Weight (8.4910) x Hospital Composite Factor ($10,897.56) x 1.20 = $102,007.85 Cost Billed Charges $96,575.00 x Cost-to-Charge Ratio .234 = $22,598.55 Thankfully, most of this work is automated so you don’t have to manually calculate these charges, but we illustrate them here using the St Rose example, should you ever have to determine them yourself.

  19. Overview Sometimes.... there is a wide disparity in cost between facilities. The fee schedule takes into consideration the operating cost, capital-related cost, acquisition cost of organs, tissue and other implantable hardware and devices used in a procedure. This is where the Cost-to-Charge Ratios and Outlier Thresholds come into play! Inpatient Hospital Guidelines… • What Inpatient Hospital Services Are • How Inpatient Fees are • Definition of Payment • Billing Examples • How Transfers are Billed • Exceptions to the Inpatient Fee Schedule

  20. This is a key concept in the billing examples that follow! Maximum Payment Should a facility’s cost exceed the outlier threshold, reimbursement would be at the Outlier Payment amount. If Facility’s Cost < Outlier Threshold, then… Reimbursement = Basic Fee If Facility’s Cost > Outlier Threshold, then… Reimbursement = Outlier Payment Amount

  21. Cost Outlier Case A hospitalization for which the hospital's cost exceeds the cost outlier threshold. Outlier Threshold = Basic Fee + Hospital-Specific Outlier Factor Outlier Threshold You’ll see how to calculate an Outlier Payment shortly! A threshold helps determine when to pay a Basic Fee vs. an Outlier Payment. This protects facilities from suffering a significant loss on a case with unusually high cost. Basic Outlier Fee Payment

  22. Hospital Specific Outlier Threshold The Hospital Specific Outlier Threshold will be key here. Still using St Rose as the example.

  23. Outlier Threshold Calculation This calculation will help you determine whether to pay the basic fee or the outlier payment. Remember… if a cost is greater than the outlier threshold, then you would calculate the outlier payment. If not, then you’d pay the basic fee. Basic Fee DRG456Weight (8.4910) x Hospital Composite Factor ($10,897.56) x 1.20= $102,007.85 cost Billed Charges $96,575.00 x Cost-to-Charge Ratio .234 = $22,598.08 Outlier Threshold (Basic fee + Hospital-specific Outlier Factor) Basic Fee ($102,007.85) + Hospital Specific Outlier Factor ($27,895.08) = $138,932.49 In this case, do you pay the Basic Fee? Yes, because the cost do not exceed the Outlier Threshold. Do you continue withthe Outlier Calculation? No, because the Facility’s cost do not exceed the Outlier Threshold.

  24. Example of Outlier Payment Okay, things are going to get interesting now. We’re going to build on what you learned in the Basic example! You’ll see here the charges have increased, which will affect the overall payment.

  25. Facilities are entitled to a mark up when the Cost is greater than the Outlier Threshold. That “mark up” is called the Outlier Payment, which replaces the Basic Fee. Example of an Outlier Payment Basic Fee DRG456Weight (8.4910) x Hospital Composite Factor ($10,897.56) x 1.20 = $102,007.85 Cost Billed Charges $835,550.00 x Cost-to-Charge Ratio .234 = $195,518.70 Outlier Threshold (Basic fee + Hospital-Specific Outlier Factor) Basic Fee ($102,007.85) + Hospital Specific Outlier Factor ($27,895.08) = $138,932.49 In this case, do you pay the Basic Fee? No, because the Cost exceeds the Outlier Threshold. Do you continue withthe Outlier Calculation? Outlier Threshold is determined by combining the Basic Fee + Hospital Specific Outlier Factor. Yes, because the Admission Cost exceeds the Outlier Threshold.

