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CAH Medicare Reimbursement: Current Issues

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Title: CAH Medicare Reimbursement: Current Issues


1
CAH Medicare ReimbursementCurrent Issues
Strategies
Third Annual Western Region Flex
Conference Phoenix, Arizona
  • Presented by
  • John Sheehan
  • June 9, 2005

2
Outline
3
Outline
  • Rules
  • Understanding swing bed reimbursement
  • Changes solidifying the 25-bed limit
  • Outpatient Method II billing issues
  • Non-patient laboratory billing issue

4
Outline
  • Outlook
  • Proposed CMS rule limiting necessary providers
    options for facility replacement
  • Recent MedPAC discussions of CAH program future
    implications
  • Pending legislation, S. 993/H.R. 2350
  • Quality monitoring reporting
  • Strategies to improve CAH margins

5
Understanding CAH Swing Bed Payment
6
Understanding CAH Swing Bed Payment
  • CAH reimbursement is 101 of cost
  • Ancillary cost
  • Routine cost

7
Understanding CAH Swing Bed Payment
  • Ancillary cost is computed using each
    departments ratio of costs to charges times
    Medicare charges
  • Example
  • Medicare PT charges 50,000
  • PT RCC 80
  • PT cost 40,000
  • (plus 1)

8
Understanding CAH Swing Bed Payment
  • Routine cost is computed using the combined
    acute/swing bed per diem times Medicare days
  • Example
  • Medicare swing bed
  • Days 600
  • Per diem 725
  • Swing bed cost 435,000
  • (plus 1)

9
Understanding CAH Swing Bed Payment
  • Points to remember. . . .
  • Dont be fooled by high swing bed interim per
    diem payment
  • Reimbursement system is same for both acute
    swing bed services for CAHs
  • Must meet acute discharge swing bed admission
    criteria for swing bed admission

10
CMS Solidified 25-bed Limit
11
CMS Solidified 25-bed Limit
  • Effective December 2003 MMA removed
  • CAH 15 acute patient limit
  • Requirement to have swing beds in order to have
    25 beds
  • CMS revised State Operations Manual in April 2004
    to clarify (enforce) 25-bed limit

12
Outpatient Method II Billing Issues
13
Outpatient Method II Billing Issues
  • Optional billing methodology for selected
    physician services to outpatients
  • Must elect 30 days prior to beginning of year
  • Annual election, not automatic
  • Must specify which physicians are covered
  • Hospital bill (UB-92) includes outpatient
    physician services
  • Still receive 101 of cost reimbursement for CAH
    services

14
Outpatient Method II Billing Issues
  • Payment for physician services under Method II
  • Medicare pays at 115 of physician fee schedule
    (sort of)
  • 5 Physician Scarcity Area bonus applies
  • 10 Health Professional Shortage Area Payment
    applies
  • Add-ons should be automatic - but may not
  • See following pages

15
Non-patient Laboratory Billing
16
Non-patient Laboratory Billing
  • Medicare Claims Processing Manual (CMS Pub.
    100-04) 250.6 Clinical Diagnostic Laboratory
    Tests Furnished by CAHs
  • A CAH cannot seek reasonable cost reimbursement
    for tests provided to individuals in locations
    such as rural helath clinic, the individuals
    home or a skilled-nursing facility

17
Non-patient Laboratory Billing
  • Individuals in these locations are non-patients
    of a CAH and their lab test would be categorized
    as referenced lab tests for the non-patinets
    (Bill type 14x), and are paid under the lab fee
    schedule

18
Non-patient Laboratory Billing
  • Individuals who have specimens collected in
    draw stations or other similar locations set up
    within non-CAH providers or facilities to collect
    laboratory specimens are not considered to be
    physically present for specimen collection, and
    payment for the clinical diagnostic tests
    performed on these specimens are paid under the
    lab fee schedule.

19
Proposed CMS Rule Limiting Necessary Providers
Options for Facility Replacement
20
Proposed CMS Rule Limiting Necessary Providers
Options for Facility Replacement
  • CMS 5/4/05 Proposed Rule, would place severe
    restrictions on CAHs building replacement
    facilities, if
  • CAH is a designated necessary provider
  • Does not apply to CAHs that meet 35 or 15 mile
    criteria
  • Builds on different site, as defined
  • Completes replacement facility after 1/1/06

21
Proposed 485.610(d)
  • A CAH that has a necessary provider
    certification from the State and places a new
    facility in service after January 1, 2006, can
    continue to meet the location requirement based
    on the necessary provider certification only if
    the new facility meets either . of the
    following two tests.

22
Proposed 485.610(d)
  • (1) A new construction of a CAH will be
    considered as a replacement facility if the
    construction is undertaken within 250 yards of
    the current building or contiguous to the current
    CAH on land owned by the CAH prior to December 8,
    2003.

