HEALTHCARE & PUBLIC SECTOR
Medicare FY 2009 IPPS Update and
Healthcare Quality Mandates
11th Annual HFMA Region 11 Healthcare Symposium
January 26, 2009
ADVISORY
Joe Sellars
Carolyn Scott
Director, KPMG LLP
Director, KPMG LLP
Jacksonville, FL
Atlanta, GA
HEALTHCARE
Medicare FY 2009 IPPS Final Rule
Joe Sellars
Director, Healthcare Advisory
HFMA Region 11 Healthcare Symposium
January 26, 2009
KPMG LLP
CMS FY 2009 IPPS Final Rule
Significant MS-DRG Payment Changes
MS-DRG Reclassifications
CMS focused on making significant reforms to IPPS consistent
with MedPAC recommendations made in March 2005.
Severity of Illness
Applying HSRV weights to DRGs
Three-year transition period started in FY 2007:
Adopted cost-based weights (1/3 cost-based, 2/3 charge-based)
20 new CMS-DRGs created, 32 others modified, 8 deleted; Involved
1.7 million cases in 13 different clinical areas
MS-DRG Reclassifications (continued)
Medicare Severity DRGs implemented in FY 2008:
745 MS-DRGs adopted, replacing CMS-DRGs
Continued transition to cost-based weights (2/3 cost, 1/3 charge)
List of Major Diagnostic Categories (MDC) not changed
FY 2009:
Completion of transition to 100% cost-based weights
MS-DRG Reclassifications (continued)
CMS subdivided MS-DRG 245 (AICD Lead & Generator Procedures)
Created new MS-DRG to separate implantation / replacement of
leads from the implantation / replacement of pulse generators
MS-DRG 245 re-titled “AICD Generator Procedures”
New MS-DRG 265 titled “AICD Lead Procedures”
The surgical hierarchy for MDC 5 (Diseases and Disorders of the
Circulatory System) was revised
MS-DRG 245 was placed above MS-DRG 265
Application of Documentation and Coding Adjustment
Per CMS, by increasing the number of DRGs and more fully
considering severity of illness, the MS-DRGs encourage hospitals
to improve their documentation and coding of patient diagnoses.
The Secretary of HHS has the authority under the Act to maintain
budget neutrality by adjusting the standardized amount to
eliminate the effect of changes in coding or classification that do
not reflect real changes in case-mix.
Documentation and coding adjustment of -0.6 percent in FY 2008,
-0.9 percent in FY 2009, consistent with P.L. 110-90 Section 7
Application of Documentation and Coding Adjustment
(continued)
Documentation and coding adjustments are cumulative
The FY 2009 documentation and coding adjustment of -0.9 percent
is in addition to the -0.6 percent adjustment for FY 2008, yielding a
combined effect of -1.5 percent.
SCH and MDH providers may be affected in FY 2010
CMS considering applying documentation and coding adjustments to
FY 2010 hospital-specific rates, including applying the FY 2008 and
FY 2009 adjustment percentages in the computation of the FY 2010
adjustment percentage.
CMS FY 2009 IPPS Final Rule
Charge Compression
Charge Compression
Beginning in FY 2007, CMS implemented relative weights based on
cost report data instead of charge information.
CMS developed cost-to-charge ratios (CCR) based on distinct
hospital departments. Charges were summed by DRG for each of
the 15 cost groups.
Transition to cost-based weights raised concerns about potential
bias in the weights due to “charge compression”
Applying a higher percentage charge markup over costs to lower
cost items and services
Applying a lower percentage charge markup over costs to higher
cost items and services
Cost-based weights would undervalue high-cost items and overvalue
low-cost items if a single CCR is applied to items of widely varying
costs in the same cost center
Charge Compression (continued)
Contract awarded to RTI in August 2006 to study effects of charge
compression.
RTI found that a number of factors contribute to charge
compression:
Inconsistent matching of charges in the Medicare cost report and
corresponding charges in MedPAR claims for certain cost centers
Inconsistent reporting of costs and charges among hospitals.
Some hospitals would report costs & charges for devices and supplies in the
Medical Supplies Charged to Patients cost center
Others would report these costs and charges in their related ancillary
departments such as Operating Room or Radiology
RTI’s findings demonstrated that charge compression exists in
several CCRs, most notably in Medical Supplies and Equipment.
Charge Compression (continued)
Longstanding Medicare cost reporting policy has been that hospitals must
include the costs and charges of separately “chargeable medical
supplies” in the Medical Supplies Charged to Patients cost center, rather
than in the Operating Room, Emergency Room or other ancillary cost
centers.
Transmittal 321, Change Request 5928 was issued 2/29/2008 to inform
FIs/MACs of hospital associations’ initiatives to encourage hospitals to
modify their cost reporting practices. It was effective March 31, 2008.
Form CMS-2552-09 is expected to establish a new Medical Implants
Charged to Patients cost center to separate higher-cost implants and
devices from the lower-cost supplies that will continue to be reported
under Medical Supplies Charged to Patients.
Charge Compression (continued)
Rather than use the existing criteria set forth in the proposed rule
to determine what should be reported in these cost centers, CMS
will use revenue codes established by the National Uniform Billing
Committee (NUBC) to determine what should be reported
The use of the NUBC definitions would not require that the
implantable device remain in the patient when the patient is
discharged
Revenue codes to be reported in “Medical supplies” are:
0270, 0271, 0272 and 0273
Revenue codes to be reported in “Implantable Devices” are:
0275, 0276, 0278 and 0624
CMS has to revise the cost report (2552-09) to accomplish this
change. Revisions are not expected to be available until Spring
2009.
CMS FY 2009 IPPS Final Rule
Preventable Hospital-Acquired Conditions (HACs) and
Present on Admissions (POAs)
Preventable Hospital-Acquired Conditions (HACs)
In a 1999 report titled “To Err is Human: Building a Safer Health
System”, the Institute of Medicine noted the following:
Medical errors and HACs caused by medical errors are a leading
cause of morbidity and mortality in the U.S.