  26. Take some time to think thisone through and review as needed. Also, the order of mathematical operations is important here. (Cost – Outlier Threshold) x 0.8 + Basic Fee = Outlier Payment Okay, let’s break this down… only when the Admission Cost exceeds the Outlier Threshold, do you perform the Outlier Calculation to determine the Outlier Payment. • The Outlier Payment is determined by… • Subtracting, the Outlier Threshold from the Admission Cost, • Multiplying, the difference by 0.8 (a state-mandated reduction factor), and • Adding, the Basic Fee Math Check Admission Cost $195,518.70 Outlier Threshold $138,932.49 Outlier Payment Calculation (Cost – Outlier Threshold) x 0.8 + Basic Fee $195,518.70 -$138,932.49 $56,595.21 x 0.8 = $45,276.16 +$102,007.85 (Basic Fee) Outlier Payment = $147,284.01

  27. Implants, Devices, Hardware, Instrumentation To complicate billing, there are some DRGs that shall be separately reimbursed for implants, devices, hardware, or instrumentation. Separately Reimbursable DRGs 028-030, 040-042, 453-460, 471-473, 495-497and 546 The billed amount for these items should be subtracted from the billed charge, before determining the cost. Implants, Devices, Hardware, and Instrumentation Reimbursement Documented Paid Cost + 10% + Sales Tax, Shipping, and Handling* *A Markup Maximum of $250 Applies

  28. Example of Outlier Paymentwith Implants See, we’re building on what you learned in the last three examples!

  29. Example of an Outlier Payment with Implants Basic FeeDRG456Weight (8.4910) x Hospital Composite Factor ($10,897.56) x 1.20 = $102,007.85 Cost Billed Charges ($835,550.00 – Implant Charge $3,607.00) x Cost-to-Charge Ratio .234 = $194,674.66 Outlier Threshold (Basic fee + Hospital-specific Outlier Factor) Basic Fee ($102,007.85) + Hospital Specific Outlier Factor ($27,895.08) = $138,932.49 Outlier Case if cost exceed the outlier threshold, it is a cost outlier case. Basic fee (102,007.85) + [0.8 X (cost – cost outlier threshold = 44,593.73) = 146,601.58 Implants= $3,607.00Amount for implant/hardware includes documented Cost + 10% (10% not to exceed $250) + actual shipping/handling and tax In this case, do you pay the Basic Fee? No, because the Cost exceeds the Outlier Threshold. Do you continue with the Outlier Calculation? Yes, because the Cost exceeds the Outlier Threshold.

  30. Again with all this math, things can get tricky. Don’t be fooled though; just take your time and it will all make sense! Math Check Cost $194,675.83 Outlier Threshold $138,932.49 Outlier Payment Calculation (Cost – Outlier Threshold) x 0.8 + Basic Fee $194,675.83 -$138,932.49 $55,74.34 x 0.8 = $44,594.67 +$102,007.85 (Basic Fee) $146,602.52 Implants + $3,607

  31. Example of an Outlier Payment with Implants Basic FeeDRG456Weight (8.4910) x Hospital Composite Factor ($10,897.56) x 1.20 = $102,007.85 CostBilled Charges ($835,550.00 – Implant Charge $3,607.00) x Cost-to-Charge Ratio .234 = $194,674.66 Outlier Threshold (Basic fee + Hospital-specific Outlier Threshold) Basic Fee ($102,007.85) + Hospital Specific Outlier Factor ($27,895.08) = $138,932.49 Outlier Case if cost exceed the outlier threshold, it is a cost outlier case. Basic fee (102,007.85) + [0.8 X (cost – cost outlier threshold = 44,593.73) = 146,601.58 Here’s our Outlier Payment, after performing the calculations. Implants = $3,607.00 Outlier Payment = $150,209.52

  32. Check Point You’re making good progress! Let’s move on to our next topic… Definition of Payment! You’re making good progress! Let’s move on to our next topic… Definition of Payment! Don’t forget, you can always e-mail your trainer if you have any questions… WCTO-Training@cvty.com Inpatient Hospital Guidelines… • What Inpatient Hospital Services Are • How Inpatient Fees are Determined • Definition of Payment • Billing Examples • How Transfers are Billed • Exceptions to the Inpatient Fee Schedule • How Transfers are Billed

  33. TRANSFER How Transfers are Billed Sometimes a hospital needs to transfer a patient to a different facility. Another facility may be better equipped to respond to a patient’s condition for services such as rehabilitation or burn therapy.

