Analysis of CMS FY11 IPPS Final Rule

It is clear from the FY11 IPPS final rule that CMS expects hospitals to do more with less reimbursement.  The market-basket increase was more than offset by a 2.9% documentation and coding adjustment, leaving overall financial impact projections at a $311,000,000 decrease for FY11.  This can place even greater emphasis on compliant and effective clinical documentation integrity programs as hospitals strive to receive all of the reimbursement to which they are legally entitled.

These rules also provide further clarification regarding changes to the three-day payment window, as mandated by Congress on June 25, 2010.  The new expectations for outpatient services provided within three days prior to and including the day of inpatient admission will leave hospital staff to determine whether therapeutic services are clinically associated with the inpatient admission.  The hospital must then be prepared to defend their rationale.  ACS advises hospitals to create a process for coders and clinical staff to work together to determine whether the outpatient services were clinically associated with the inpatient stay.  While a greater number of claims will be combined based on this new definition, automatic bundling of all inpatient and outpatient claims will almost certainly lead to unintended loss of reimbursement.

Hospitals continue to wait for final claims processing instructions to clarify how the unrelated outpatient charges are to be submitted.  According to the FY11 final rule, this may be in the form of a condition code or outpatient modifier.  In summary, the new three-day payment window provision requires that:

• Outpatient services provided on the day of admission are included in the inpatient MS-DRG claim;
• Outpatient diagnostic services provided within the three-day payment window are included in the inpatient MS-DRG claim;
• Outpatient therapeutic services provided within the three-day payment window are included in the inpatient MS-DRG claim unless the hospital attests that the services were not clinically associated with the inpatient admission.  CMS has rescinded the previous definition of related services being those with an exact ICD-9-CM diagnosis code match.

The impact of reporting on quality measures is also evident as CMS prepares to accept up to 25 diagnosis codes and 25 procedure codes when submitted with the new 5010 claims processing format.

“We recognize the value of the additional information provided by this coded data for multiple uses such as for payment, quality measures, outcome analysis, and other important uses.”

Other highlights from the final rule include:

Reimbursement Implications

• <2.9%> Documentation and Coding Adjustment (DCA)
• $23,075 Cost Outlier Threshold
• New Technology Add-On Payments:
  • Spiration IBV System:  $3,437.50 maximum (continued from FY10)
  • CardioWest Temporary Artificial Heart System:  $53,000 (continued from FY10)
  • Auto Laser Interstitial Thermal Therapy (AutoLITT™) System:  $5,300 (NEW)
  • Three-Day Payment Window Revisions

MS-DRG and ICD-9-CM Changes

• New MS-DRGs for bone marrow transplants to distinguish allogeneic transplants from autologous transplants, providing increased reimbursement for allogeneic bone marrow transplants.
• MS-DRG reassignments for postsurgical hypoinsulinemia in pancreas transplants will permit cases to be assigned to pancreas transplant or simultaneous kidney / pancreas transplant MS-DRGs.
• Downgrade of Acute Renal Failure from MCC to CC
  • ARF was also the #1 MCC diagnosis which prevented hospitals with HACs from receiving lower reimbursement.  With ARF now being a CC, will hospitals see more reimbursement loss with HACs that are MCCs?
  • New ICD-9-CM diagnosis and procedure codes
  • Discharge status code implications:
    • 05 Discharged / Transferred to Cancer or Children’s Hospital will result in MS-DRG 789 Neonates Died or Transferred to Another Acute Care Facility
    • 66 Discharged to Critical Access Hospital will have the same impact on MS-DRG payments as 02 Discharged to Another Acute Care Hospital

Implications for Quality Reporting

• Hospital Acquired Conditions (HACs)
  • No new HAC categories; only new ICD-9-CM codes added within existing categories based on expanded ICD-9-CM codes for ABO incompatibility effective 10/1/10.
  • Estimated $20 million annual savings to Medicare based on HAC initiative
  • New Quality Measures for FY12 Payment Update
    • Include 8 HAC categories, so that hospital-specific rates for these HACs will be posted to Hospital Compare
    • Postoperative Respiratory Failure
    • Postoperative PE or DVT
    • NOT finalizing any new registry-based measures at this time

To download a PDF version of this article click here. 

To view the entire PDF version of the FY11 IPPS final rules, see http://www.cms.gov/AcuteInpatientPPS/IPPS2011/list.asp#TopOfPage