23
Proposed 485.610(d)
  • (2) A new facility CAH will be considered as a
    relocation of a CAH if, at the relocated site
  • (i) The CAH serves at least 75 percent of the
    same service area that it served prior to its
    relocation, provides at least 75 percent of the
    same services that it provided prior to the
    relocation, and is staffed by 75 percent of the
    same staff (including medical staff, contracted
    staff, and employees) and

24
Proposed 485.610(d)
  • (ii) The CAH provides documentation
    demonstrating that its plans to rebuild in the
    relocated area were undertaken prior to December
    8, 2003.

25
MedPAC Discussions of CAH Program
26
MedPAC Discussions of CAH Program
  • MMA 433 mandated the Medicare Payment Advisory
    Commission (MedPAC)
  • Study impact of 9 specific sections of MMA
  • Issue interim report in June 2005 on CAH
    provisions of 405 (the CAH provisions)
  • Issue final report in December 2006

27
MedPAC Discussions of CAH Program
  • MMA 405 CAH provisions
  • Change from 100 to 101 of costs
  • Coverage for on-call ER NPs PAs
  • Reinstatement of PIP
  • Expanding access to Method II
  • Increase to 25 acute beds
  • Reauthorization of Flex grants
  • Ability to have psych rehab DPUs
  • Elimination of necessary provider exception

28
MedPAC Discussions of CAH Program
  • Commission discussed CAH program
  • March 2005 meeting
  • April 2005 meeting
  • Transcripts available at http//www.medpac.gov/
  • Click meetings
  • Click transcripts
  • Information below is based on transcripts of
    meetings

29
MedPAC Discussions of CAH Program
  • At April meeting, staff proposed 2
    recommendations
  • Swing bed reimbursement should be reduced by
  • Eliminating 101 of cost reimbursement
  • Reinstituting old care-out methodology
  • CAHs lt 15 miles from another hospital or CAH
    should lose CAH status
  • With few exceptions a transition provision
  • 151 CAHs were identified, but data was old

30
MedPAC Discussions of CAH Program
  • After lengthy discussion, Commissioners
  • Rejected recommendations as unsupported by
    research to-date
  • Approved reporting that these matters were
    identified for further study
  • General attitude about CAH program remains a
    serious concern
  • Chairmans comments at close of discussion follow

31
Pending Legislation - RCH Act
32
Pending Legislation - RCH Act
  • Rural Community Hospital Assistance Act
  • S. 933 introduced by Senators Nelson Brownback
  • H.R. 2350 introduced by Rep. Moran with 16
    original cosponsors
  • Very similar to 2004 bill
  • Improves CAH program
  • Creates Rural Community Hospital designation

33
Pending Legislation - RCH Act
  • Improvements to CAH program
  • May have psych rehab Distinct Part Units (DPUs)
  • Duplicates MMA provision
  • Payment improvements
  • 101 of cost for all CAH ambulance services
  • 101 of cost for distinct SNF units
  • 101 of cost for psych rehab DPUs

34
Pending Legislation - RCH Act
  • RCH criteria
  • Rural
  • 50 or fewer beds
  • Provides 24/7 ER services
  • Operating as of 1/1/05
  • May have psych rehab DPUs

35
Pending Legislation - RCH Act
  • RCH payment 1-time election of regular PPS
    payments or
  • 101 of cost for inpatient acute care
  • 101 of cost for outpatient services
  • 101 of cost for home health care
  • But only if its a very isolated HHA

36
Pending Legislation - RCH Act
  • Additional RCH payments
  • 100 of Medicare bad debts
  • 101 of cost for ambulance services

37
Pending Legislation - RCH Act
  • Compared to RCH, CAHs have cost reimbursement in
    areas that RCHs dont
  • Swing beds
  • SNF
  • Psych rehab DPUs

38
Quality Monitoring Reporting
39
Quality Monitoring Reporting
  • Focus on quality is growing will continue
  • HHS Hospital Compare website
  • Live 4/1/05 at www.hospitalcompare.hhs.gov/
  • Growing efforts to pay for performance
  • PPS hospitals penalized for not reporting
    effective 10/1/04
  • Quality will continue in the spotlight

40
Quality Monitoring Reporting
  • MedPAC analyzed quality of care at CAHs
  • Findings were somewhat positive, but mixed
  • Analysis was limited by available data
  • Expect more scrutiny of your quality

41
Quality Monitoring Reporting
  • HHS hospital compare website
  • Segregates CAHs
  • Characterizes 2 classes of hospitals
  • Acute care (general hospitals)
  • Critical access (small, remote hospitals)
  • Cant accommodate comparison between the 2 groups
  • Presents low volume hospitals in negative light
  • Examples from site . . .

