Reimbursement Methodologies » Healthcare Reimbursement

outpatient prospective payment system

Outpatient services that are reimbursed by Medicare and Medicaid through a prospective payment system.

fee-for-service reimbursement system

reimbursement is based on what services are provided to the patient. Self-pay Retrospective payment Managed care

Two types of Healthcare reimbursement methodologies

1. Fee-For-Service 2. Episode-of-Care

Ambulatory payment classification (APC) system

A coding and reimbursement hierarchy for outpatient services that organizes CPT® and HCPCS codes into several hundred groups. Each code of Level I and II HCPCS are assigned a payment status indicator, identifying how it will be paid. These service bundles are the basis for Medicare reimbursement for many outpatient hospital services.

CMS multiplier

A set dollar amount in one unit. Example, $38 CMS Miltiplier of 38, code X10= $380

The new ASC facility payment system links.....

ASC facility payments to Medicare payments to hospital outpatient departments for the same procedure.

Services provided to the patients under Fee-For-Service

Self-pay Retrospective payment fee schedules usual, customary, and reasonable RBRVS (resource-based relative value scale) Managed care HMOs PPOs

Long-Term Care Hospital (LTCH)

After acute care is finished, those patients that have serious long-term conditions may require extended stays. These patients may have multiple acute and chronic diseases and certainly can require complex care. Services consist of 90-days in this setting. Part A of Medicare provides services for this long-term care hospitalization for its beneficiaries.

fLOW CHART for IPPS When the inpatient facility submits a claim to a third-party payer under PPS, the claim is categorized into a diagnosis related group. The diagnosis related group determines the amount the hospital will receive

CMS sets MS-DRGs (Medicare severity diagnosis related groups) for classifying hospital services for a given diagnosis. Patient receives inpatient services at a hospital. Documentation is coded. Codes are transferred to claim. Claim sent to third-party payer. Third-party payers assign itemized charges to appropriate DRG classification based on diagnosis and patient profile. Claim is reimbursed at DRG rate.*

Managed Care - Capitation

Capitation HMO

10 types of APCs

Clinic or emergency department visit V Significant procedures, multiple reduction applies T Significant procedure, not discounted when multiple S Ancillary service X Non-pass-through drugs and nonimplantable biological agents including therapeutic radiopharmaceuticals K Pass-through drugs or biological agents G Pass-through device categories H Partial hospitalization P Blood and blood products R Brachytherapy sources

Customary:

Customary for the community

DRG diagnosis related groups

Diagnosis related groups list groups based on diagnoses and procedures, treatments, and supplies hospitals used to treat those diagnoses for patients fitting a specific profile (age, sex, weight, complications, etc.).

Quality Improvement Organizations (QIO)

Established by CMS, In order to help Medicare beneficiaries with quality-of-care complaints and to help implement healthcare improvement These organizations are always staffed by healthcare professionals. Contracts with QIO organizations are granted for a period of 5 years at a time.

fee-for-service reimbursement methodologies have a few common elements

Fee-for-service providers are reimbursed for each service they provide. The more services a fee-for-service provider renders, the more reimbursement the provider receives. Most fee-for-service reimbursement methodologies are based on a retrospective payment system. Reimbursement amounts are determined after the patient has already received the services. Discounted fee-for-service arrangements are common. The difference between the amount billed by the provider and the amount paid by a third-party payer in a fee-for-service environment may or may not be billed to the patient. Contractual agreements between patient, provider, and third-party payer determine whether or not the patient is billed some or all of the difference. Medicare pays physicians using the resource-based relative value system, a discounted fee-for-service system. Some states use the resource-based-relative-value-system multiplied by some form of a conversion factor for their Medicaid reimbursement, while others use a state mandated Medicaid fee schedule or a combination of both.

Global payment/Prospective payment

HHPPS

Prospective payment

IHS OPPS ASC APC SNF PP IPPS

pre-authorization.

Managed Care policy, The third-party payer requires the patient to obtain approval from the insurance company prior to scheduling surgery as a condition for the third-party payer to reimburse the provider for the surgery claim. If Patient fails, the 3rd party payer may not pay anything or a small amount. allows the insurance company (third-party payer) to influence the patient's decision-making by requiring second opinions or conservative therapy first. The insurance company can review healthcare documentation prior to the surgery and educate providers and patients about length of stay limitations and so forth.

Patients that use LTCH

Many of these patients have chronic diseases such as cancer, tuberculosis, respiratory conditions and head trauma. Many of these patients are ventilator-dependent or require extensive rehabilitative services.

