FY 2019 IPPS Final Rule: A Closer Look at MSDRG Changes

Version 36 incorporates changes to our MSDRG list as well as associated relative weights.  From FY 2018 to FY 2019, 742MSDRGs are present in both versions.

Does FY 2019 (MSDRG V36) involve any new or deleted MSDRG?

It sure does! Eleven (11) MSDRGs are removed for FY 2019 and eighteen (18) MSDRGs have been created.

To what extent is Relative Weight changing from FY 2018 to FY 2019?

 

*Data Source: CMS, FY 2018 & 2019 Table 5

*Data Source: CMS, FY 2018 & 2019 Table 5

Based on the data presented, the clear majority of MSDRG relative weights are experiencing an increase or decrease less than 5% or no change at all (76%).

What are the top 10 MSDRGs experiencing Relative Weight change?

 

*Data Source: CMS, FY 2018 & 2019 Table 5

Why should hospitals be aware?

MSDRG relative weight (RW) is assigned to each MSDRG indicating a relative costliness or average resources required to care for cases assigned to that diagnosis related group compared to the average Medicare case costliness.  MSDRG relative weights are recalibrated annually, intended to not affect overall payments.  However, MSDRG relative weight changes could mean significant payment differences based on a hospital’s unique mix of services and volumes.

Case Hospital Example: Urban Ohio Hospital

Reviewing the top 5 MSDRGs for increase in payment and the top 5 MSDRGs for decreases in payment for FY 2018 to FY 2019 for an example hospital illustrates impact of payment due to changing MSDRG relative weights.  In this example, the volumes by MSDRG remain static, with the assumption volumes will remain the same or similar in subsequent years.

OHIO Hospital: Top 5 MSDRG Increases in Payment FY 2018 to FY 20191

*Data Source: CMS, FY 2018 & 2019 Table 5, FY 2019 IPPS Final Rule, 2017 MedPAR 1

Payment Differences due to RW Changes:FY 2019 Operating base rate and FY 2019 Wage Index to isolate Relative Weight impact with static volumes

In review of the top 5 increases and decreases in payment isolated by MSDRG relative weight for an individual hospital, the overall related payment differences for all MSDRGs could be vastly different when compared to the National payments – again due to Hospital specific volumes.

*Data Source: CMS, FY 2018 & 2019 Table 5, FY 2019 IPPS Final Rule, 2017 MedPAR

1Payment Differences due to RW Changes: FY 2019 Operating base rate and FY 2019 Wage Index to isolate Relative Weight impact with static volumes

 

OHIO Hospital: Top 5 MSDRG Decreases in Payment FY 2018 to FY 20191

*Data Source: CMS, FY 2018 & 2019 Table 5, FY 2019 IPPS Final Rule, 2017 MedPAR

1Payment Differences due to RW Changes: FY 2019 Operating base rate and FY 2019 Wage Index to isolate Relative Weight impact with static volumes

 

*Data Source: CMS, FY 2018 & 2019 Table 5, FY 2019 IPPS Final Rule, 2017 MedPAR

1Payment Differences due to RW Changes: FY 2019 Operating base rate and FY 2019 Wage Index to isolate Relative Weight impact with static volumes

 

What is the Impact to my Hospital?

Assessing the impact to Prospective Payment Rule polices is essential is understanding future Medicare payments. Identifying driving factors could assist the hospital in offering feedback to CMS and/or budgetary purposes at the facility and departmental levels.

Interested to comment to CMS on MSDRG Classification concerns?

The deadline to request updates to the MS-DRGs is now November 1 of each year. Interested parties needed to submit any comments and suggestions for FY 2019 by November 1, 2017. CMS encourages comments and suggestions for FY 2020 by November 1, 2018 via the CMS MS-DRG Classification Change Request Mailbox located at:MSDRGClassificationChange@cms.hhs.gov

CMS’s Acute Care Hospital Inpatient Prospective Payment System FACT SHEET: www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/acutepaymtsysfctsht.pdf

 

FY 2019 IPPS Final Rule: A Closer Look at Quality

Remove – Remove – Remove!

