FINAL EXAM: PROVIDER PAYMENT AND MANAGING CARE /PERFORMANCE INDICATORS

1,

CHAPTER 4 PROVIDER PAYMENT

Per Diems Unlike straight charges, a negotiated per diem is a single charge for a day in the hospital regardless of any actual charges or costs incurred. It applies only to inpa­tient cases and is very common. For example, the plan pays $2500 for each day regardless of the actual cost of the service. Per diems ace predictable and provide savings for shorter lengths of sray, unlike some other types of payment such as diagnosis-related groups.

Flat per Jinns means a single per diem rate is negotiated and applied to any type of inpatient day. In other words, the payment for a day in the intensive care unit is the same as for a day for a routine medical patient. Because of the high differences in costs, service-specific per diems arc more common in acute care hospitals.

Servia-specific per dimu refer to multiple sets of negotiated per dicms based on service type; examples include differcor per dicms for medical-surgical ca.rcJ obstetrics, intensive care. neonatal intensive care, rehabilitation, and so forth. Service-specific per dicms also minimize the need to negotiate outlier provisions.

Table 4-8 Simplified Hypothetical Example of a Sliding-Scale Discoun�

Total Number of Bed-Days per Yea� 0-200

Percent Discount off Charges

10%

201-300 301-400 401 and greater

CHAPTER 4 PROVIDER'PAYMENT

Table 4-9 Types of DRGs TypeofDRG Medicare Medicare severity All patient All patient refined All p_atient severity adjusted Department of Defense

'3M is a private corporation.

Acronym DRGs or CMS-DRGs

MS-DRGs AP•DRGs

APR-DRGs APS-DRGs Tricare DRGs

15%

20%

30%

Developer

3M' for CMS 3M for CMS 3M 3M and NACHRI' Optumlnsignc' 3M

1Nat�onal Associa�ion of Children's Hospitals and Re.lated Institutions, a nonprofit association of children's hospitals.

J Optumlnsight, formerly known as lngenix, is a subsidiary of United Health Group.

commercial payers still using them will need to transition to the new system before ICD-10 becomes a required code set under HIPAA.

Some commercial payers negotiate rates bas(d on a pcrccmagc markup of what­ ever Medicare would pay for similar services. Such rates may vary from as low as Medicare plus 5% to as high as Medicare plus 60%, and the percentage often varies by type of product such as Medicare Advantage, HMO, and/or PPO. For cases that must use a DRG type other than MS-DRGs, a similar calculation is applied, but in those cases the other DRGs do not necessarily come with pricing attached; consequently, payment terms may need to be desctibcd in more detail.

PAYMENT OF FACILITIES

Per diem diff,rentia/ by 'day in hospital refers to the fact that most hospi taliza­ tions are more expensive on the first day. For example, the first day for surgical cases includes operating suite costs, the operating surgical team costs (nurses and recovery), and so forth. Thisrype of payment method is generally combined with a per diem approach, but the first day is paid at a higher rate. For example, the first day may be paid at $4000 and each subsequent day is $1200.

Sliding-scale per dierm, like sliding-scale discounts on charges, ace based on total volume.

Diagnosis-Related Groups and Medicare Severity {Ad}��ted} Diagnosis-Related Groups DRGs, which were initially developed for Medicare, arc broadly referred to as inpatient prospective payment. They provide a flat payment per admission and apply only to inpatient cases. DRGs place responsibility on the hospital to man­ age the inpatient stay. Savings from shorter stays are kept by the hospital and do not go to the payer, whereas longer stays usually do not cost the payer more unless it is an oudier. DRGs do pay more for outlier cases, and the number of cases being classified as outliers has continually risen. To deal with this trend, Medicare changed from DRGs to MS-DRGs to better incorporate severity of illness and complications into the payment system.

DRGs and now MS-DRGs are sorted into 'major diagnostic categories (MDCs), e_ach of which represents a system in the body. Within each MDC, DRGs arc assigned by a "grouper" program based on the mix of diagnoses, pro­ cedures performed, age, sex, discharge status, and presence of complications or comorbidities (i.e., medical problems in addition to the one thar resulted in the admission). In other words, DRGs are created through the submission of other code se� data and supplemented by additional information.

As seen in Table4-9, several forms ofD RGs exist, and two are being phased out or have already been phased out (phased-out DRG types appear in italics in the table). The reason for the different types of DRGs is that DRGs, and now MS-DRGs, were and arc intended for use by Medicare and, therefore, do not have the same types and levels of detail needed for commercial populations of members rep­ resenting all ages; for example, they do not cover childbirtl, or neonatal care. Medicare uses only MS-DRGs, which are also used by many commercial payers. Many commercial payers supplement MS-DRGs with. another type such as APR-DRGS that cover a broad range of patients. DRGs and all-patient ORGs (AP-DRGs) have been phased out and do not comply with J�D-10, so any

PAYMENT OF FACILITIES

for defined types of outpatient procedures, such as screening colonoscopies and cataract surgery.