The number of Americans who die each year as a result of medical
errors that occur in hospitals may be as high as 98,000
Total national costs of these errors due to lost productivity, disability
and health care costs were estimated at $17 billion to $29 billion
Preventable Hospital-Acquired Conditions (HACs)
Other organizations’ findings:
In 2000, the CDC estimated that hospital-acquired infections added
nearly $5 billion to U.S. health care costs every year
A 2007 study published in the March-April 2007 issue of Public
Health Reports found that, in 2002, 1.7 million hospital-acquired
infections were associated with 99,000 deaths
A 2007 Leapfrog Group Hospital Survey of 1,256 hospitals found
that 87% of those hospitals do not follow recommendations to
prevent many of the most common hospital-acquired infections
Preventable Hospital-Acquired Conditions (HACs)
Combating HACs, including infections:
In 2005, Congress authorized CMS to adjust Medicare IPPS hospital
payments to encourage the prevention of these conditions
This is part of an array of Medicare value-based purchasing (VBP) tools to
promote increased quality and efficiency of care:
Measuring performance
Payment incentives
Publicly reporting performance results
Applying national and local coverage policy decisions
Enforcing conditions of participation
Providing direct support for providers through Quality Improvement Organization (QIO)
activities
“CMS’ application of VBP tools… is transforming Medicare from a passive
payer to an active purchaser of higher value health care services”
Preventable Hospital-Acquired Conditions (HACs)
Combating HACs, including infections (continued):
The President’s FY 2009 budget outlines another
approach for addressing serious preventable adverse
events, or “never events”, including HACs:
Prohibit hospitals from billing the Medicare program for “never events”
and prohibit Medicare payment for these events
Require hospitals to report occurrence of these events or receive a
reduced annual update
Preventable Hospital-Acquired Conditions (HACs)
Examples of how an MS-DRG might be paid:
Service: MS-DRG Assignment: (Operating amounts for a hospital
whose wage index is equal to the national average)
Present on
Admission
(Status of
Secondary
Diagnosis)
Average
Payment
(Based on
50th
percentile)
Principal Diagnosis: Intracranial hemorrhage or cerebral infarction
(stroke) without CC/MCC – MS-DRG 066
--
$5,347.98
Principal Diagnosis: Intracranial hemorrhage or cerebral infarction
(stroke) with CC – MS-DRG 065
Y
$6,177.43
N
$5,347.98
(Examples below with CC/MCC indicate a single secondary diagnosis only)
Example Secondary Diagnosis: Dislocation of patella – open due to a
fall (code 835.6 (CC))
Principal Diagnosis: Intracranial hemorrhage or cerebral infarction
(stroke) with CC – MS-DRG 065
Example Secondary Diagnosis: Dislocation of patella – open due to a
fall (code 835.6 (CC))
Preventable Hospital-Acquired Conditions (HACs)
Examples of how an MS-DRG might be paid (continued):
Service: MS-DRG Assignment: (Operating amounts for a hospital
whose wage index is equal to the national average)
(Examples below with CC/MCC indicate a single secondary diagnosis only)
Principal Diagnosis: Intracranial hemorrhage or cerebral infarction
(stroke) with MCC – MS-DRG 064
Present on
Admission
(Status of
Secondary
Diagnosis)
Average
Payment
(Based on
50th
percentile)
Y
$8,030.28
N
$5,347.98
Example Secondary Diagnosis: Stage III pressure ulcer (code 707.23
(MCC))
Principal Diagnosis: Intracranial hemorrhage or cerebral infarction
(stroke) with CC – MS-DRG 065
Example Secondary Diagnosis: Stage III pressure ulcer (code 707.23
(MCC))
Preventable Hospital-Acquired Conditions (HACs)
HACs selected per FY 2009 Final Rule:
Foreign Object Retained After Surgery
Air Embolism
Blood Incompatibility
Stage III & IV Pressure Ulcers
Falls and Trauma:
Fractures
Dislocations
Intracranial Injuries
Crushing Injuries
Burns
Electric Shocks
Preventable Hospital-Acquired Conditions (HACs)
HACs selected per FY 2009 Final Rule (continued)
Catheter-Associated Urinary Tract Infection (UTI)
Vascular Catheter-Associated Infection
Manifestations of Poor Glycemic Control
Surgical Site Infection – Mediastinitis after Coronary
Artery Bypass Graft (CABG)
Preventable Hospital-Acquired Conditions (HACs)
HACs selected per FY 2009 Final Rule (continued)
Surgical Site Infections Following Certain Orthopedic
Procedures
Surgical Site Infection Following Bariatric Surgery for
Obesity
Deep Vein Thrombosis (DVT) / Pulmonary Embolism
(PE) Following Certain Orthopedic Procedures
Sample Group of Five Washington State Hospitals –
Preventable Hospital-Acquired Conditions (HACs)
NOTE: This slide presents a WORST-CASE scenario using the claims in the FY2007 MedPAR data. The MedPAR data
does not include Present On Admission (POA) indicators. Therefore, the estimated impact is based upon the
assumption that none of the HAC diagnosis codes in the MedPAR data were POA. In addition, this slide includes only
those occurrences of HACs with no other qualifying CCs/MCCs present, thereby resulting in reduced payment.
