Routine Costs Within IPF Rates: Implications
of Over-Aggregation
AcademyHealth 2009 Annual Research Meeting
June 30, 2009
Presented by:
Edward M. Drozd, Ph.D.
RTI International
www.rti.org
RTI International is a trade name of Research Triangle Institute
Funding and Contributors
• This presentation based on a CMS-funded study:
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“Psychiatric Inpatient Routine Cost Analysis”
CMS Contract 500-95-0058, T.O. 13
Jerry Cromwell, Ph.D., Project Director
Frederick G. Thomas, Ph.D., CMS Project Officer
• Co-authors
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Jerry Cromwell, Ph.D. (RTI)
Barbara Gage, Ph.D. (RTI)
Jan Maier, RN, MPH (RTI)
Leslie Greenwald, Ph.D. (RTI)
Howard Goldman, MD (U. Maryland)
Background: Medicare’s Role in Payment for
Inpatient Psychiatric Care
• About 500 thousand hospitalizations in over 1,800
inpatient facilities annually.
• Freestanding psychiatric hospitals (public and
private) and hospital units
– Focus in this presentation on freestanding hospitals and socalled distinct part units, formerly exempt from the Acute
Inpatient PPS (IPPS)
– About 25% of patients are treated in “scatterbeds” subject to
the IPPS.
• In contrast to Medicare inpatient care as a whole, a
majority of these patients (about ⅔) are disabled, not
aged.
3
Background: Medicare Payment for Inpatient
Psychiatric Care
• For over 20 years (from 1983 to 2004), payments
based on facility-specific historic cost (updated
annually).
– Same payment regardless of expected patient cost.
– Newer hospitals received relatively higher payments.
• Balanced Budget Refinement Act (BBRA; 1999)
mandated changes in reimbursement
– Per diem, not per stay payments
– “Such system shall include an adequate patient classification
system that reflects the differences in patient resource use
and costs among such hospitals”
• Inpatient Psychiatric Facility PPS (IPF-PPS)
implemented in 2004
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Challenges in Meeting the Congressional
Mandate
• Congressional mandate presented two main
challenges:
– Challenge 1: Measuring patients’ true per diem cost.
– Challenge 2: Developing a casemix classification system to
estimate patient costs prospectively.
• In this presentation we:
– Describe the limitations of administrative data in estimating
relative costliness of patients, especially when costs are
driven heavily by differences in staff time with patients
– Present results from the Cromwell (2005) study showing the
impact of using incomplete information on resource use
variation in setting payment rates
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Limitations of Administrative Data
• Existing administrative consists of cost report and
claims data
• Costs can be divided into routine (nursing) versus
ancillary
• Routine costs include nursing, aide, social work, etc.
staffing costs as well as room costs
• Ancillaries include drugs, labs, therapy, ECT services
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Implications of Limitations of Administrative
Data
• Administrative data include patient-specific charges
for ancillary services, but not for routine care
• Of costs in IPFs:
– Routine costs account for 80%
– Labor costs account for 75%
• Not distinguishing individual patients’ specific
contributions to routine costs, especially labor, may
underestimate cost of treating patients who use a
great deal of staff time, and vice versa
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Study Overview: Purpose & Data
• Purpose: to collect background information for CMS
for implementing the IPF-PPS
– Collect patient-specific daily data on actual resources used
– Identify characteristics associated with resource use that
could be used in a payment system
– 4-year effort, data collected from 40 inpatient psychiatric
facilities
• Data: Primary data on resource use combined with
administrative data
– Patient and staff times in activities for up to 7 days per
patient.
– Medicare patient diagnostic, behavioral, and demographic
characteristics
– 696 Medicare patients with matched claims and primary data
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Study Overview: Methods (1)
• Staff and patient times in activities combined to
create facility-specific patient day staff resource
intensity index
• Per diem cost measure sum of three components:
– Labor-related routine portion adjusted for patient day-level
variation in resource use
– Non-labor–related portion based on facility average
– Ancillary portion based on patient stay average from claim
(charges multiplied by cost-to-charge ratio)
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Study Overview: Methods (2)
• Patient casemix classification groups created based on patient
average cost
– Groups defined by hierarchical splits of patient characteristics,
generated by CART with expert guidance over splits
– Patients first be separated by clinician-advised diagnostic
categories (Schizophrenia, Dementia, Mood Disorders, SubstanceRelated Disorders, and Others) for maximal clinical relevance
– Other characteristics further separate patients hierarchically
• Per diem cost regressions estimated using patient groups, dayof-stay groups, and facility characteristics
• End result: 16-group model using some characteristics (ADLs,
