FY 2021 IPPS Proposed Rule: MSDRG Changes

The 2021 Inpatient Prospective Payment Systems (IPPS) proposed rule is out and as data nerds, we could not wait to dig into it and see what changed. A comparison of Table 5 – listing of MS-DRGs and relative weights – is a great place to start.

Quick refresher on terms:

  • Medicare Severity-Diagnosis Related Group (MS-DRG) is a classification system for inpatient discharges that helps standardize payment of services.
  • Relative Weight (RW) reflects the patient’s severity of illness and is a measure of costliness or average resources required to care for cases assigned to that MS-DRG. A higher RW yields a higher payment.

What are the new and deleted codes for FY 2021 (MSDRG V38)?

Six (6) MSDRGs are removed for FY 2021 and twelve (12) MSDRGs have been created.

How are relative weights changing from FY 2020 to FY 2021?

The vast majority (80.9%) of MS-DRG relative weights are experiencing an increase or decrease of less than 5%. How payment is affected by the change in relative weights at your facility depends on your specific mix of services and volumes.

What’s Happening with Bone Marrow Transplants?

We do not typically see a change in the “Type” category but noticed the switch from surgical to medical for the three bone marrow transplant procedures. CMS received the request to make the change because bone marrow transplant procedures involve transfusion services that do not require the resources of the operating room. CMS also identified eight (8) ICD-10 procedure codes associated with bone marrow transplants that are currently designated as operating room procedures. For clinical consistency, they are proposing to reassign these codes as non-operating room.

Want to make a comment to CMS on MSDRG Classification concerns?

The deadline to request updates to the MS-DRGs is now October 20th of each year – almost two weeks earlier than in previous years. For FY 2021, interested parties needed to submit comments and suggestions by November 1, 2019. CMS encourages comments and suggestions for FY 2022 by October 20, 2021 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: https://www.cms.gov/newsroom/fact-sheets/fiscal-year-fy-2021-medicare-hospital-inpatient-prospective-payment-system-ipps-and-long-term-acute

How Do Hospitals Set Prices for COVID-19 Isolation Rooms?

COVID-19 has dramatically impacted the hospital industry. As hospitals adjust to new challenges, they must also face questions about new procedures and treatment requirements. Last week we took a close look at how hospitals are pricing COVID-19 lab tests. Now, let’s take a look at isolation rooms.

We sent out a survey to assess how hospitals were approaching this new pricing challenge. We received 40 responses.

Some of the questions focused on isolations rooms. These are not always broken out as a separate charge in the CDM. We asked our responders how many of them have an established isolation room charge. About 40% have a rate or plan to develop one. The remainder don’t and do not plan to add.

For those that already have a charge, or plan to add, a majority consider Room Capabilities (for example, a negative pressure environment) and different levels of clinical resource utilization (higher nursing ratios or protective supply usage, as example) as important when defining the charge.  

For those that have established a room rate, most consider it a separate room rate, not an add-on fee on top of the base room rate. Those that have established a rate, or plan to, about a third have for both special care (ICU) and routine (general med/surg bed).

For hospitals that currently have isolation room charges, or plan to add one, here is how they plan to proceed (it’s assumed that the 68% who did not respond represent the 60% not able to as they have no isolation room rate and/or do not plan to add one):

If you’d like more information about our survey, or to take a look at the result, let us know!

How Do Hospitals Set Prices for COVID-19 Lab Tests?

COVID-19 has dramatically impacted the hospital industry. As hospitals adjust to new challenges, they must also face questions about new procedures and treatment requirements. In our next two blog posts, we’ll take a close look at how hospitals are pricing COVID-19 lab tests and isolations rooms.

We sent out a survey to assess how hospitals were approaching this new pricing challenge and were pleased to receive 40 responses.  In the midst of this challenging time, we appreciate this sharing of information!

We’ll first look at how hospitals are pricing COVID-19 lab tests.  First, some context: On March 5 and February 13, CMS announced new HCPCS codes to test patients for SARS-CoV-2/2019-nCoV (COVID-19). Starting in April, laboratories using CDC tests are to use the U0001 code while non-CDC tests will use the U0002 code.  Medicare payment has been established at $36 for U0001 and $51 for U0002.  On April 15, reimbursement was increased to $100 for U0003 and U0004 for sites using high throughput technologies. 

Our survey focused on how hospitals are developing CDM and cash pay pricing for these tests.  Cash pay pricing is an important element as part of the stimulus package requires that providers post a cash pay price for these tests.  Three key points emerged from the survey:

  1. CDM pricing:
    1. over 60% of respondents are using some markup over Medicare payment, cost, or non-Medicare reimbursement.  Meaning, the majority are pricing these tests in a way that is likely consistent with other items in the CDM. 
    1. 25% are essentially creating a CDM price that is virtually the same as the Medicare payment/cost/or non-reimbursement rate.
  2. Cash pay pricing: Roughly half are posting a cash pay price that is virtually the same as the Medicare payment/cost/or non-reimbursement rate. 
  3. The combination of both points above make it clear that no one is trying to make money on these tests – just providing the ability to cover costs.  Even those using a markup to create pricing appear to be setting rates such that when their payer discounts or self-pay policies are applied the end payment will be virtually the same as their cost. 