CMS’s strategy for a holistic quality payment program, the FY 2019 IPPS Final Rule, involves several removed measures to prevent duplication across programs in which is stated as considered causing unnecessary complexity or unnecessary costs. This focus on removal is ultimately positive and will help reduce administrative burden on providers.

“Regulatory reform and reducing regulatory burden are high priorities for CMS.” (CMS, FY 2019 IPPS Final Rule)

 

Through the Meaningful Measures Initiative and its impact, the strategy is to reduce regulatory burden by finalizing the following changes to the various quality programs, including Inpatient Quality Reporting (IQR) Program, Hospital Value-Based Purchasing (VBP) Program, Hospital-Acquired Conditions (HAC) Program, and Readmissions Reduction Program.

 

Meaningful Measures Hub: www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/MMF/General-info-Sub-Page.html

Inpatient Quality Reporting (IQR) Program


Estimated dollar savings and hours savings shown above are based on 3,300 IPPS hospitals. Additional costs unrelated to data collection are anticipated to be realized from the removal of various measures.

Overall changes to the program include:

  • Adding a new measure removal factor (Factor 8) to determine if the continued use of a measure will end up with greater costs associated and outweigh the benefit
  • Removing a total of 39measures from FY 2020 through FY 2023
    • Two (2) structural patient safety measures
    • Six (6) patient safety measures
    • Four (4) chart-abstracted clinical process of care measures
    • Seven (7) claim-based coordination of care measures
    • Five (5) claims-based mortality measures
    • One (1) claim-based patient safety measure
    • Seven (7) claims-based payment measures
    • Seven (7) EHR-based clinical process of care measures (eCQMs)

 

Homepage:www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/HospitalRHQDAPU.html

 

Hospital Value-Based Purchasing (VBP) Program

Since the amount available for value-based incentive payments under the program each year must be equal to the total amount of base operating MSDRG payment amount reductions for that year, CMS estimates no net financial impact for FY 2019 VBP. The amount available is estimated to be $1.9 billion.

Overall changes to the program include:

  • Clinical domain has been renamed Clinical Outcomes domain
  • Removal of four (4) measures:
  1. Acute Myocardial Infarction – Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care (for FY 2019)
  2. Heart Failure – Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care (for FY 2019)
  3. Pneumonia – Hospital-Level, Risk-Standardized Payment Associated with a 30-Day Episode-of-Care (for FY 2019)

Why? Due to duplication. These will continue to be used in the Hospital IQR program

  1. Elective Delivery (for FY 2021)

Why? Cost of measure outweighs benefit of its continued use

 

Hospital Value-Based Purchasing FACT SHEET: www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/Hospital_VBPurchasing_Fact_Sheet_ICN907664.pdf

 

Homepage:www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/HVBP/Hospital-Value-Based-Purchasing.html

 

Hospital-Acquired Condition (HAC) Reduction Program

CM states any significant impact, including the hospitals to receive a HAC adjustment, will depend on actual experience.

 

Overall changes to the program include:

  • Establish the applicable period for FY 2021
  • Beginning January 1, 2020: Establish administrative policies to collect, validate, and publicly report NHSN healthcare-associated infection (HAI) quality measure data that facilitate a seamless transition, independent of the Hospital IQR Program
  • Scoring methodology by removing domains and assigning equal weighting to each measure for which a hospital has a measure

 

Readmissions Reduction Program

For FY 2019 and subsequent years, reduction is based on a hospital’s risk-adjusted readmission rate during a 3-year period for:

  • Acute myocardial infarction (AMI)
  • Heart failure (HF)
  • Pneumonia
  • Chronic obstructive pulmonary disease (COPD)
  • Total hip arthroplasty/total knee arthroplasty (THA/TKA)
  • Coronary artery bypass graft (CABG)

 

CMS estimates 2,610 hospitals will receive reduced operating payments due to the readmissions reduction program, producing a savings of approximately $566 million.