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Quality Monitoring Reporting
  • Recommended actions by CAHs
  • Be vocal about this portrayal of CAHs
  • Participate in voluntary data reporting
  • Participate in other programs
  • Programs that track performance
  • Programs that improve performance
  • Code claims accurately
  • Focus on quality
  • Plan for EHR (electronic health record)
  • Anticipate pay for performance

53
Strategies to Improve CAH Margins
54
Top 10 List Strategies to Improve CAH Margins
  • Operate CAH as a business
  • Develop a bed management strategy
  • Design a revenue cycle management program
  • Improve Medicare reimbursement
  • Avoid Medicare cash flow trap
  • 6. Develop optimal pricing strategies
  • 7. Improve clinic performance
  • 8. Manage labor non-labor resources
  • 9. Evaluate capital expenditures needs
  • 10. Evaluate new products services

55
Operate CAH as a Business
  • Forget Medicare cost based myth
  • Maximize productivity minimize expenditures
  • Prepare meaningful budgets
  • Closely monitor budget hold departments
    accountable for performance
  • Develop dynamic strategic business plan
    quantify financial implications
  • Establish financial benchmark goals

56
Develop a Bed Management Strategy
  • Utilize hospital acute care beds effectively
  • Enhance utilization of swing bed program
  • Educate physicians staff on bed management
    third-party payer coverage issues
  • Evaluate performance of home health
  • Evaluate the feasibility of excluded units

57
Design a Revenue Cycle Management Program
  • Contracting - review negotiate contracts with
    third-party payers
  • Patient admitting registration - design patient
    access system to produce clean claim
  • HIM - develop effective health information system
    to provide for management of patient
    documentation final code assignments
  • Patient accounting
  • Maximize cash flow by developing following
    effective policies procedures
  • Submit timely claims
  • Prepare clean claims
  • Minimize denials appeal them whenever
    possible
  • Employ effective collection efforts to
    minimize bad debts

58
Improve Medicare Reimbursement
  • Review cost finding allocation statistics, e.g.
    square footage
  • Review cost allocations to non-reimbursable cost
    centers
  • Claim all allowable costs
  • Identify all non-allowable costs
  • Assign costs to appropriate cost centers
  • Elect Method II billing, if beneficial
  • Receive HPSA bonus payments
  • Capture all qualifying Medicare bad debts (100
    reimbursed)
  • Claim proper depreciation (capitalization policy,
    election of useful life, idle square footage,
    etc.)
  • ER stand-by on-call arrangements

59
Avoid Medicare Cash Flow Trap
  • Closely monitor Medicare interim rates
  • Be aware of changes such as volume fluctuations,
    inpatient outpatient shifts, price increases,
    cost increases and decreases, etc.
  • Prepare interim cost reports
  • Prepare monthly or quarterly monitoring
    calculations
  • If Medicare overpays CAH hospital spends the
    cash, its difficult to repay the liability
  • Interest on loans to repay Medicare overpayments
    is a non-allowable cost

60
Develop Optimal Pricing Strategies
  • Evaluate departments that are winners losers
  • Prepare departmental operating analysis
  • Evaluate market prices
  • Implement CDM management program
  • Perform strategic pricing analysis
  • Endeavor to make non-Medicare business profitable

61
Improve Clinic Performance
  • Evaluate how physicians are compensated
  • Evaluate provider based RHC model
  • Evaluate provider based clinic model
  • Conduct operations review of clinic
  • Evaluate arrangements with physicians in
    specialty clinics

62
Manage Labor Non-labor Resources
  • Labor costs productivity
  • Compare actual results to benchmarking sources
  • Perform salary survey
  • Perform benefit analysis
  • Conduct employee attitude survey
  • Reduce hospital turnover rate

63
Manage Labor Non-labor Resources
  • Non-labor costs
  • Restrict who can sign contracts
  • Evaluate make vs. buy
  • Implement competitive bid policy
  • Capitalize on group purchasing contracts
  • Consider cost sharing with other hospitals
  • Evaluate lease versus purchase

64
Evaluate Capital Expenditures Needs
  • Evaluate age condition of physical plant
  • Prepare equipment needs analysis
  • Prepare capital expenditure budget (5 year plan)
  • Prepare debt capacity study
  • Evaluate lease vs. buy
  • Preservation of capital
  • Funded depreciation
  • Excess working capital
  • Cash flow trap

65
Evaluate New Products Services
  • Evaluate community need
  • Evaluate competitive issues
  • Interview community leaders, physicians, staff,
    etc.
  • Perform RD of new products services
  • Prepare financial profitability analysis
  • Perform financial reimbursement analysis before
    adding new products services

66
Summary of Strategies
  • Operate as a business
  • Develop a bed management strategy
  • Fine-tune revenue cycle management program
  • Conduct a comprehensive review of Medicare
    payment program
  • Closely monitor Medicare payment rates
  • Develop appropriate pricing strategies
  • Monitor physician mid-level productivity
    level of compensation

67
Summary of Strategies
  • Manage labor non-labor expenses by benchmarking
    by closely monitoring the budget
  • Evaluate capital expenditures based upon needs
    develop a strategic capital plan
  • Evaluate new products services based upon
    community need financial feasibility

68
Thank You!
  • John Sheehan, CPA
  • Partner
  • BKD, LLP
  • 501 N. Broadway, Suite 600
  • St. Louis, Missouri 63102
  • 314 231-5544
  • jsheehan_at_bkd.com
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