Hospital-Acquired Condition Category and
Impact
Hospital
"A"
(LURBAN,
320 beds)
Hospital
"B"
(LURBAN,
673 beds)
Hospital
"C"
(OURBAN,
270 beds)
Hospital
"D"
(OURBAN,
165 beds)
Hospital
"E"
(LURBAN,
210 beds)
Foreign Object Retained After Surgery
Number of Cases
Projected FY 2009 payment before reduction
Reduced FY 2009 payment due to HACs
Potential payment impact
0
$0
$0
$0
1
$13,858
$8,231
$5,627
0
$0
$0
$0
0
$0
$0
$0
0
$0
$0
$0
Falls and Trauma
Number of Cases
Projected FY 2009 payment before reduction
Reduced FY 2009 payment due to HACs
Potential payment impact
8
$136,573
$104,345
$32,228
41
$315,752
$268,570
$47,182
22
$289,602
$181,959
$107,643
21
$173,387
$131,018
$42,369
21
$170,911
$155,906
$15,005
Sample Group of Five Washington State Hospitals –
Preventable Hospital-Acquired Conditions (HACs)
NOTE: This slide presents a WORST-CASE scenario using the claims in the FY2007 MedPAR data. The MedPAR data
does not include Present On Admission (POA) indicators. Therefore, the estimated impact is based upon the
assumption that none of the HAC diagnosis codes in the MedPAR data were POA. In addition, this slide includes only
those occurrences of HACs with no other qualifying CCs/MCCs present, thereby resulting in reduced payment.
Hospital
Hospital
Hospital
Hospital
Hospital
"A"
"B"
"C"
"D"
"E"
(LURBAN, (LURBAN, (OURBAN, (OURBAN, (LURBAN,
320 beds) 673 beds) 270 beds) 165 beds) 210 beds)
Catheter-Associated Urinary Tract Infection (UTI)
Number of Cases
2
5
1
2
3
Projected FY 2009 payment before reduction
$33,524
$30,006
$6,066
$20,523
$24,628
Reduced FY 2009 payment due to HACs
$25,358
$24,551
$6,066
$10,668
$17,497
Potential payment impact
$8,166
$5,455
$0
$9,855
$7,131
Hospital-Acquired Condition Category and
Impact
Manifestations of Poor Glycemic Control
Number of Cases
Projected FY 2009 payment before reduction
Reduced FY 2009 payment due to HACs
Potential payment impact
0
$0
$0
$0
0
$0
$0
$0
0
$0
$0
$0
2
$10,960
$10,960
$0
0
$0
$0
$0
Sample Group of Five Washington State Hospitals –
Preventable Hospital-Acquired Conditions (HACs)
NOTE: This slide presents a WORST-CASE scenario using the claims in the FY2007 MedPAR data. The MedPAR data
does not include Present On Admission (POA) indicators. Therefore, the estimated impact is based upon the
assumption that none of the HAC diagnosis codes in the MedPAR data were POA. In addition, this slide includes only
those occurrences of HACs with no other qualifying CCs/MCCs present, thereby resulting in reduced payment.
Hospital
Hospital
Hospital
Hospital
Hospital
"A"
"B"
"C"
"D"
"E"
(LURBAN, (LURBAN, (OURBAN, (OURBAN, (LURBAN,
320 beds) 673 beds) 270 beds) 165 beds) 210 beds)
Surgical Site Infection Following Certain Orthopedic Procedures
Number of Cases
1
0
0
0
0
Projected FY 2009 payment before reduction
$30,578
$0
$0
$0
$0
Reduced FY 2009 payment due to HACs
$29,421
$0
$0
$0
$0
Potential payment impact
$1,157
$0
$0
$0
$0
Hospital-Acquired Condition Category and
Impact
Deep Vein Thrombosis and Pulmonary Embolism Following Certain Orthopedic Procedures
Number of Cases
2
2
1
0
Projected FY 2009 payment before reduction
$58,111
$38,449
$23,698
$0
Reduced FY 2009 payment due to HACs
$37,934
$29,142
$14,461
$0
Potential payment impact
$20,177
$9,307
$9,237
$0
1
$20,264
$12,365
$7,899
Sample Group of Five Washington State Hospitals –
Preventable Hospital-Acquired Conditions (HACs) – Occurrences
of HAC DX Codes in Cases Still Qualifying for CC/MCC DRGs
NOTE: This slide presents a WORST-CASE scenario using the claims in the FY2007 MedPAR data. The MedPAR data
does not include Present On Admission (POA) indicators. The cases described on this slide (as opposed to the three
previous slides) are those that still have a qualifying CC / MCC present after the HAC CC / MCC DX codes HACs have
been eliminated.
Number of Occurrences by HospitalAcquired Condition Category
Foreign Object Retained After Surgery
Air Embolism
Blood Incompatibility
Pressure Ulcer Stages III & IV
Falls and Trauma
Catheter-Associated Urinary Tract Infection
Vascular Catheter-Associated Infection
Manifestations of Poor Glycemic Control
Surgical Site Infection, Mediastinitis, Following
Coronary Artery Bypass Graft (CABG)
Surgical Site Infection Following Certain
Orthopedic Procedures
Surgical Site Infection Following Bariatric
Surgery for Obesity
Deep Vein Thrombosis and Pulmonary
Embolism Following Certain Orthopedic
Procedures
Hospital
"A"
(LURBAN,
320 beds)
Hospital
"B"
(LURBAN,
673 beds)
2
Hospital
"C"
(OURBAN,
270 beds)
Hospital
"D"
(OURBAN,
165 beds)
1
Hospital
"E"
(LURBAN,
210 beds)
1
21
5
92
13
86
6
73
35
10
7
10
7
13
7
2
1
1
1
1
4
8
1
2
9
1
Present On Admission (POA) Indicator Reporting
To identify which conditions were acquired during
hospitalization for the HAC payment provision
For broader public health uses of Medicare data
Present On Admission (POA) Indicator Reporting
Five POA indicators are defined in the FY 2009 Final Rule:
“Y” – condition present on admission.
“W” – affirms that provider has determined, based on data and clinical
judgment, that it is not possible to document when onset of condition
occurred.
“N” – condition not present on admission
“U” – insufficient medical record documentation to determine if condition
was POA
“1” – Signifies exemption from POA reporting. CMS established this code
as a workaround to blank reporting on the electronic 4010A1. A list of
exempt ICD-9-CM diagnosis codes is available in the ICD-9-CM Official
Coding Guidelines.
CMS will pay CC/MCC MS-DRGs only for HACs coded with “Y” and “W”
indicators. CMS plans to analyze all indicators for appropriateness of use.
