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Comparison of the Prospective Payment System
Methodologies Currently Utilized in the
United StatesToni Cade, MBA, RHIA, CCS,
FAHIMAUniversity of Louisiana at Lafayette
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Overview

• Some of the prospective payment systems covered
  will include MS-DRGs, RBRVS, RUGs, APCs, CMGs,
  HHRGs, MS-LTC-DRGs, and IPF-PPS.

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Can you speak the jargon of Prospective Payment
Systems?
MS-LTC DRGs
RBRVS
MS-DRGs
IRF-PAI
HHRGs
APCs
CMGs
RUGs
IPF-PPS
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• Each of the prospective payment systems is unique
  and quite complex.
• We are all challenged to understand the
  application of these prospective payment systems.

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Reimbursement is based upon the

• third party payer
• healthcare setting or provider
• coding system used
• data set utilized
• encoder, grouper, and data entry software used

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Third Party Payers

• Third party payers are entities or organizations
  that pay for some or all of the covered medical
  expenses.
• There are many forms of health insurance coverage
  in the United States.
• Categories of health insurance include
• Government plans (i.e., Medicare, Medicaid,
  TRICARE, CHAMPVA)
• Commercial or private insurance plans (i.e, Blue
  Cross/ Blue Shield, Prudential, Aetna)
• Managed care contracts
• Workers compensation plans

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Sources of Third Party PayersU.S. Census Bureau
indicated that 84 of Americans had some type of
health insurance and 16 had no health insurance
in the calendar year 2006
Health Insurance Types U. S. Population with Coverage ()
Commercial or private insurance plans 69.9
Medicare 13.6
Medicaid 12.9
Military Healthcare 3.6
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Healthcare Setting or Providers

• Providers are those persons, institutions,
  facilities and firms who are eligible to provide
  services and supplies.
• Examples of providers include
• hospitals of all types (i.e., acute care, rehab,
  psych, long term,
• specialty)
• skilled nursing facilities
• intermediate care facilities
• home health agencies
• physicians
• independent diagnostic laboratories
• independent facilities providing x-ray
  services
• outpatient physical, occupational, and speech
  pathology services
• ambulance companies
• chiropractors
• facilities providing kidney dialysis or
  transplant services
• rural clinics
• veterinary clinics

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The Coding System

• There are two primary coding systems utilized in
  reimbursement
• ICD-9-CM
• CPT
• These and other coding systems are used for
  statistical purposes.

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The Data Sets

• Some of the prospective payment systems require
  the standardized collection of a core set of
  common data items which can be utilized for many
  purposes, such as measuring patient outcomes,
  assessing the quality of services, and measuring
  the effectiveness of interventions and
  treatments.
• These data sets can also be used to form the
  basis of reimbursement for the services provided.

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The Data Sets
Data Set Acronym Name of Data Set Healthcare Setting
MDS/RAI Minimum Data Set/Resident Assessment Instrument Skilled Nursing Facility (SNF)
MDS-PAC/PAI Minimum Data Set for Post Acute Care/Patient Assessment Instrument Inpatient Rehabilitation Facility (IRF)
OASIS Outcomes and Assessment Information Set Home Health Agency (HHA)
CMAT Case Mix Assessment Tool Inpatient Psychiatric Facility (IPF)
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Encoder, Grouper, and Data Entry Software

• Encoder a computer software program designed to
  assist coders in assigning appropriate clinical
  codes to words and phrases expressed in natural
  human language. There are two types of encoders
• Logic-based prompts the user through a variety
  of questions and the choices are based upon the
  clinical terminology entered
• Automated codebook prompts screen views that
  resemble the actual format of the coding book

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Grouper

• Grouper a computer software program that applies
  appropriate logic to assign a particular payment
  group (i.e, MS-DRG, APC) according to the
  information provided for that episode of care.

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Data Entry Software

• Data entry software computerized data entry
  software may be required for the establishment of
  a database and for purposes of transmission of
  data.

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Data Entry Software
Software Acronym Name of Software Used For
RAVEN Resident Assessment Validation and Entry Skilled Nursing Facility (electronic transmission of data in MDS format)
IRVEN Inpatient Rehabilitation Validation and Entry Inpatient Rehabilitation Facility (electronic transmission of data from the IRF-PAI)
HAVEN Home Assessment Validation and Entry Home Health Agency (electronic transmission of data in OASIS format)
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Why prospective payment?

