MSDRG Changes

FY 2020 IPPS Proposed Rule: MSDRG Changes

Version 37 incorporates changes to our MSDRG list as well as associated relative weights.  From FY 2019 to FY 2020 two (2) MSDRGs are removed and two (2) MSDRGs have been created.

To what extent is Relative Weight changing from FY 2019 to FY 2020?

*Data Source: CMS, FY 2019 & 2020 Table 5
*Data Source: CMS, FY 2019 & 2020 Table 5

Based on the data presented, the clear majority of MSDRG relative weights are experiencing an increase or decrease less than 5% (56.1%.)  

What are the top 10 MSDRGs experiencing Relative Weight change?

 *Data Source: CMS, FY 2019 & 2020 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

In the case example below, we reviewed the top 5 MSDRGs for increase in payment and the top 5 MSDRGs for decreases in payment.  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 2019 to FY 20201

*Data Source: CMS, FY 2019 & 2020 Table 5, FY 2020 IPPS Proposed Rule, 2018 MedPAR
1Payment Differences due to RW Changes: FY 2020 Operating base rate and FY 2020 Wage Index to isolate Relative Weight impact with static volumes

OHIO Hospital: Top 5 MSDRG Decreases in Payment FY 2019 to FY 20201

*Data Source: CMS, FY 2019 & 2020 Table 5, FY 2020 IPPS Proposed Rule, 2018 MedPAR
1Payment Differences due to RW Changes: FY 2020 Operating base rate and FY 2020 Wage Index to isolate Relative Weight impact with static volumes
*Data Source: CMS, FY 2019 & 2020 Table 5, FY 2020 IPPS Proposed Rule, 2018 MedPAR
1Payment Differences due to RW Changes: FY 2020 Operating base rate and FY 2020 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 the IPPS Proposed Rule?

Comments must be received no later than 5 p.m. EDT on June 24th, 2019.  CMS encourages electronic submission of comments to  Follow the instructions under the “submit a comment” tab.

CMS’s Acute Care Hospital Inpatient Prospective Payment System FACT SHEET:

Transparency Fifty™ Update and Observations

What is the Transparency Fifty™?

This report identifies the 50 most common outpatient procedures where hospitals compete with free-standing entities. This helps hospitals who are searching for strategies to reduce prices, by focusing on procedures where they are likely to have the most competition from free-standing providers. 

Cleverley + Associates first released this report about a year ago, using 2016 Medicare charge data, but we updated it for 2017. For this current version, we compared volumes and charges for free-standing entities to hospitals for imaging, laboratory tests, outpatient surgery, therapy and sleep lab to determine the top codes where they compete.

  • We replaced seven HCPCS codes with the following due to changes in usage between 2016 and 2017:
    • Imaging
      • CAT scan of head or brain
      • CT abdomen & pelvis w/o contrast
      • Contrast CAT scan of chest
      • CT abdomen & pelvis 1+ sections/regions
    • Lab
      • Presumptive drug class screening
    • Therapy
      • PT evaluation moderate complexity 30 minutes
    • Surgical Procedures
      • Interlaminar lumbar/sacral epidural injection with imaging guidance (new code in 2017)
      • Transforaminal epidural injection; lumbar or sacral, single level 

We had a few interesting reflections on the new and improved report.

For the 18 imaging codes on this report, the US hospital price compared to the US Free-standing price is 216% higher on average. One interesting exception where the hospital price and free-standing price were almost equal is for Screening Mammography.

For the 17 laboratory tests on this report, the US hospital price compared to the US Free-standing price is 209% higher on average. The lone exception in this area was for the newly added code for Presumptive Drug Class Screening where the average hospital price is lower.

For the six therapy procedures, the US hospital price is about 231% higher on average than the US free-standing price. The percentage difference between hospitals and free-standing is very consistent across these codes. 

Sleep lab and ECG monitoring procedures for hospitals are priced 174% higher than free-standing entities on average.

In Summary, we believe the Transparency Fifty™report will help hospitals compare their prices in areas where competition is high from free-standing centers and will help them position themselves to better compete for ambulatory patients who engage in price shopping. 

For more information about the report, or any of our other reports, give us a call at 888.779.5663.

2019 Changes to Provider Based Departments

Simply put, a provider based department is a location where hospitals provide services to their patients that is outside of the traditional main hospital. This year, there are a few changes to how these departments are defined and billed as prescribed in the CY19 Medicare Physician Fee Schedule Final Rule.

The 4 types of Provider Based Departments (PBDs) remain unchanged.