CMS FY 2009 IPPS Final Rule
Other Decisions and Changes –
Standard Payment Rates
Standard Payment Rates
FY 2009 market basket update factors:
Full Update 3.6% (Proposed was 3%)
Reduced Update 1.6%
As required by the Medicare TMA, Abstinence Education, and
QI Programs Extension Act of 2007, CMS will reduce the
payment rates by another -0.9 percent for FY2009. Cumulative
effect is -1.5 percent (0.06 percent in FY2008)
Hospitals must have successfully reported quality measures in
FY 2008 to receive the FY 2009 full update
Standard Payment Rates
National Adjusted Operating Standardized Amounts (excluding Puerto Rico)
Fiscal Year
Labor
Share
Percent
Nonlabor
Share
Percent
Full Update –
Labor-related
Full Update
Nonlaborrelated
Reduced
Update
Laborrelated
Reduced
Update
Nonlaborrelated
69.7%
30.3%
$3,478.45
$1,512.15
$3,411.10
$1,482,87
62%
38%
$3,094.17
$1,896.43
$3,034.28
$1,859.71
69.7%
30.3%
$3,574.50
$1,553.91
$3,505.49
$1,523.91
62%
38%
$3,179.61
$1,948.80
$3,118.23
$1,911.17
2008
(Wage Index > 1)
2008
(Wage Index <=1)
2009
(Wage Index > 1)
2009
(Wage Index <=1)
S
Standard Payment Rates
Capital Standard Federal Payment Rate (excluding Puerto Rico)
Fiscal Year
2008
$426.14
2009
$424.17
Outlier Threshold
Fiscal Year
2008
$22,185
2009
$20,045
S
Sample Group of Five Washington State Hospitals –
Operating and Capital Payment Rates
For FY08 vs. FY09 comparisons using 2007 MedPAR claims data
SOURCE: FY2008 and FY2009 Medicare Impact Files (from CMS website)
FY 2008
FY 2009
FY 2009
Blended Rate Blended Rate
Urban / Rural (including IME (including IME Percentage
Classification
& DSH)
& DSH)
Change
Provider
Hospital
Hospital
Hospital
Hospital
Hospital
"A"
"B"
"C"
"D"
"E"
- 320 beds
- 673 beds
- 270 beds
- 165 beds
- 210 beds
LURBAN
LURBAN
OURBAN
OURBAN
LURBAN
Federal Capital Rate
Provider
Hospital
Hospital
Hospital
Hospital
Hospital
"A"
"B"
"C"
"D"
"E"
$8,507.35
$6,470.76
$6,534.15
$5,989.97
$5,464.71
$8,870.50
$6,750.29
$6,720.15
$6,022.72
$5,677.81
FY 2008
$426.14
FY 2009
$424.17
4.27%
4.32%
2.85%
0.55%
3.90%
(0.46%)
FY 2008 Capital FY 2009 Capital
Impacted by Rate (including Rate (including
Capital IME
GAF, IME &
GAF, IME &
Percentage
Reduction?
DSH)
DSH)
Change
YES
YES
YES
NO
NO
$642.96
$512.55
$493.13
$485.73
$479.42
$576.58
$507.26
$482.55
$483.72
$481.12
(10.32%)
(1.03%)
(2.15%)
(0.41%)
0.35%
Sample Group of Five Washington State Hospitals –
Outlier Payment Factors
For FY08 vs. FY09 comparisons using 2007 MedPAR claims data
SOURCE: FY2008 and FY2009 Medicare Impact Files (from CMS website)
Outlier Fixed Loss Threshold
Provider
Hospital
Hospital
Hospital
Hospital
Hospital
"A"
"B"
"C"
"D"
"E"
Provider
Hospital
Hospital
Hospital
Hospital
Hospital
"A"
"B"
"C"
"D"
"E"
FY 2008
$22,185
FY 2009
$20,045
(9.65%)
FY 2008 Hospital FY 2009 Hospital
Specific
Specific
Operating Cost- Operating Cost- Percentage
Change
to-Charge Ratio to-Charge Ratio
0.4670
0.3060
0.4170
0.3290
0.5140
0.4780
0.3030
0.3810
0.2870
0.4960
2.36%
(0.98%)
(8.63%)
(12.77%)
(3.50%)
FY 2008 Hospital FY 2009 Hospital
Specific Capital Specific Capital
Cost-to-Charge Cost-to-Charge Percentage
Change
Ratio
Ratio
0.0410
0.0300
0.0290
0.0300
0.0660
0.0380
0.0290
0.0290
0.0210
0.0520
(7.32%)
(3.33%)
0.00%
(30.00%)
(21.21%)
Summary of FY2008 vs. FY2009 Impact
Total Payment and DRG Amount Only
Provider
Hospital
Hospital
Hospital
Hospital
Hospital
"A"
"B"
"C"
"D"
"E"
Provider
Hospital
Hospital
Hospital
Hospital
Hospital
"A"
"B"
"C"
"D"
"E"
FY 2007
MedPAR FY 2008 Total FY 2009 Total
Discharges
Payment
Payment
4,934
8,685
4,803
5,468
3,638
$95,883,253
$96,110,341
$65,167,718
$50,532,607
$31,767,303
$99,260,733
$99,769,305
$66,332,109
$50,425,851
$33,010,077
FY 2008 DRG FY 2009 DRG
Amount
Amount
$81,803,102
$83,205,415
$58,578,953
$44,506,176
$27,503,143
$85,442,258
$87,082,544
$60,387,339
$45,243,112
$29,025,319
Gain (Loss)
$3,377,480
$3,658,964
$1,164,391
($106,756)
$1,242,774
Percentage
Change
3.52%
3.81%
1.79%
(0.21%)
3.91%
Gain (Loss)
Percentage
Change
$3,639,156
$3,877,129
$1,808,386
$736,936
$1,522,176
4.45%
4.66%
3.09%
1.66%
5.53%
Summary of FY2008 vs. FY2009 Impact
Capital and Outlier Payments
Provider
Hospital
Hospital
Hospital
Hospital
Hospital
"A"
"B"
"C"
"D"
"E"
Provider
Hospital
Hospital
Hospital
Hospital
Hospital
"A"
"B"
"C"
"D"
"E"
FY 2008
Capital
Payment
$6,182,526
$6,590,395
$4,421,360
$3,609,050
$2,413,022