Skilled Nursing Facilities (SNFs)

Medicare beneficiaries are eligible for SNF services immediately after acute-care inpatient stays that are three days or more in length. The SNF PPS pays a daily rate and mandates consolidated billing. must complete the Minimum Data Set (MDS) that provides clinical documentation about the resident's care. reimbursed based on the all-inclusive Perdiem rate and the RUGs. The payment system rewards those that efficiently and effectively treat complex cases.

Case Management under HMO

Patients with certain illnesses—cancer, diabetes, asthma—are assigned a case manager who coordinates patient care to reduce overlapping care, duplication of treatments, and so forth.

Self-Pay

Patients without third-party payer coverage or with very restrictive third-party coverage pay for healthcare services on a fee-for-service basis. Payment options for self-pay patients vary depending on the policies of the healthcare provider. Some providers will not see patients who do not have insurance coverage without payment in full at the time of service. Other providers offer options for monthly payment plans.

The basics of prospective payment systems:

Payment is not made on individual services provided but on predetermined calculated rates. Predetermined calculated rates are based on historical information/data and set for future healthcare costs. Prospective payment systems are based on averages of actual data and projections, not on individual services provided.

PMPM

Per Member Per Month, the provider absorbs a certain degree of risk because how many patients will need high levels of care in a given month is unknown Providers need a high enough capitation rate to balance those risks and average a positive cash flow.

reimbursement system seeks to set reimbursement rates for physician services based on three primary factors:

Physician work (effort) Practice expense (overhead) Professional liability (malpractice insurance) Each of these factors is translated into a "relative value unit" and multiplied by a dollar amount supplied by CMS (Centers for Medicare and Medicaid Services). each CPT code is assigned a relative value unit Payments are adjusted for geographical differences.

Retrospective Payment

Retrospective payment is described as a fee-for-service that is reimbursed to providers after health services have been given. payment is based on costs or charges actually incurred for the care of the patient during his or her healthcare encounter. Payment decisions are made after the costs are incurred (retrospectively).

Reasonable:

Reasonable for the situation

only the CPT/HCPCS codes that drive the.....

Reimbursement in other words....Other procedures are not bundled or packaged such as ancillary services like x-rays, and MRI, and other minor procedures such as injections. These all have separate APC groups. Each CPT code is assigned to only one APC. The APC assignment does NOT change based on the diagnosis or condition of the patient.

RBRVS method

Resource-Based Relative Value Scale Established in 1992

CMS (Centers for Medicare and Medicaid Services) analyzes

Services listed in the CPT® procedure coding book and the HCPCS book CMS looks at what resources are required to provide the services. Clinical services that require similar resources are grouped into payment classifications called Ambulatory Payment Classifications (APCs).

Ambulatory Surgical Centers (Provider) Government Prospective Payment Systems

System ASCPPS - Ambulatory Surgical Center Prospective Payment System Calculation Unit ASC (Ambulatory Surgical Center) Group

Home Health Care (Provider) Government Prospective Payment Systems

System HHPPS - Home Health Prospective Payment System Calculation Unit HRG w/case-mix adjustment

Inpatient Hospital Services (Provider) Government Prospective Payment Systems

System IPPS - Inpatient Prospective Payment System Calculation Unit MS-DRG - Medicare Severity Diagnosis-related Groups

Outpatient Hospital Services (Provider) Government Prospective Payment Systems

System OPPS - Outpatient Prospective Payment Systems Calculation Unit APC - Ambulatory Payment Classification

Skilled Nursing Facilities (Nursing Homes) (Provider) Government Prospective Payment Systems

System SNFPPS - Skilled Nursing Facility Prospective Payment System Calculation Unit RUG - Resource Utilization Group

Ambulatory surgical center (ASC) system

The ASC is a freestanding outpatient facility that provides outpatient surgeries to patients. Previously the payment system consisted of an ASC list with procedure codes grouped into the different payment rates. Inpatient procedures were also shifted into the outpatient setting. This trend identified a need to change the ASC list to APCs.

RUG (resident's resource utilization group)

The part of the reimbursement that adjusts for the case mix three components to each RUG: The nursing component, the therapy component and the non-case-mix-adjusted component. the PPS payment starts with the daily rate (per diem rate) and then adjustments are made for geographic factors and inflation, other adjustments mandated by statute or regulation and the patient case mix. The case mix of a resident means the complexity and resource intensity of the residents' condition.