  34. TRANSFER How Transfers are Billed Reimbursement to the transferring hospital is calculated by multiplying the number of days stayed by the fee schedule’s per diem rate (per diem rate = the maximum reimbursement divided by the average length of stay specific to the DRG used). Transfer Reimbursement Calculation #Days Stayed X Per Diem Rate/Avg. Length of Stay per DRG

  35. TRANSFER How Transfers are Billed IMPORTANT!! The first day is reimbursed at twice the per diem rate! In no event should the transferring hospital be reimbursed more than the maximum reimbursement, which is equal to the Basic Fee. The facility receiving the patient should bill and be reimbursed as normal under the Inpatient Fee Schedule.

  36. Geometric Mean Length of Stay For this Three-day Transfer example, we’ll use DRG 56. Remember, the transfer reimbursement calculation is #Days Stayed X Per Diem Rate/Avg. Length of Stay per DRG Let’s take a look…

  37. Example of a Transfer Fee Basic Fee DRG 56 Weight (1.6349) x Hospital Composite Factor ($10,897.56) x 1.20 = $21,379.70 Per Diem Rate Basic Fee divided by the Geometric Mean Length of Stay (LOS) $21,379.70/ 5.7 = $3,750.82 First Day Two times the per diem rate $3,750.82 x 2 = $7,501.64 This does not exceed the maximum DRG allowable. However, more than a three-day stay would. Additional Days2 days @ $3,750.82 = $7,501.64 Total Reimbursement $ 7,501.64 + 7,501.64= $15,003.28 Three-day Stay

  38. Once you’ve checked the Fee Schedule, • the math falls into place. • Calculate the Basic Fee, • Calculate the Per Diem, • Remember that the First Day is charged at twice the Per Diem, and then add the Additional Days. Remember, the Transfer Fee is calculated by multiplying the number of days stayed times the fee schedule’s per diem rate. The per diem rate is equal to the maximum reimbursement divided by the average length of stay, specific to the DRG used. Math Check In our Three-day Transfer Fee Example… DRG 56 Weight = 1.6349 Hospital Composite Factor = $10,897.56 Basic Fee Calculation DRG Weight x Composite Factor x 1.20 1.6349 x $10,897.56 x 1.2 = $21,379.70 Geometric Mean LOS $21,379.70/5.7 = $3,750.82 First Day (2x Per Diem) $3,750.82 x 2 = $7,501.64 Additional Days $3,750.82 x 2 = $7,501.64 Three-day Stay = $15,003.28 In our Three-day Transfer Fee Example… DRG 56 Weight = 1.6349 Hospital Composite Factor = $10,897.56 Basic Fee Calculation DRG Weight x Composite Factor x 1.20 1.6349 x $10,897.56 x 1.2 = $21,379.70 Three-day Stay = $15,003.28

  39. Geometric Mean Length of Stay For this Ten-day Transfer example, an acute care patient is discharged to a rehabilitation hospital or rehab unit, with DRG 480 applied.

  40. Example of a Transfer Fee Basic Fee (Amount Paid) DRG 480 Weight (2.8995) x Hospital Composite Factor ($10,897.56) x 1.20 = $37,916.96 Per Diem Rate $ 37,916.96/ Geometric Mean Length of Stay (7.8) = $4,861.14 First Day Twice the per diem rate $4,861.14 x 2 = $9,722.28 Additional Days(DRG 480 Additional Days = 50% of Amount Paid + (50% of Per Diem Rate x # Addl. Days)) 50% of Basic Fee (Amount Paid) = $18,958.48 9 days @ $2,430.57 = $21,875.13 This exceeds the maximum DRG allowable. In this case, pay the Basic Fee. 10-day Stay= $40,833.61

  41. Oops, looks like this exceeds the DRG maximum, so the provider will be paid the Basic Fee! Math Check In our Ten-day Transfer Fee Example… DRG 210 Weight = 1.9059 Hospital Composite Factor = $10,011.37 Basic Fee (Amount Paid) Calculation DRG Weight x Composite Factor x 1.20 1.9059 x $10,011.37 x 1.2 = $22,896.80 In our Ten-day Transfer Fee Example… DRG 480 Weight = 2.8998 Hospital Composite Factor = $10,897.56 Basic Fee (Amount Paid) Calculation DRG Weight x Composite Factor x 1.20 2.8998 x $10,897.56 x 1.2 = $37,916.96 Per Diem Rate $37,916.96/7.8 = $4,861.14 First Day (2x Per Diem) $4,861.14 x 2 = $9,722.28 Additional Days $18,958.48 + ($2,430.57 x 9) = $40,833.61 (DRG 480 Additional Days = 50% of Amt. Pd. + 50% of Per Diem Rate) Ten-day Stay = $40,833.61 Per Diem Rate $37,916.96/7.8 = $4,861.14 First Day (2x Per Diem) $4,861.14 x 2 = $9,722.28 Additional Days $18,958.48 + ($2,430.57 x 9) = $40,833.61 (DRG 480 Additional Days = 50% of Amt. Pd. + 50% of Per Diem Rate) Ten-day Stay = $40,833.61