FY 2008
Outlier
Payment
$7,897,625
$6,314,531
$2,167,405
$2,417,381
$1,851,138
FY 2009
Capital
Payment
$5,553,776
$6,543,640
$4,336,077
$3,633,525
$2,459,482
FY 2009
Outlier
Payment
$8,264,699
$6,143,121
$1,608,693
$1,549,214
$1,525,276
Gain (Loss)
($628,750)
($46,755)
($85,283)
$24,475
$46,460
Gain (Loss)
$367,074
($171,410)
($558,712)
($868,167)
($325,862)
Percentage
Change
(10.17%)
(0.71%)
(1.93%)
0.68%
1.93%
Percentage
Change
4.65%
(2.71%)
(25.78%)
(35.91%)
(17.60%)
CMS FY 2009 IPPS Final Rule
Other Decisions and Changes –
Phase-out of Capital IME
Phase-out of the Capital Teaching (IME) Adjustment
CMS has indicated that the statutory history of the Capital IPPS
suggests that the system in the aggregate should not provide for
continuous, large positive margins
CMS concluded that the record of relatively high, persistent
positive margins for teaching hospitals under Capital IPPS
indicated that the teaching adjustment is unnecessary
CMS also believes that abrupt changes in payment policy should
be mitigated and that time should be provided to hospitals to
adjust to changes in Medicare payments
Phase-out of the Capital Teaching (IME) Adjustment
With the FY 2008 IPPS final rule with comment period, CMS
adopted a policy to phase out the capital teaching adjustment over
a three-year period:
The adjustment was maintained for FY 2008
For FY 2009, the formula for the adjustment was revised so that
teaching adjustments will be reduced by half
For FY 2010 and after, hospitals will no longer receive a teaching
adjustment under Capital IPPS
Requires subscripting column 1 of Worksheet L Part I to separate
DRG payments and Capital IME factors into before 10/1 and on/after
10/1 portions
Sample Group of Three Washington State
Teaching Hospitals – Capital Payment Rates
For FY08 vs. FY09 comparisons using 2007 MedPAR claims data
SOURCE: FY2008 and FY2009 Medicare Impact Files (from CMS website)
Federal Capital Rate
Provider
Hospital "A" - 320 beds
Hospital "B" - 673 beds
Hospital "C" - 270 beds
Provider
Hospital "A"
Hospital "B"
Hospital "C"
FY 2008
$426.14
FY 2009
$424.17
(0.46%)
FY 2008 Capital FY 2009 Capital
Rate (including Rate (including
GAF, IME &
GAF, IME &
Percentage
DSH)
DSH)
Change
$642.96
$512.55
$493.13
$576.58
$507.26
$482.55
(10.32%)
(1.03%)
(2.15%)
FY 2008 Capital FY 2009 Capital Percentage
IME Factor
IME Factor
Change
0.30084
0.03954
0.03074
0.15042
0.02059
0.01457
(50.00%)
(47.93%)
(52.60%)
Summary of FY2008 vs. FY2009 Impact
Capital and Capital IME Payments
Provider
Hospital "A"
Hospital "B"
Hospital "C"
Provider
Hospital "A"
Hospital "B"
Hospital "C"
FY 2008
Capital
Payment
$6,182,526
$6,590,395
$4,421,360
FY 2008
Capital IME
Payment
$1,345,461
$236,663
$122,026
FY 2009
Capital
Payment
$5,553,776
$6,543,640
$4,336,077
FY 2009
Capital IME
Payment
$677,608
$124,183
$57,350
Gain (Loss)
($628,750)
($46,755)
($85,283)
Gain (Loss)
($667,853)
($112,480)
($64,676)
Percentage
Change
(10.17%)
(0.71%)
(1.93%)
Percentage
Change
(49.64%)
(47.53%)
(53.00%)
Joseph W. Sellars
KPMG LLP
904-350-1234
jwsellars@kpmg.com
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we
endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue
to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
©2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
HEALTHCARE
Healthcare Quality Mandates – From the
CMS IPPS Final Rule and Beyond
KPMG LLP
Carolyn Scott, RN, M.Ed., MHA
Director, Healthcare Advisory
HFMA Region 11 Healthcare Symposium
January 26, 2009
Presentation Outline
Hospital Quality Reporting – Core Measures and
Beyond
The next big focus: Hospital Readmissions
Medicare’s Value Based Purchase Program – Update
A Hot Topic in Healthcare Quality: Organization-wide
Throughput
Physician Quality Reporting
Leadership’s Role and Accountability for Healthcare
Quality
Healthcare Quality
How is it defined?
To what extent do hospital leaders recognize that reimbursement
is now tied to healthcare quality?
Do you know the difference between hospital acquired conditions
and “never events”?
Who has responsibility for a hospital’s quality and safety?
How accurate is your organization’s quality information?
What regulatory activities impacting healthcare quality reporting
and performance are on the horizon?
What are hospital leaders’ responsibilities regarding healthcare
quality at your organization?