If you’d like more information about our survey, or to take a look at the result, let us know!

COVID-19 Telehealth – What You Need To Know

Note: This post was updated on 4/16/20 to reflect the most current information.

During this COVID-19 pandemic, we have received several questions on how facilities should be billing for telehealth services. As we continue to collect as much information as possible, we wanted to provide our findings so far: 

Payment Guidance:

  • Facility:
    • Currently, billing for Medicare telehealth services is limited to professionals only
    • Hospitals are only eligible to bill for the originating site facility fee using HCPCS code Q3014
    • There are no changes for reporting modifier GT on Telehealth services billed under critical access hospital (CAH) method II
    • Managed care departments should check with their commercial payers for additional guidance on payment for telehealth services, as it could differ from Medicare’s regulations
  • Professional:
    • Use Place of Service (POS) code equal to what it would have been had the service been furnished in-person
    • Medicare pays providers the same amount for telehealth services as it would if the service was provided in person
    • For telehealth with a site of service payment differential (i.e. services paid different rates in the office versus the facility) Medicare pays the facility payment rate
    • For claims with dates of service on or after 3/1/20, report modifier 95 to indicate a service was provided via Telehealth.
    • CMS is not requiring modifier CR (catastrophe/disaster related) on telehealth services. To comply with current rules, however, the following modifiers should still be reported as usual:
      • GQ – required on claims furnished in Alaska or Hawaii for asynchronous (store and forward) technology
      • G0 – reported for services to diagnose and treat acute strokes

General Information:

  • March 6th, 2020 – Section 1135 waiver temporarily waives certain restrictions on Medicare telehealth coverage under the Coronavirus Preparedness and Response Supplemental Appropriations Act
  • Medicare beneficiaries can now receive expanded healthcare services, regardless if their symptoms are related to COVID-19, in the safety of their home
    • Previously, Medicare could only pay practitioners for routine telehealth services furnished to beneficiaries in a medical facility in rural or health professional shortage areas
  • Allows physicians, nurse practitioners, physician assistants, clinical psychologists, and licensed clinical social workers, among others, to provide telehealth services within their scope of practice
  • Beneficiaries can now receive telehealth services in a variety of settings, in addition to their home, such as: physician offices, hospitals, nursing homes, or rural health clinics
  • Providers must use an interactive audio and video telecommunication system that permits real-time communication between the provider at the distant site and the patient at the originating site
    • Penalties for HIPAA violations during the COVID-19 emergency will be waived against health care providers serving patients, in good faith, through everyday communication technology like FaceTime or Skype

As changes to telehealth services continues to evolve, we will provide any additional guidance as we learn more.

To talk to one of our consultants about what this might mean for your hospital, give us a call at 888.779.5663.

What are Comprehensive APCs?

Comprehensive APCs, aka C-APCs, are much like DRGs but on the Outpatient side. Comprehensive APCs expand CMS’s intentions of the Outpatient Prospective Payment System (OPPS) being a partially packaged system.  

The official definition is:

“A classification for the provision of a primary service and all adjunctive services provided to support the delivery of the primary service.”

C-APCs are identified by HCPCS with assigned status indicator = J1 or J2.  All covered services on the claim are packaged with the primary J1,J2service.  CY 2020 includes 2,977 HCPCS codes assigned J1 or J2 status and therefore, triggering a single claim payment.  All those HCPCS are placed into C-APCs based on clinical family.

This is the history of C-APCs. They began in 2015 with 25 C-APCs involved. Today, there are 67 C-APCs that are part of the OPPS.

History of C-APCs 

Services typically additional to the primary service and provided during the delivery of 

the comprehensive service (and NOT paid separately) include:

  • Diagnostic procedures
  • Laboratory tests
  • Other diagnostic tests & treatments that assist in the delivery of the primary procedure
  • Visits & evaluations performed in association with the procedure
  • Un-coded services and supplies used during the service
  • DME, prosthetic/orthotic items and supplies, when provided as part of the outpatient service
  • Any other HCPCS code representing services given during the complete comprehensive service

Some services are excluded from the packaging into a single payment. The following are NOTincluded in the C-APC payment and ARE paid separately:

  • Corneal Tissue (status indicator = F)
  • Pass-Through Drugs and Biologicals (status indicator = G)
  • Pass-Through Devices (status indicator = H)
  • Influenza & Pneumococcal Pneumonia Vaccines (status indicator = L)
  • Brachytherapy Sources (status indicator = U)
  • Ambulance 
  • Mammography (diagnostic & screening)
  • Rehabilitation Therapy
  • New Technology
  • Self-administered drugs
  • All Preventative services

Based on CMS All US volumes, the most reported top 5 C-APCs (out of 67) Nationally over recent years include (listed in order of most frequently reported):

REMEMBER: OPPS is not a simple fee schedule – something to really think about when using as a guide for pricing strategy!


Sometimes ComprehensiveAPCs may get confused with CompositeAPCs.  Stay tuned for our post coming soon, “What are Composite APCs?”