• Development of prospective payment systems was
  mandated by federal law for Medicare
  reimbursement
• Current retrospective payment systems were not
  effective in controlling costs or in controlling
  government expenditures for Medicare beneficiaries

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Retrospective Payment Systems

• Reimbursement is established after the healthcare
  services are rendered and the costs are incurred
• Increases in the length of stay translates to
  increased charges on the itemized bill and
  therefore an increase in the reimbursement
• Increases in the services rendered means
  increased charges on the itemized bill and
  therefore an increase in the reimbursement

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Prospective Payment Systems

• Reimbursement is established before the
  healthcare services are rendered and monies are
  expended
• Reimbursement is based upon a specific
  prospective payment system methodology
• The length of stay and services rendered will
  result in increased charges on the itemized bill,
  but will not necessarily result in an increase in
  the reimbursement

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MS-DRG FACT SHEET

• Reimbursement to (Provider) Acute Care, Short
  Term Hospitals
• MS-DRG stands for Medicare Severity Diagnosis
  Related Group
• Reimbursement for Medicare and TRICARE
  Inpatients
• Coding System Used ICD-9-CM
• Effective Dates for Original DRGs
• October 1, 1983 for Medicare Inpatients
• October 1, 1987 for TRICARE Inpatients
• Effective Date for MS-DRGs
• October 1, 2007
• Number of MS-DRGs about 745

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MS-DRG ASSIGNMENT

• Diagnoses and major procedures are coded using
  ICD-9-CM codes.
• Case is categorized into an MDC (Major Diagnostic
  Category), which are divided by body systems.
• Case may be further divided into surgical versus
  medical partitioning.
• Case may be split into one of three alternatives
• - with MCC, with CC, and w/o CC/MCC
• - with MCC and w/o MCC
• - with CC/MCC and w/o CC/MCC
• Each MS-DRG has a CMS relative weight and when
  multiplied by the hospitals specific rate, the
  reimbursement is derived.

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MS-DRGs with three subgroups (MCC, CC, and
non-CC) referred to aswith MCC, with CC,
and w/o CC/MCC)

• MS-DRG 682
• Renal Failure w MCC
• MS-DRG 683
• Renal Failure w CC
• MS-DRG 684
• Renal Failure w/o CC/MCC

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MS-DRGs with two subgroups (MCC and CC/non-CC)
referred to as with MCC and without MCC

• MS-DRG 725
• Benign Prostatic Hypertrophy w MCC
• MS-DRG 726
• Benign Prostatic Hypertrophy w/o MCC

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MS-DRGs with two subgroups(non CC and CC/MCC)
referred to as with CC/MCC and without
CC/MCC

• MS-DRG 294
• Deep Vein Thrombophlebitis w CC/MCC
• MS-DRG 295
• Deep Vein Thrombophlebitis w/o CC/MCC

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RBRVS FACT SHEET

• RBRVS stands for Resource Based Relative Value
  System
• Reimbursement to (Provider) Physicians
• Reimbursement for Medicare Patients
• Coding System Used HCPCS/CPT
• Effective Date January 1, 1982
• Number of RBRVSs each CPT and HCPCS code has a
  payment amount (thousands)

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RBRVS ASSIGNMENT

1. Each service and procedure is coded using the
   HCPCS/CPT codes.
2. Each HCPCS/CPT code has RVUs (relative value
   units) for the physicians work, practice
   expense, and malpractice.
3. Each RVU is adjusted by a GPCI (geographical
   practice cost indices).
4. The sum of the adjusted RVUs is multiplied by a
   conversion factor which constitutes the Medicare
   fee schedule amount.
5. The physician is reimbursed the lower of the
   Medicare fee schedule amount or the actual
   charges.

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ASC FACT SHEET

• ASC stands for Ambulatory Surgery Center
• Reimbursement to (Provider) Free-Standing
  Surgery Centers
• Reimbursement for Medicare Ambulatory Surgery
• Coding System Used HCPCS/CPT
• Effective Date January 1, 1997
• Number of ASCs Originally only 9 groups,
  effective January 1, 2008 there were several
  hundred payment groups (APCs)

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ASC ASSIGNMENT

1. Ambulatory surgery is coded using CPT codes.
2. The CPT code should appear on the approved list
   of ASC procedures.
3. Each CPT code is categorized into one of several
   hundred payment groups.
4. Each payment group has a payment rate.