Homepage:www.cms.gov/medicare/medicare-fee-for-service-payment/acuteinpatientpps/readmissions-reduction-program.html

 

Medicare and Medicaid Promoting Interoperability Program

Overall changes to the program include:

  • An EHR reporting period of a minimum of any continuous 90 days in CYs 2019 and 2020 for new and returning participants attesting to CMS or their State Medicaid agency
  • Modifications to proposed performance-based scoring methodology (now a smaller set of objectives, smaller set of new and modified measures)
  • Removal of certain CQMs beginning with the reporting period in CY 2020 as well as the CY 2019 reporting requirements to align the CQM reporting requirements for the Promoting Interoperability Programs with the Hospital IQR Program
  • Codification of policies for subsection (d) Puerto Rico hospitals
  • Amendments to the prior approval policy applicable in the Medicaid Promoting Interoperability Program to align with the prior approval policy for MMIS and ADP systems and to minimize burden on States
  • Deadlines for funding availability for States to conclude the Medicaid Promoting Interoperability Program

 

Homepage: www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/index.html?redirect=/EHrIncentivePrograms

 

A Compliance Continuum for the FY19 IPPS Final Rule

A Compliance Continuum for the FY19 IPPS Final Rule (CMS-1694-F) for Requirements for Hospitals to Make Public a List of Their Standard Charges via the Internet

**Updated October 2018 to reflect CMS responses to frequently asked questions

Provided by: Cleverley + Associates

BACKGROUND

The FY19 IPPS Final Rule contains a section for requirements for hospitals to make public a list of their standard charges via the internet. This section of the final rule revisits a reminder contained in the FY15 IPPS Proposed Rule and ultimately the initial calls for transparency in the Affordable Care Act (specifically, 2718(e) of the Public Health Service Act). That language required hospitals to “either make public a list of their standard charges (whether that be the chargemaster itself or in another form of their choice) or their policies for allowing the public to view a list of those charges in response to an inquiry.”

It is no surprise that the CMS is attempting to continue this national dialogue as many providers still struggle with how to effectively improve price transparency. In fact, our firm has conducted national provider surveys on how hospitals are approaching price transparency and the areas that tend to receive the most price inquiries from patients. The results of those surveys have been transferred into HFMA-related

publications. What we’ve found is that the vast majority of hospitals are complying with the ACA transparency language by providing a means for patients to request pricing information – but not – through public display of pricing information via a website or some other form.

As a result, the FY19 IPPS Final Rule indicates that: “as one step to further improve the public accessibility of charge information, effective January 1, 2019, we announced the update to our guidelines to require hospitals to make available a list of their current standard charges via the Internet
in a machine readable format and to update this information at least annually, or more often as appropriate. This could be in the form of the chargemaster itself or another form of the hospital’s choice, as long as the information is in machine readable format.”

At the end of September 2018, the CMS posted responses to frequently asked questions to its website to provide additional clarity to the new rule (https://www.cms.gov/Medicare/Medicare-Fee-for-Service- Payment/AcuteInpatientPPS/Downloads/FAQs-Req-Hospital-Public-List-Standard-Charges.pdf). Based these responses to the frequently asked questions, as well as the original language of the rule, we are attempting to provide our position on how hospitals can be in compliance.

We believe there are four keys to compliance:

  1. 1)  TYPE OF INFORMATION: A hospital must show standard charges via the chargemaster (CDM) oranother form of the hospital’s choosing – however – all items and services must be represented
  2. 2)  AVAILABILITY OF INFORMATION: Information must be made available on the internet – however –participation in a state online transparency initiative does not exempt a hospital from therequirement
  3. 3)  FORMAT OF INFORMATION: Data must be machine readable
  4. 4)  UPDATES OF INFORMATION: At least annually

If a hospital can check the above four boxes, then, given the language in the rule, the hospital should be in compliance. However, the CMS, likely intentionally, has allowed for significant room for interpretation to compliance. There would seem to be a variety of different approaches a hospital could take to be in compliance, so, we have presented a continuum to illustrate different options. Before we present the compliance options, though, there are a few key areas to consider.