  1. On Campus – Less than 250 yards from main hospital
  2. Off Campus – More than 250 yards from main hospital
  3. Remote Hospital Locations – Remote building created or acquired by hospital to provide inpatient services under the name, ownership, and financial and administrative control of the main hospital (i.e. multi-campus)
  4. Satellite Hospital Facilities – Part of hospital that provides inpatient services in a building also used by another hospital, or in one or more entire buildings located on the same campus as buildings used by another hospital

But a few things are changing this year. 

First off, in order to see how much Outpatient Prospective Payment System (OPPS) services are shifting to off campus, provider based emergency departments, The Centers for Medicare & Medicaid Services (CMS) will collect data on the types of services furnished in off campus emergency departments. These services are exempt from the site-neutral payment reductions affecting in non-excepted PBDs.  Hospitals should utilize the new modifier ER to identify these services for every claim line of the UB-04. While there are no payment adjustments specified for this change yet, there could be in the future.

Second, the CMS is concerned about the shift in services from freestanding physician offices to hospital outpatient department settings, and the financial effect on beneficiaries. To address this, reduced Medicare Physician Fee Schedule (MPFS) facility payment rates for clinic visits to all off campus PBDs will be extended, even if they’re excepted under Section 603 of the Bipartisan Budget Act of 2015. The CMS estimates a savings of $380 million from this change, with beneficiaries saving approximately $80 million of that total in the form of lower copayments.

Although it is unclear if the CMS has the authority to make these payment cuts in a non-budget neutral manner, hospitals should monitor their change in payments. These site-neutral payments will gradually phase in between 2019 and 2020.

Next, the CMS expressed a concern that a difference in payment amounts for 340B acquired drugs provided by hospital outpatient departments creates an incentive for hospitals to move drug administration services to non-excepted PBDs, rather than excepted, to receive higher payment. The CMS’ basis for this change is if drugs are being purchased at a reduced rate, providers should also be reimbursed at a discount, regardless of the PBD status or location. To address this, Part B drug payment methodology for separately payable 340B drugs billed by non-excepted, off campus PBDs will be changed to the same formula applied to excepted, off campus PBDs – which is: ASP – 22.5% instead of ASP + 6%.

In addition, the payment amount for status indicator (SI) “K” (non-pass through drugs and biologicals, therapeutic radiopharmaceuticals, brachytherapy sources, and blood/blood products), purchased through the 340B program in non-excepted PBDs will decrease by -28.5%. SI “K” drugs not purchased through the 340B program, but billed by non-excepted off campus PBDs will continue to be paid ASP + 6%.  Non-excepted PBDs are required to append modifier JG to the same claim line as the drug or biological HCPCS code to indicate it was acquired by the 340B drug pricing program discount.

As in previous years, the CMS once again proposed excepted off campus PBDs should be paid the same adjusted MPFS rate as non-excepted locations; specifically, for any new services not furnished at that location 12-months prior to the Bipartisan Budget Act of 2015. The concern is additional physician practices could be purchased and operated under the existing excepted off campus PBD umbrella, resulting in higher OPPS payment. The CMS believed Congress did not intend for new service lines in excepted locations to be paid OPPS rates so this proposal is an attempt to limit service line expansion for higher payment.

This service line expansion proposal hasn’t yet been finalized due to the CMS’ concerns that the implementation of this policy is operationally complex and could create administrative burdens for hospitals. Instead, the following actions were put into place for 1/1/19:

  • Off Campus PBDs will continue to receive full payment under OPPS as long as it remains excepted, not including clinic visit services.
  • The CMS will continue to monitor the expansion and volume of services in off campus PBDs in the interim.

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

Negotiation Skills Have an Impact on Health Plan Terms

A clear sense of current market trends, cost of care, and demonstrated efficiencies that reduce cost are essential elements of contract negotiation preparations.

Negotiation leverage, in terms of hospital control, comes from several sources. The most recognized driver is market power based on geographical area or demographic factors. However, hospital/payer relationships, service offerings needed in the community, and negotiation skill and/or negotiation philosophy are other important drivers.

To read the rest of the article click here!

Understanding Why Hospital Costs are Increasing – It Depends on the Metrics

Obtaining an accurate perspective on the meaning and relative impacts of cost and payment increases in the healthcare industry depends on the specific metrics that provide the basis for the analysis.

To no one’s surprise, health care was a primary political issue in the Fall midterm elections. Everyone knows that our country spends more on health care as a percentage of GDP than other developed countries. The primary question that the industry has long grappled with is whether we, as a nation, spend more on health care because we consume much more than anyone else or just spend more for the services that we consume.

To read the full article, from HFM Magazine, click here.