Hospital Quality Reporting –
Core Measures and Beyond
Progression in the Number of Quality Measures
for Reporting/Payment Update
FY 2005 - 2006 – 10 measures
FY 2007 – 21 measures
FY 2008 – 27 measures
FY 2009 – 30 measures
FY 2010 – 44 measures (so far)
FY 2011 – ??? – expect another increase in the
number of measures to be reported
Quality Reporting for 2008
To avoid the 2% reduction in the payment update, hospitals
had to submit quality data for 27 different metrics – all from
2007 plus 6 new ones
New Metrics for 2008
HCAHPS Survey Results
Surgical Care Improvement Project (“SCIP”)
VTE prophylaxis ordered
VTE prophylaxis given within 24 hours of surgery
Appropriate antibiotic selection for surgery patients
30-Day Mortality Results
AMI Patients
Heart Failure Patients
AMI Performance (January 2007 – December 2007)
Top 10%
Hospitals
National
Average
ASA @ Arrival
100%
94%
ASA @ Discharge
100%
91%
ACEI/ARB for LVSD
100%
88%
Smoking Cessation Advice/Counseling
100%
92%
BBlocker @ Discharge
100%
92%
BBlocker @ Arrival
100%
89%
Fibrinolytics w/in 30 minutes
100%
40%
PCI w/in 90 minutes
92%
67%
Indicator
Source: www.hospitalcompare.hhs.gov
Heart Failure Performance (January 2007 – December 2007)
Top 10%
Hospitals
National
Average
Discharge Instructions
97%
69%
LVS Assessment
100%
87%
ACEI/ARB for LVSD
100%
87%
Smkg Cessation Advice/Counseling
100%
89%
Indicator
Source: www.hospitalcompare.hhs.gov.
Pneumonia Performance (January 2007 – December 2007)
Top 10%
Hospitals
National
Average
O2 Assessment
100%
99%
Pneumococcal Scrng/Immun.
95%
78%
ED BCult Before 1st Antibiotic
100%
90%
Smkg Cessation Advice/Counseling
100%
85%
Antibiotic within 6 hours**
100%
93%
Appropriate Initial Antibiotic
97%
87%
Influenza Screening/Immun.
99%
75%
Indicator
Source:www.hospitalcompare.hhs.gov
** denotes measure in effect commencing with 4/1/07 discharges
Surgical Care Improvement Performance
(October 2006 – September 2007)
Top 10%
Hospitals
National
Average
Antibiotic Start within 1 Hour of Surgical
Incision
97%
84%
Appropriate Antibiotic Selection for Surgery
Type
99%
91%
95%
77%
97%
80%
97%
82%
Indicator
Patients who received treatment for blood
clots within 24 hours before or after surgery
for selected surgery types
Patients whose doctors ordered treatment to
prevent blood clots for selected surgeries
Antibiotics Discontinued within 24 Hours
after Surgery End (48 Hours for Cardiac
Surgery)
30 Day Mortality Results
How do hospitals in your state perform?
Primary goal – improve coordination of patient
care
Within the hospital setting
At the time of discharge
Next big area of focus for coordination of care:
Hospital Readmissions
HCAHPS Survey
Components
Nurse communication
Physician communication
Responsiveness of hospital staff
Pain management
Communication about medications
Discharge information
Overall rating of hospital (0 – 10)
Likelihood to recommend hospital (Definitely no – Definitely yes)
Overall Goal: Continually improve quality of care
HCAHPS Performance Results
Indicator
US Average
Nurse Communication
74%
Physician Communication
80%
Responsiveness of Hospital Staff
63%
Pain Management
68%
Communication about Medications
59%
Cleanliness of Room/Bathroom
70%
Quietness at Night
56%
Discharge Information
80%
Overall Rating (0-10)
6.4
Likelihood to Recommend
68%
HCAHPS Oversight Process - Background, Implications,
and Future Activities
Hospitals and survey vendors must participate in quality oversight process
conducted by the HCAHPS project team (source: FY 2008 IPPS Final Rule)
Commencing in July 2007, CMS asked hospitals and survey vendors to
correct any problems that were identified and to provide for review
documentation of corrections
HCAPHS project staff reviews and discusses findings with hospitals and
survey vendors
Quality Assurance Plans
Survey Management Procedures
Sampling and Data Collection Protocols
Data Preparation and Submission Procedures
If the HCAHPS project team finds that the hospital has not made the
corrections, “CMS may determine that the hospital is not submitting
HCAHPS data that meet the requirements for the RHQDAPU program”
No significant change in oversight process planned for FY 2009 or 2010
Quality Reporting for 2009
To avoid the 2% reduction in the payment update, hospitals must
submit quality data for at least 30 different metrics – all from 2008 plus
three new ones
New Metrics for 2009
Surgical Care Improvement Project (“SCIP”)
Cardiac surgery patients with controlled 6am glucose
24 hours post surgery
Surgery patients with appropriate hair removal
30 Day Mortality Results – Pneumonia Patients
Outpatient Measures (Heart Attack and Surgical Measures Released
November 1, 2007 and new Imaging Measures in the Final OPPS
Proposed Rule)
Hospital Quality Measures in the 2009 OPPS Final
Rule
For hospitals to receive the full OPPS payment updated for CY 2010,
hospitals must submit quality data on the following for services rendered
in the outpatient setting
OP 1 – Median Time to Fibrinolysis
OP 2 – Fibrinolytics Received within 30 Minutes of Arrival
OP 3 – Median Time to Transfer to Another Facility for Acute Coronary
Intervention
OP 4 – Aspirin at Arrival
OP 5 – Median Time to Electrocardiogram (ECG)
OP 6 - Timing of Antibiotic Prophylaxis
OP 7 – Prophylactic Antibiotics for Surgical Patients
OP 8 – MRI Lumbar Spine for Low Back Pain
OP 9 – Mammography Follow-up Rates
OP 10 – Abdomen CT – Use of Contrast Material
OP 11 – Thorax CT – Use of Contrast Material
Quality Reporting for 2010
To avoid the 2% reduction in the payment update, hospitals must
submit/allow CMS to report quality data for at least 42 different metrics
New Metrics for 2010
Surgical Care Improvement Project - 1 measure (Beta Blocker)
Readmissions – 1 measure (Heart Failure)
AHRQ Patient Safety Indicators, Inpatient Quality Measures and
Composite Measure – 9 measures
Nursing Sensitive – 1 measure (Failure to Rescue)
Cardiac Surgery – 1 measure (Database Participation)
One measure from 2009 will be retired and not reported by hospitals for
2010 (PN measure – Oxygenation Assessment)
Items in yellow are measures for which data will be collected from Medicare claims
Quality Reporting for 2011 and Beyond
Additional measures being considered
Those that were proposed for 2010 but didn’t make the final list
COPD Measures
Complications of Vascular Surgery
Timeliness of Emergency Care
Additional Surgical Care Improvement Project measures
HACs/Complications
Cancer Care
Length of Stay coupled with Global Readmissions Measures
More Glycemic Control Measures
Specific focus of future measures
Surgical care
Patient outcomes
Patient safety
Efficiency
CMS Perspective –Reducing the Data
Collection Burden
Staggering the data collection start dates
Allowing the data to come from other sources (e.g., registries)
CMS collecting some of the data from Medicare claims
Some proposed relief for hospitals that have less than five
cases of a specific condition in a quarter (e.g., AMI, HF)
Hospital Readmissions
Making the Case: Readmission Statistics
Medicare spends $15 billion each year on
readmissions
Approximately 18% of Medicare patients discharged
from hospitals are readmitted within 30 days
80% of Medicare spending for readmissions is
potentially avoidable
Source: Medicare Payment Advisory Commission: Report to Congress: Promoting Greater Efficiency in
Medicare. June 2007, Chapter 5, page 103.