  42. Check Point Keep up the good work! Whew! There’s a lot to learn here, so take your time and review as needed. There are just a few more things to know about inpatient fees I’d like to show you before we conclude. There are instances in which hospitals are entitled to higher fees. Let’s take a look at them now! Inpatient Hospital Guidelines… • What Inpatient Hospital Services Are • How Inpatient Fees are Determined • Definition of Payment • Billing Examples • How Transfers are Billed • Exceptions to the Inpatient Fee Schedule • Exceptions to the Inpatient Fee Schedule

  43. Sole Community Hospitals There are sole community hospitals, located in rural areas. Sole community hospitalsalso include hospitals that are the sole source of care within a certain radius of the community. Due to the limitation of services, the operating component of the composite rate shall be allowed at the higher of the prospective operating cost.

  44. New Technology Pass-through Also, there are cases known as “New technology pass-through”, which warrant additional payments for new medical services and technologies. To qualify as a new technology, it must demonstrate a substantial clinical improvement over technologies otherwise available, and absent an add-on payment, it would be inadequately paid under the regular DRG payment.

  45. Exempt Items Some items are exempt from the Inpatient Fee Schedule, like … O Bills from facilities that do not have a Medicare O number/composite factor O Critical access hospitals O O Children’s hospitals O O Cancer hospitals O O Veterans hospitals O O Long term care hospitals O O DME supplied for home use (should be excluded from IPFS) O O Preadmission services, such as blood work and other tests O rendered by the facility more than 24 hours before admission are excluded from this schedule, but are reimbursable under the OMFS (if applicable).

  46. Exempt Items Also exempt from the Inpatient Fee Schedule … O Rehabilitation hospital or rehabilitation units of an acute care O hospital, psychiatric hospital or psychiatric unit of an acute care hospital, are exempt from the maximum reimbursement formula for inpatient services. When certain revenue codes are billed in conjunction with psychiatric or rehabilitation hospital type inpatient stays, the maximum inpatient reimbursement formula is not be applied.

  47. PPO Contracts and Inpatient Bills It is critical that you familiarize yourself with the contract rates and the information pertaining to the Inpatient Fee Schedule, as any mistake can be a costly one! In January 2002, a bill (AB 1177) was passed, stating that “a contract rate supercedes the fee schedule.” During this time PPO Developers were frantically renegotiating with facilities to ensure “Lesser of” language (lesser of fee schedule rate or the contracted rate) was included in the contracts so we were not bound to reimburse at a fee higher than the fee schedule allows.

  48. DRG and Facility Composite Factors Change Important! Both DRG Weights and Facility Composite Factors are subject to change without notice. Make sure you use the correct data applicable for the date of service. The discharge date is used to determine this.

  49. Summary The Medicare Severity Diagnosis Related Group (MS-DRG) system is used in determining reimbursement. Inpatient services apply when a hospital patient occupies a bed at midnight. Due to the limitation of services at sole community hospitals, the operating component of the composite rate shall be allowed at the higher of the prospective operating cost. Reimbursements to transferring hospitals are calculated by multiplying the number of days stayed times the fee schedule’s per diem rate, with the first day reimbursed at twice the per diem rate. Some items are exempt from the Inpatient Fee Schedule. A contract rate supercedes the fee schedule.

  50. In Closing… The Inpatient Hospital Fee schedule is adjusted to conform to any relevant changes in the Medicare payment schedule no later than 60 days after the effective date of those changes. Updates will be posted on the Division of Workers’ Compensation web page http://www.dir.ca.gov/dwc/feeschedules. The updates to the Inpatient Hospital Fee schedule will be effective every year on October 1.

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