dangerousness to self or others) not found on claims
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0
11
RN-Equivalent Minutes per Patient
1280+
1121–1200
1201–1280
1041–1120
881–960
961–1040
801–880
641–720
721–800
561–640
481–560
321–400
401–480
241–320
81–160
161–240
≤ 80
Percent of Patients
Distribution of Staff Intensity Per Medicare
Patient Day
25
20
15
10
5
Sources of Variation in Resource Intensity:
Staff Intensity in Most Frequent Activities
Top
10%
Middle
80%
Bottom
10%
Top 10% ÷
Bottom 10%
835.0
361.6
150.1
5.6
Personal Care
48.5
21.0
7.5
6.5
Meals
28.6
19.5
11.3
2.5
Medications
47.3
30.3
12.2
3.9
Assessment/Treatment
Planning
145.4
53.9
11.8
12.1
Observation/Seclusion
207.6
5.0
0.8
259.5
Checks
36.1
32.2
16.7
2.2
Other
74.5
53.3
26.5
2.8
All Routine
12
% of Patients
13
2.25
30
2.00
25
1.75
20
1.50
15
1.25
10
1.00
5
0.75
0
0.50
Relative Weight
35
Schizo 1
Schizo 2
Schizo 3
Schizo 4
Schzio 5
Dementia 1
Dementia 2
Dementia 3
Mood 1
Mood 2
Mood 3
Mood 4
Mood 5
Residual
Substance 1
Substance 2
Compression in Estimates of Relative Costs
for RTI Case Mix Groups
% Covered Days
Adjusted
Not Adjusted
Compression in Estimated Relative Cost for
Above- and Below-Average Cost Patients
Case Mix Groups With
Above-Average Costs
(Relative Weight > 1)
Case Mix Groups With
Below-Average Costs
(Relative Weight < 1)
Difference in Weight
Between Adjusted and
Unadjusted Per Diem
Cost
0.16
0.05
Average Relative
Weight
1.26
0.91
Proportion of Patients
29.3
70.7
Average Compression
Percentage
12.4%
5.9%
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Summary of Compression Findings (1)
• There is significant variation in routine resource use
per patient day
– Coefficient of variation equal to 54%
– Interquartile range equal to 64% of the median
– Ratio of top decile to bottom decile equal to 5.6
• Differences driven by certain activities
– Personal care, observation/seclusion, assessment/
treatment planning
– Suggests there may be case mix characteristics that can
identify these patients
• This variation is unmeasured within facility, only
incorporated into costs to the degree that facilities
specialize is treating certain types of patients
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Summary of Compression Findings (2)
• Compression in estimated per diem cost less
pronounced than in routine cost differences
– Ancillary costs already patient-specific (though not patientday–specific
– Other components of cost (e.g., overhead, non-labor–related
routine costs) not identified as patient specific
• More compression in estimated cost for high-cost
patients than low-cost patients
• On average, 12% underestimate of cost for high-cost
patients; 6% overestimate of cost for low-cost
patients
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Implications
• Systematic under- and overpayments for patients can
lead to distortions in service delivery
– More selective admission patterns
– Dropping or adding service lines/specialties
• How to collect more patient-specific resource use
information?
– Intermittent time studies, as also done for SNFs and
currently for post-acute care
– Modified charge structures for incremental nursing costs
(e.g., 1-1 observation or seclusion) or recognizing different
levels of care (as is done for intensive care, critical care, etc.
units in acute hospitals)
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Appendix: Patient Classification System Used
in this Presentation (1)
Patient
Group
Relative
Weight
Medicare
Day %
Definition
Schizo 1
HiADL + Age>65 + HiPsy
1.98
0.61
Schizo 2
Age>65 + (HiADL + LoMed or LoADL +
HiDanger)
1.01
3.66
Schizo 3
LoADL + Age>65 + LoDanger
0.96
5.40
Schizo 4
LoADL + Age<65 + HiPsy
0.90
3.99
Schizo 5
Age<65 + (LoADL + LoPsy or HiADL)
0.85
31.20
Dementia 1
HiADL + HiMed
1.45
2.95
Dementia 2
All Other Dementia
1.23
8.50
Dementia 3
LoADL + LoPsy
0.97
4.54
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Appendix: Patient Classification System Used
in this Presentation (2)
Patient
Group
Relative
Weight
Medicare
Day %
Definition
Mood 1
Age>65 + HiPsy + HiMed
1.40
2.32
Mood 2
Age>65 + HiPsy + LoMed + HiDanger
1.27
3.32
Mood 3
LoMed + OnECT + (Age<65 or Age>65 +
HiPsy + LoDanger)
1.37
3.18
Mood 4
All Other Mood Disorder
1.00
14.43
Mood 5
Age<65 + LoMed + NoECT + NoDetox
0.92
10.37
Residual
All Residual Disorder
1.15
4.35
Substance 1
HiDanger
1.09
0.41
Substance 2
LoDanger
0.85
0.79
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Appendix: Patient Classification System Used
in this Presentation (3)
Characteristic
Description of Clinical Criterion
Diagnosis
Category
One of 5 diagnosis categories (schizophrenia, dementia, mood
disorders, residual disorders, substance/related) determined
through expert opinion
(Hi/Lo)ADL
Patient indicated as having 2 or more ADL deficits
Age(<65/>65)
Patient’s age is 65 years or greater
(Hi/Lo)Psy
Patient’s primary (psychiatric) diagnosis in a class of severe
diagnoses determined through expert opinion
(Hi/Lo)Med
Patient’s has any comorbid medical diagnoses in a class of
severe diagnoses determined through expert opinion
(Hi/Lo)Danger
Patient indicated as being dangerous to self or others
(On/No)ECT
Patient receiving electroconvulsive therapy during stay
(On/No)Detox
Patient receiving detoxification during stay
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