A NOTE ABOUT THE DIFFERENCES BETWEEN PRICE PER UNIT AND ENCOUNTER

Ultimately, there are two basic forms of providing price information – at the unit level and at the encounter level. While both have challenges to public disclosure, we have placed the encounter level comparisons higher on our usefulness scale because charges at that level will come closest to what the patient will be charged for the entire visit. The final rule states that the reporting form can be the CDM or another form of the hospital’s choice. It is our view that the CDM reporting level would be a “per unit” display of pricing, while encounter views would fall under “another form of the hospital’s choice.” A few notes to describe the benefits and challenges are below:

  1. 1)  Price per unit reporting level (Chargemaster, procedure code, etc pricing)
    Pricing at the unit level, whether that is a list of prices at the CDM code and/or procedure code would be the easiest for hospitals to provide – its major advantage. However, pricing comparison at this level is likely to be the most irrelevant for patients for the following two reasons:

    1. Per unit price comparison can be misleading because of varying degrees of bundling at different hospitals
      A goal of price transparency is the ability to compare prices across providers so that patients can make informed decisions. However, at the procedure code level, pricing across providers can include differing levels of associated services and supplies. One provider could charge individually for all items received in care while another could bundle some of those services and supplies into a packaged price. As a result, comparing prices at the procedure code level can be misleading to patients.
    2. Per unit pricing can be misleading because it is only one part of a patient’s total encounter chargesFor many patient encounters, the patient claim will consist of a variety of services. Those individual services will have established prices that will be consistently priced for all payers. However, the value of publicizing the prices for these individual services (at the chargemaster and/or procedure code level) is greatly diminished because the frequency of use for those services cannot be known until the patient’s care is delivered – uniquely for what that specific patient requires.
  2. 2)  Price per encounter reporting level (MSDRG, Primary APC, etc pricing)Ultimately, this level of charge information would be preferable for a patient because it would provide a better understanding of total charges for the patient’s encounter at the hospital. For this reason, we believe this reporting is preferable to per unit price displays. However, there are still obstacles to this level of price transparency:
    1. Significant charge variation can exist in “similar” patient encountersIf charges were grouped by MSDRG or primary APC there can still be significant variation in average charge levels across patients due to the different types of individual services provided and the frequency and duration of service. This could be mitigated somewhat with some statistical measures to help patients understand the magnitude of variation, but, is still a challenge.
    2. Patients rarely understand the encounter group their service will fall into prior to receiving treatment – and likely would not understand the group after
      Our industry has created groups of related cases for the purposes of payment. However, the naming conventions and different levels of service (“w/ CC” or “Level 3” as examples for inpatient and outpatient levels) are not patient friendly. So, the patient struggles to know what to select and to even understand what would be included in that economic grouping. Hospitals can try to mitigate this somewhat by creating search criteria to help patients understand where their prospective service will fall.

DO STATE REPORTING INITIATIVES QUALIFY?

There has been some discussion around duplicity or contradictory reporting if the hospital is located in a state with pricing transparency requirements. While an initial comment and response in the final rule seemed to suggest that hospitals participating in a state initiative had no additional reporting burden, the CMS did provide clarity to this in its responses to frequently asked questions at the end of September 2018:

Question: Does participation in a state online price transparency initiative satisfy the federal requirements?Response: CMS is fully supportive of and encourages state price transparency initiatives. However, under the current guidelines, participation in an online state price transparency initiative does not exempt a hospital from the requirements.

WHAT IS MACHINE READABLE?

The CMS also provided further definition of “machine readable” in its FAQ responses:

Question: What is the definition of “machine-readable” for purposes of the requirements?
Response: By definition, machine readable format is a digitally accessible document but more narrowly defined to include only formats that can be easily imported/read into a computer system (e.g., XML, CSV). A PDF, on the other hand, can be a digitally accessible document but cannot be easily imported/read into a computer system.

DO PHYSICIANS OR OTHER PROFESSIONAL PROVIDERS NEED TO COMPLY?