CMS Perspectives
Readmissions may reflect poor quality of care
Readmissions may affect beneficiaries’ quality of life
Not all readmissions are avoidable
Hospitals should share accountability for readmission
rates
Readmission rates could be lower through the application
of evidence-based practices
Application of incentives may serve to reduce
readmissions, resulting in
Higher quality of care
Reduction in unnecessary costs
Comments Received on Use of Incentives to Reduce
Avoidable Readmissions
Approaches to applying incentives to reduce
avoidable readmissions
Direct adjustment to hospital DRG payments
(similar to HACs)
Adjustments to hospital DRG payments through a
performance-based payment methodology
(similar to VBP)
Public reporting of readmission rates
Measures of readmissions
Accountability
Medicare’s Value Based Purchasing (VBP) Program – Update
Medicare’s VBP Program
Premise of VBP: CMS will no longer be a transactional
purchaser of healthcare services; it is moving to being an active
purchaser of quality healthcare services
Authorized as part of the Deficit Reduction Act of 2005
Links payment with quality, rather than for just the delivery
of service
Replaces the current hospital quality reporting system
Encompasses both public reporting and financial incentives to
drive improvements in clinical quality, patient centeredness,
and efficiency
Commences in fiscal year 2009 – will require additional
legislation
Goals of Medicare’s VBP Program
Improve clinical quality
Address problems of overuse, underuse, and misuse of services
Encourage patient-centered care
Reduce adverse events and improve patient safety
Avoid unnecessary costs in the delivery of care
Stimulate investments in structural components and the
reengineering of care system-wide
Make performance results transparent to and useable by consumers
Avoid new/reduce existing disparities in healthcare
Other VBP Details – Currently in Development
Payments at Two Levels
Top decile performers
Overall improvement
Potential reduction in DRG payment – 2–5 percent – with
opportunity to “earn back” based on performance on the quality
metrics
VBP Implementation
Phased Approach
FY 2009 – Payment based 100 percent on reporting
FY 2010 – Payment based 50 percent on reporting and 50
percent on performance
FY 2011 – Payment based 100 percent on performance
Additional Impacts on Hospitals
Data submission time reduced from 135 days to 60 days after
quarter-end
Increased validation efforts by CMS
VBP Candidate Measures for 2009
Clinical quality measures
Outcomes measures
30-day AMI mortality
30-day Heart Failure mortality
HCAHPS Survey results
Yet to be determined outpatient measures (good
source – those in the 2008 OPPS Final Rule)
Note: Measures noted in blue on the following pages are initial candidate
measures in the VBP Program
AMI Performance (January 2007 – December 2007)
Top 10%
Hospitals
National
Average
ASA @ Arrival
100%
94%
ASA @ Discharge
100%
91%
ACEI/ARB for LVSD
100%
88%
Smoking Cessation Advice/Counseling
100%
92%
BBlocker @ Discharge
100%
92%
BBlocker @ Arrival
100%
89%
Fibrinolytics w/in 30 minutes
100%
40%
PCI w/in 90 minutes
92%
67%
Indicator
Source: www.hospitalcompare.hhs.gov
Heart Failure Performance (January 2007 – December 2007)
Top 10%
Hospitals
National
Average
Discharge Instructions
97%
69%
LVS Assessment
100%
87%
ACEI/ARB for LVSD
100%
87%
Smkg Cessation Advice/Counseling
100%
89%
Indicator
Source: www.hospitalcompare.hhs.gov.
Pneumonia Performance (January 2007 – December 2007)
Top 10%
Hospitals
National
Average
O2 Assessment
100%
99%
Pneumococcal Scrng/Immun.
97%
78%
ED BCult Before 1st Antibiotic
100%
90%
Smkg Cessation Advice/Counseling
100%
85%
Antibiotic within 6 hours**
100%
93%
Appropriate Initial Antibiotic
97%
87%
Influenza Screening/Immun.