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RUG FACT SHEET

• RUG stands for Resource Utilization Group
• Reimbursement to (Provider) Skilled Nursing
  Facilities
• Reimbursement for Medicare Inpatients
• Coding System Used ICD-9-CM
• Effective Date July 1, 1998
• Number of RUGs 53

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RUG ASSIGNMENT

• This case mix payment system utilizes information
  from the MDS (Minimum Data Set).
• The patient is classified into 1 of 7 major
  categories depending on the patient type (rehab,
  extensive services, special care, clinically
  complex, impaired cognition, behavior problems,
  and reduced physical function).
• Each of these 7 categories is further
  differentiated to yield 53 specific patient
  groups used for payment.
• Each of the 53 RUGs has a per-diem rate.

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APC FACT SHEET

• APC stands for Ambulatory Payment Classification
• Reimbursement to (Provider) Hospitals
• Reimbursement for Medicare Outpatients
• Coding System Used HCPCS/CPT
• Effective Date August 1, 2000
• Number of APCs about 850

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APC ASSIGNMENT

1. All services (major and minor) are coded using
   HCPCS/CPT codes.
2. Each HCPCS/CPT code is grouped to an APC. There
   can be many different APCs.
3. Each APC has a Medicare payment amount and a
   beneficiary coinsurance amount. The provider
   receives the sum of these dollar amounts as
   reimbursement for each APC.

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CMG FACT SHEET

• CMG stands for Case Mix Group
• Reimbursement to (Provider) Rehabilitation
  Hospitals and Units
• Reimbursement for Medicare Inpatients
• Coding System Used ICD-9-CM
• Effective Date January 1, 2002
• Number of CMGs 92

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CMG ASSIGNMENT

1. This prospective payment system uses information
   from the Inpatient Rehabilitation
   Facility-Patient Assessment Instrument (IRF-PAI).
2. Patients are classified into distinct Case Mix
   Groups (CMGs) based upon clinical characteristics
   and expected resource needs.
3. The CMGs were constructed using rehab impairment
   categories, functional status (both motor and
   cognitive), age, comorbidities, and other
   factors.
4. Each CMG has a different payment amount.

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HHRG FACT SHEET

• HHRG stands for Home Health Resource Group
• Reimbursement to (Provider) Home Health Agencies
• Reimbursement for Medicare Patients
• Coding System Used ICD-9-CM
• Effective Date October 1, 2000
• Number of HHRGs 153

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HHRG ASSIGNMENT

1. This prospective payment system uses information
   from the Outcomes and Assessment Information Set
   (OASIS).
2. Each HHRG has an associated weight value that
   increases or decreases Medicares payment for an
   episode of care and this payment is relative to a
   national standard per episode amount.

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MS-LTC-DRG FACT SHEET

• MS-LTC-DRG stands for Medicare Severity Long
  Term Care-Diagnosis Related Group
• Reimbursement to (Provider) Long Term Care
  Hospitals
• Reimbursement for Medicare Inpatients
• Coding System Used ICD-9-CM
• Effective Date October 1, 2002
• Number of MS-LTC-DRGs 650

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MS-LTC-DRG ASSIGNMENT

1. The assignment of a patient case into a
   MS-LTC-DRG is similar to the way a patient is
   classified to a MS-DRG.
2. The biggest difference is that the relative
   weights are different.

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IPF-PPS FACT SHEET

• IPF-PPS stands for Inpatient Psychiatric
  Facility-Prospective Payment System
• Reimbursement to (Provider) Psychiatric
  Facilities
• Reimbursement for Medicare Inpatients
• Coding System Used ICD-9-CM
• Effective Date January 1, 2005
• Number of IPF-PPSs 15

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IPF-PPS ASSIGNMENT

1. This prospective payment system is based on the
   cost of an average day of care in a psychiatric
   facility.
2. Payment for the average day or per diem would be
   the Federal per diem base rate, to which various
   adjustments would be applied applicable to the
   patient treated and facility characteristics.
3. The proposed IPF-PPS uses the existing inpatient
   hospital MS-DRG system to group inpatient
   psychiatric patients into one of the 15 allowed
   psychiatric MS-DRG groups, but does not use the
   inpatient PPS payment amount. The IPF-PPS has its
   own set of payment adjusters for each of the
   MS-DRG codes.
4. The MS-DRG payment adjustment amount is applied
   to the Federal per diem rate along with the
   applicable payment adjusters to derive the final
   per diem amount for each inpatient psychiatric
   stay.

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CHALLENGE

• YOUR MISSION IS
• TO STAY INFORMED
• OF THE PARTICULAR PROSPECTIVE PAYMENT SYSTEM(S)
  THAT RELATES TO YOUR JOB!