The rule’s language is specific to hospitals, however, the responses to frequently asked questions did note that ALL hospitals are required to comply – there are no hospital designations (CAH, as example) that would be exempt.

A NOTE ABOUT COMPARISON DATA

While not required in the final rule, some providers have questioned the value of also providing peer comparison data to facilitate benchmarking for patients. We have indicated in the continuum which options would permit the use of comparison data. Obviously, the inclusion of comparison data can present both risks and rewards as no hospital is likely to be lower charge for every code or encounter category. Still, if the hospital has, in general, a favorable position then the inclusion of this data could be of benefit. Typically, peer comparison data will come via publicly-available data that could be a different source year from the hospital’s data, so, this should be clearly noted in the display.

THE COMPLIANCE CONTINUUM

We’ve presented the continuum in order of increasing usefulness to the patient with regard to price and payment transparency. It’s important to note that any of the compliant options presented, we believe, are technically compliant on their own. Meaning, a hospital would not have to have a minimum CDM provided in order for the “Encounter Charges” option to be compliant. However, this is our interpretation of the rule and clearly a hospital’s own internal stakeholders and counsel may come to a different conclusion.

  1. NO REPORTINGa. Status: Non-Compliant
    b. Price reporting level: N/A
    c. Notes: Some providers have questioned the value of reporting information to be incompliance given the risks of confusion it could cause for patients and additional administrative burden to post data and field questions. These hospitals could still be providing access to information to patients, consistent with the ACA language, but feel this new requirement is not worth the added resource costs of compliance. While these hospitals will not be in compliance, there are no penalties for failure to comply at this time.
  2.  MINIMUM CDMa. Status: Compliant
    b. Price reporting level: Per Unit
    c. Notes: In this option, the provider would simply post on their website a basic CDM withcharge code and current standard price (multiple columns or an average could be used if more than one fee schedule exists). While this information wouldn’t be useful to the patient as there wouldn’t be any identifying information (description, HCPCS, etc) it would technically satisfy the language of the rule. If taking this option – or any other for that matter, we believe the hospital should still provide contact information for additional details and questions should the patient need further assistance.
  3. TOP CONSUMER CODESa. Status: Non-Compliant
    b. Price reporting level: Per Unit
    c. Notes: In this option, the hospital would provide the current price (or multiple/average pricing if several fee schedules) by HCPCS, with description for frequently requested – or top consumer-oriented – services. This option is an improvement to the patient because it provides focus for top services where the majority of patient concerns and questions originate. However, while this option initially seemed compliant under the language in the final rule, the responses to FAQs posted by CMS at the end of September 2018 state that all items and services need to be represented in the reporting.
  1.  EXPANDED CDMa. Status: Compliant
    b. Price reporting level: Per Unit
    c. Notes: This option builds on the last as it would provide the entire CDM with identifiers (likeHCPCS and descriptions) for patients to view. While this would be more useful than the minimum CDM, it could be argued that this would be more challenging to navigate than the reduced list of top sensitive codes. It is worth noting that some states have requirements that hospitals post charges at the HCPCS level – either on their website or through some centralized portal for the entire state. If so, the responses to FAQs now state that state-level reporting is not sufficient for compliance – the hospital must post independently.
  2. ENCOUNTER CHARGESa. Status: Compliant
    b. Price reporting level: Per Encounter
    c. Notes: Average encounter charges have advantages for pricing transparency as they are a better representation of the patient’s usual charge for a specific type of service. In this option, the hospital would present the average charge – and potentially other statistical measures – by inpatient (MSDRG, as ex) and outpatient encounter (Primary APC, as ex). A hospital could even create groupings like those presented on Medicare’s Hospital Compare website that could facilitate comparison among other reported quality metrics. This option would be compliant as it represents a non-CDM display of standard charges that is “another form of the hospital’s choice.” However, based on the responses to FAQs, ALL inpatient and outpatient encounters would need to be displayed as “the current requirements apply to all items and services provided by the hospital.”
  3. b. Payment reporting level: Per Encounter
    c. Notes: Consider this the same reporting as “Encounter Charges” only that instead of grossprices being presented the hospital displayed average payment levels. These averages could be further broken down into generic payer groupings, such as government and commercial. However, specific payer payments by encounter would likely be met with legal resistance. Still, this level of reporting would be a step closer to providing patients with their ultimate concern: cost to them. While this option is preferable to patients, it would not satisfy the rule’s interpretation for “standard charges” – meaning, list or gross prices – not, reimbursement. The final rule states that nothing precludes hospitals from doing this, though – and – in fact, encourages greater transparency efforts to include this information.
  4. PATIENT-SPECIFIC PAYMENTSa. Status: Non-Compliant
    b. Payment reporting level: Per Encounter
    c. Notes: Ultimately, patients are interested in knowing what their service is going to costthem. For this reason, this option is at the end of our usefulness spectrum. Many insurers are already helping their members understand specific payment responsibilities based on their offerings, agreements with providers, and how the patient’s utilization of service with other providers would impact copayment and deductible amounts. However, there are a number of hospitals that are helping to provide this level of information to patients in advance, as well. While it’s likely that insurers are best positioned to provide this information as the agreements with their members – and their members’ utilization of other healthcare services – will change frequently to impact patient responsibility, this is an option providers have and can pursue. Unfortunately, this level of reporting would not satisfy the rule’s requirements for machine readable posting of charges (not payments).