Managed Care - Capitation

The third-party payer contracts with the healthcare provider(s) to pay a flat fee per individual enrolled in the healthcare plan. The actual services provided to the patient—few or numerous—don't affect the reimbursement to the provider.

Case Mix Adjustment

Using OASIS, The adjustment for the health condition, or clinical characteristics, and service needs of the beneficiary

Usual:

Usual for the provider's practice

HHRG (home health resource group)

a multiplier used by HHPPS, and operates by setting a fixed rate for home health services based on historical data. Once this fixed rate is set, adjustments may be made for severely acute patients or for patients receiving care in more (or less) expensive geographic areas.

prospective payment system

When the costs of healthcare services are projected and allowable reimbursement amounts set for future healthcare services

explanation of benefits (EOB)

a document or report sent to the policyholder and to the provider by the insurer.

Global reimbursement

a fixed amount of money or a lump-sum payment designated to cover a related group of services. Global payments and prospective payment are closely related.

PPO Preferred Provider Organizations

a less restrictive type of managed care. Third-party payers contract with healthcare providers for discounted rates. If a covered patient elects to see a preferred provider in the preferred provider "network," the patient pays a smaller amount than if the patient elects to see a provider outside of the preferred provider network.

Inpatient rehabilitation facility patient assessment instrument (IRF PAI)

a special data collection tool. This is an 85-item tool to collect specific data about the patient so that the PPS rate can be calculated. This data is electronically submitted and the case-mix grouping drives the reimbursement for the inpatient rehabilitation PPS.

UCR reimbursement methodology

an extension of the fee schedule retrospective reimbursement system. the balance may or may not be billed to the patient.

Avgerage LOS at LTCH

about 25 days or longer.

QIO duties

addressing Medicare beneficiary's complaints, handling provider-based notice appeals, watching for violations of the Emergency Medical Treatment and Labor Act (EMTALA), ensuring Medicare pays only for reasonable and necessary care, and improving quality of care in general.

Third party fee schedules

are a predetermined list of maximum allowable fees for specific healthcare services. Third-party payers establish a fee schedule that lists all services and the maximum allowable rate the insurer will pay. Provider is responsible to bill patient if they want.

Relative weight

are assigned based on complexity of procedure, cost to provide procedure, degree of skill required, and other factors.

APC payment rates

are maximum reimbursement rates For surgical claims, only the highest APC (highest dollar value) is paid at the maximum rate; all other surgical charges are paid at 50% of the maximum rate. X-rays/radiology are not considered surgical procedures, so they are paid at the maximum rate.

the components of the ASC PPS would be updated....

every year as part of the annual OPPS rule-making process CMS uses the ambulatory payment classifications (APCs) established in the hospital OPPS as the mechanism for grouping ASC procedures. The APC relative payment weights for hospitals become the basis for calculating ASC payment rates under the new payment system.

Balanced Budget Act (BBA) of 1997

called for the development and implementation of a prospective payment system (PPS) for Medicare home health services. as amended by the Omnibus Consolidated and Emergency Supplemental Appropriations Act (OCESAA) of 1999

Minimum Data Set (MDS)

consists of an extensive database containing all of this clinical data. This becomes part of the resident's health record. Part of the data of the MDS is comprehensive assessment information. Assessments must be prepared for the start of therapy; the change of therapy; the end of therapy and any significant change in status. In addition, treatment plans are also part of the clinical data on the MDS.

Episode of Care reimbursement model

don't pay based on individual services rendered. Episode-of-care models determine payment based on one lump sum payment for all the care provided related to a disease or particular condition. Many times it is based on a time factor. An example is in home health all services delivered to the patient during a 60-day period is considered an episode of care. A unit of time may be a visit (encounter for care) or a daily, monthly, or other specified time period of care when a patient receives continuous care.

Health Maintenance Organizations (HMOs)

exercise the most control over patient choice and provider treatment options. HMOs follow a set of care guidelines patients must follow in order to receive maximum benefits. A structure common to many HMOs is the requirement for a patient to choose a primary care physician. contract with physicians, physician groups, hospitals, and clinics to provide care under the terms of the HMO. HMO patients are seen at steeply discounted rates and providers have a "pipeline" of patients through the HMO.

Outcome and Assessment Information Set (OASIS)

instrument to assess the patient's condition, used by the HHA (Home Health Agencies)

Inpatient Prospective Payment System

looks at the historical costs for providing inpatient services for a given diagnosis and sets a payment amount for treatment of the diagnosis in patients fitting a certain profile (age, sex, complications, etc). examples: Medicare, Medicaid, Blue Cross, TRICARE, and many other third-party payers use a prospective payment system to reimburse for inpatient healthcare. Hospital inpatient visits vary from the routine to the most extended, complex cases.

