Reimbursement Changes on the Horizon

On Friday, April 13, 2007, the Centers of Medicare and Medicaid (CMS) released Proposed Inpatient Rules for 2008. Highlights of the proposed rules related to cardiovascular reimbursement include:
• A new methodology to severity adjusts cases using Medicare Severity DRGs (MS-DRGs). The MS-DRGs would replace the current 538 DRGs with 745. MS-DRGs are tiered based on the presence of major complication or co-morbid conditions (MCC) or minor complication or co-morbid conditions (CC). These MCCs or CCs are diagnoses that when present increase the cost of caring for the patients. In 2007 there were 54 DRGS in the Major Diagnostic Category (MDC) 5: Cardiovascular. For 2008 CMS has proposed to expand the number of DRGs to 87.
• Revision of the entire list of co-morbid conditions eliminates several common CCs, including the most commonly coded heart failure diagnosis, 428.0 CHF NOS. This is significant because the number of patients with CCs drops from 78 percent in 2007 to only 41 percent under the new revised list. The term major cardiovascular condition (MCV) will not be used and some of those conditions will not even be a minor CC in 2008.
• The changes in cardiovascular case payments at the DRG level are modest, but huge represent changes in how the patients will be distributed among the DRGs. Most hospitals with heavy cardiovascular procedure volume are projected to see a major reduction in case mix index and subsequent payment because of DRG redistribution. CMS projected a 0.6 percent decrease in payment for Specialty heart hospitals.
• Hospitals who report quality data will receive a 3.3 percent market basket increase (think cost of living). If they don’t comply, it will be reduced by 2 percent. There will be 32 quality indicators to report for 2008 to qualify for the 2009 market basket increase.
• CMS continues the transition from charge based DRG payments to cost based by utilizing 2/3 cost based and 1/3 charge. In 2009 payments will be based strictly on “costs.” CMS did not move forward with a fix for the issue of charge compression, which severely underestimates the cost of devices.
• A reduction in payment for devices replaced at reduced or no cost similar to the outpatient payment system. Currently inpatient payment is not affected if the device is replaced at cost or reduced cost due to recall. The proposed method for calculating payment may require the facility to produce the invoice to their intermediary.
According to 2006 CMS data provided by American Hospital Directory www.ahd.com, the following DRG reimbursement will be the most severely impacted by both the proposed payments and the redistribution of patients to DRGs without CCs or MCCs.
For example, 79 percent of patients currently grouping to DRG 557 will group to the 2008 MS DRG 247 “Percutaneous cardiovascular proc w drug-eluting stent w/o MCC,” the payment for which is approximately $3,556 less per case.
CMS has released the 2006 data used to determine the DRG groupings and proposed distribution of the MS DRGs to various data vendors such as American Hospital Directory, which can provide hospitals with their individual impacts at the service line. Hospitals with cardiovascular programs should determine what impact the proposed rules will have on their cardiovascular programs.