In sum, we believe that hospitals have several available options to satisfy the FY19 IPPS Final Rule Requirements for Hospitals to Make Public a List of Their Standard Charges via the Internet. These options range from minimum levels of reporting that will satisfy the rule’s language to those that provide greater depth of detail to patients. Although there are drawbacks to all of the options, we believe hospitals will select a strategy that they believe will provide the most value to their patients in an evolving healthcare marketplace.

Are Hospitals Still Focused On Pricing Transparency?

Pricing transparency has been the topic and trend in healthcare for the past few years.  The industry has responded with numerous research articles, solutions and products.  Hospitals have made prices more publicly available, reduced charges and restructured pricing methodology.  However, with pricing transparency being all the buzz, where has that left the focus on costs in healthcare?

Recently, at HFMA’s Annual Conference in Las Vegas, we asked respondents in a random poll: “What is your hospital currently concerned about?”  We found out that more than half (~55%), were currently concerned about costs, while only 20% were currently concerned about pricing.  Obviously the two are always going to be inextricably linked as they both impact profitability. Therefore, you can never be solely focused on pricing without considering the cost and vice versa. However, with all the attention pricing transparency has been getting we were a little surprised about the high concern with costs.

So let’s examine the Hospital Cost Index™ and what changes we have seen across the nation in the last few years.  For trending purposes, we will be looking at two specific metrics that make up the Hospital Cost Index™, Average Cost per Medicare Discharge case mix and wage index adjusted and Average Cost per Visit case mix and wage index adjusted.  The table below presents the 25th, 50th, and 75thquartile from 2014 – 2016 and is derived from public use files.

From the data we can see consistent growth in inpatient costs but virtually no change in outpatient costs. This may result from intense competitive pressure from free standing providers in surgery and imaging.

If you would like know how your hospital has trended give us a call at 888.779.5663.

Data Sample: States With The Lowest Costs

The state of Nevada has continued its ascent to the leading cost position in the nation as it was ranked 6th lowest three years ago, 2nd two years ago, and first in the current national study.  Not surprisingly, the Las Vegas metro area was among the five lowest cost metro areas.  Some might be surprised, though, that two California metro areas lead the way for cost position.  It’s important to note that the HCI is adjusted for cost-of-living, so, this allows for higher cost-of-living areas to be normalized in the study.  Our remaining four states in the top five have all been consistently lower cost in the research.  Interestingly, though, is that three of the five (ND, SD, MT) represent hospitals that are typically smaller and rural which are found to have higher cost positions nationally.  Likely, this relationship stems from smaller, rural hospitals having fixed cost levels that are not balanced against the same levels of patient throughput that larger facilities would have, as well as, competition for labor that might not be fully reflected in the wage index designation.

To download a copy click here!