Medicare Severity DRGs (MS-DRGs)

on Oct. 1, 2007 replaced the version 24 Centers for Medicare and Medicaid Services (CMS) DRGs. CMS implemented the new MS-DRG system to better account for differences in patient severity.

Episode-of-care reimbursement system

payment is based upon services provided for conditions for which the patient is treated. There are different situations this reimbursement method applies. Depending upon the specific method, the unit of time a patient is treated may affect the received reimbursement. reimbursement is based on the patient's particular condition/illness or a specified time period over which the patient receives care. Managed care - capitation Global payment Prospective payment

other fee-for-service models

point-of-service plans, exclusive-provider-organizations, private policy (indemnity), and many others.

The home health PPS (Prospective Payment System)

provides HHAs with payments for each 60-day episode of care for each beneficiary. If a beneficiary is still eligible for care after the end of the first episode, a second episode can begin; there are no limits to the number of episodes a beneficiary who remains eligible for the home health benefit can receive.

Inpatient Rehabilitation Facility (IRF)

provides intense rehabilitation services to patients in an inpatient setting. These services are multidisciplinary services that require a team of healthcare professionals providing care to the patient. Physicians, nurses, physical therapists, occupational therapists, and speech therapists may all be involved. . The type of injuries can be severe, and the goal of this care is to help the patient to restore or enhance functions after an injury or illness. The classification of patients into special groups involves similar characteristics, and there are specific conditions that qualify such as strokes, major brain and spinal cord injuries.

RBRVS medicaid

reimbursement may be based on RBRVS or a modified RBRVS system or other state-specific reimbursement methodology. Medicaid varies from state to state since Medicaid is a joint federal and state program

IHS Indian Health Services

sets a per-diem (daily) rate. Reimbursement rates are set based on historical daily costs of providing healthcare services and then reimbursed on a per-day basis or per-encounter basis. Prospective Payment System

SI

the APC Status Indicator

Reimbursement rates are set for each Ambulatory Payment Classification and reimbursement is based on...

the Ambulatory Payment Classifications listed on the patient's claim. Keep in mind the claim also lists the patient's diagnosis (ICD-10-CM codes), and the procedures performed.

home health prospective payment system HHPPS

the Medicare system used to reimburse home health services a global prospective payment system Medicare pays home health agencies (HHAs) a predetermined base payment. The payment is adjusted for the health condition and care needs of the beneficiary. The payment is also adjusted for the geographic differences in wages for HHAs across the country. also a prospective payment system because reimbursement rates are set in advance for home healthcare. Reimbursement rates are paid for 60-day blocks of time.

The usual, customary, and reasonable (UCR)

the amount paid for a medical service in a geographic area based on what providers in the area usually charge for the same or similar medical service.

LTCH similar to the MS-DRG system

the calculations are different to account for this special circumstance. The PPS is based on MS-LTC-DRGs. They actually have the same groups as the MS-DRGs that are in effect for acute-care hospitals. The main difference is that the MS-LTC-DRGs have different relative weights and so therefore different payments.

Capitation

the provider is paid the same rate for a patient with complex medical needs who is seen frequently as for a healthy patient who rarely seeks treatment. A system of medical reimbursement wherein the provider is paid an annual fee per covered patient by an insurer or other financial source, which aggregate fees are intended to reimburse all provided services.

Resource-Based Relative Value Scale

the retrospective fee-for-service reimbursement methodology used by Medicare to determine reimbursement amounts for physician-based services.

Prospective Payment system

the third-party payer is interested in looking at averages over time and paying the average cost for each patient instead of the actual cost for each patient. Prospective payment systems establish payment amounts in advance for future healthcare services. may be based on time units or based on services for specific conditions or diseases. Not all prospective payment systems are global payment systems Prospective payment systems can be set up so that different payments are made to different providers

discounted fee-for-service retrospective payment system

the third-party payer pays less than the full price charged for the service. Depending on the contractual agreement(s) between provider, third-party payer, and patient, the difference between the price charged and the amount paid by the third-party payer may or may not be passed on to the patient. In other words, the discount gained by the third-party payer doesn't necessarily have to be passed on to the patient.

Managed Care

the third-party payer takes an active role in influencing cost and quality through its policies and provisions. fee-for-service model or under an episode-of-care model.

The mission of the QIO Program

to improve the effectiveness, efficiency, economy, and quality of services delivered to Medicare beneficiaries.