99%
75%
Indicator
Source:www.hospitalcompare.hhs.gov
** denotes measure in effect commencing with 4/1/07 discharges
Surgical Care Improvement Performance
(January 2007 – December 2007)
Top 10%
Hospitals
National
Average
Antibiotic Start within 1 Hour of Surgical
Incision
97%
84%
Appropriate Antibiotic Selection for Surgery
Type
99%
91%
95%
77%
97%
80%
97%
82%
Indicator
Patients who received treatment for blood
clots within 24 hours before or after surgery
for selected surgery types
Patients whose doctors ordered treatment to
prevent blood clots for selected surgeries
Antibiotics Discontinued within 24 Hours
after Surgery End (48 Hours for Cardiac
Surgery)
30 Day Mortality Results
AMI
Heart Failure
Pneumonia
HCAHPS Performance Results
Indicator
US Average
Nurse Communication
74%
Physician Communication
80%
Responsiveness of Hospital Staff
63%
Pain Management
68%
Communication about Medications
59%
Cleanliness of Room/Bathroom
70%
Quietness at Night
56%
Discharge Information
80%
Overall Rating (0-10)
6.4
Likelihood to Recommend
68%
VBP Measures for Fiscal Years 2010 and Beyond
FY 2010–FY2011
Efficiency measures
Outcomes measures
Emergency care measures
Care coordination measures
Patient safety measures
Structural measures
FY 2012 and Beyond
Areas where performance gaps are identified
New measures currently in development
VBP Testing
Workgroup is currently testing the VBP Plan
Information to be gained from the VBP testing
Performance scores by domain
Total performance scores
Financial impacts
Comments noted in the Final Rule
Most objected to publicly posting test information at the
hospital level
Most believed test results should be provided to the hospital at
the hospital level
Most supported public reporting of test results at an aggregate
level (e.g., State or National)
A Hot Topic in Healthcare Quality: Organization-Wide
Throughput
Making the Connection between Organization-wide
Throughput and Healthcare Quality
Joint Commission
New for 2008 – hospital-specific tracer on
patient flow
Rationale: Patient safety
Treatment delays, medical errors, and
unsafe practices “thrive” during times of
patient congestion and can lead to
sentinel events
Focus: Organization-Wide
Areas First Impacted: ED, OR, ICU
Accountability: Hospital Leadership
Making the Connection between Organization-wide
Throughput and Healthcare Quality (cont’d.)
National Quality Forum (NQF)
National Voluntary Consensus Standards for Emergency
Care – Phase 2
NQF is formally considering measures that address
pressing quality issues such as patient wait-time,
overcrowding, boarding, and diversions
(source:www.qualityforum.org)
Other “efficiency-related” projects and measures in
development
CMS – VBP
Emergency care and “efficiency” are program domains
and will have specific measures
Making the Connection between Organization-Wide
Throughput and Healthcare Quality (cont’d.)
Media
“Tucson Emergency Rooms in Life and Death
Crunch” (source: Arizona Daily Star, March
16, 2008)
39 year-old man dies after waiting in a
crowed ED waiting room for 8 hours
Consumers
HCHAPS Survey Results
Likelihood to recommend hospital
Overall rating of hospital
Word of Mouth
Physician Quality Reporting Initiative
Overview of PQRI – 2007
CMS given the authority to establish this initiative via the Tax
Relief and Healthcare Act of 2006
“Eligible professionals” had the potential for receiving a bonus,
which could be up to 1.5 percent of the total allowed charges for
services paid pursuant to the Medicare Physician Fee Schedule
Lump sum bonus to be paid to eligible professionals during mid2008
Reporting was for activity from July 1 – December 31, 2007
Reporting was all “claims based”
74 metrics included in the metric set – professionals submit
information only on those metrics that apply to his/her practice
Reporting for at least 80% of the cases that apply to the appropriate
metrics
Results from 2007
More than 70,000 NPI/TINs submitted quality data for one measure
(more than 109,000 attempted to submit data)
56,722 NPI/TINs received an incentive payment
Average payment per individual - $630
Average payment per group - $4,713
Total payment amount - $36 million
Providers in all 50 states plus D.C., Puerto Rico, Virgin Islands, and
Guam participated in the program
Florida (over $3 million) and Illinois (over $2 million) received the
highest incentive payments
Feedback reports regarding performance became available around
the same time as the incentive payments were made
(Source: QUADAX, Inc. Newsletter, August 2008)
PQRI for 2008
Legislative authority given through the Medicare,
Medicaid, and SCHIP Extension Act of 2007 (MMSEA),
which was enacted on December 29, 2007
Program Timeframe: January 1 – December 31, 2008
No significant change in the bonus payment
percentage from 2007 (1.5%)
119 measures included in the metric set – all process
measures except 2 (EHRs and E-prescribing)
New aspect for the program – reporting can be claims
or registry based (32 registries already approved)
PQRI for 2009 and Beyond
Starting in 2009, the PQRI incentive payment increases
to 2%
Expands the list of “eligible providers” to include
audiologists
New and additional incentives for E-prescribing
starting in 2009 (2%)
This incentive will decline over 2011 and 2012
Plan for the future: Penalties for not E-prescribing
Additional information regarding the 2009 PQRI
program will be included in the 2009 Medicare
Physician Fee Schedule
Leadership’s Role and Accountability for Healthcare Quality
Corporate Responsibility and Healthcare
Quality
Quality oversight is part of the Board’s fiduciary duty
Increased focus on accuracy of quality reporting data
Core Measure data to CMS
PQRI data to CMS
Sentinel Event information to Joint Commission
Increased attention on “provision of care that is so
deficient it amounts to no care at all”
Remedies available
Civil money penalties
Criminal fines
Exclusion from federal health care programs (Medicare and
Medicaid)
(Source: Corporate Responsibility and Health Care Quality: A Resource for Healthcare Boards of
Directors, United States Department Health and Human Services Office of Inspector General and
American Health Lawyers Association. www.oig.hhs.gov.)
Recent Regulatory Actions Related to
Healthcare Quality
“Hospital Fined in Wrong Site Surgery” (source: Rhode Island
News, November 27, 1907)
Hospital fined $50,000 after third wrong site neurosurgery
“California Hospitals Fined for Not Ensuring Patient Safety”
(source: Modern Healthcare’s Daily Dose, August 18, 2008)
18 hospitals fined $25,000 per violation
“Yale-New Haven Fined $8,000 for Violations” (source: New
Haven Register, October 2, 2008)
State Health Department issues fine and Consent Agreement
based on safety and quality issues
“State Reprimands Miriam Hospital for Wrong Site Surgery”
(Source: Rhode Island News, October 8, 2008)
Hospital enters into a Consent Agreement with the Rhode Island
Department of Health regarding surgical quality deficiencies
Carolyn Scott, RN, M.Ed., MHA
KPMG LLP
817-800-6504
carolynscott@kpmg.com
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we
endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue
to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
©2008 KPMG LLP, a U.S. limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
THANK YOU!
Are there any questions?