2014 CMS Financial Update: Charting the Course Toward Future Reimbursement

Over the last several decades, since the enactment of Medicare, there have been a number of modifications to the healthcare payment system in the United States. Recently, however, soaring healthcare costs and a heightened focus on quality have necessitated even more significant changes to the system as we know it today. The 2010 Patient Protection and Affordable Care Act (PPACA) introduced new payment revisions, such as the hospital Value-Based Purchasing program and penalties for specific condition readmissions. New, innovative initiatives and pilot programs like the Bundled Payments for Care Initiative (BPCI) and the Medicare Shared Savings program through Accountable Care Organizations have given insight into how the future of the payment system may be structured. 

The new legislation and related programs have prompted all providers to rethink current care processes and focus attention on greater efficiency and coordination. In the cardiac cath lab, for example, hospitals have focused their attention on reducing supply costs and maximizing inventory efficiency. Bundled payment programs, which can be implemented through one of the four CMS BPCI models or in partnership with commercial payors or employers, increase incentives for a variety of providers to reduce costs associated with certain episodes of care. In cath labs, procedures such as coronary angioplasty have become front and center for bundled payments, in which certain procedures are reimbursed a single set fee for all services provided in an episode of care. 

As part of Corazon’s annual financial update, two common themes — increasing accountability and bundling — are apparent. These themes are interwoven throughout the reimbursement updates, and likely foreshadow a trend in how future healthcare reimbursement regulations will be shaped.

Fiscal year 2014 final IPPS update

CMS published the final Inpatient Prospective Payment System (IPPS) rule for Fiscal Year 2014 (FY14) on August 19, 2013. Among payment rate and other updates, the FY14 IPPS includes new inpatient admission and readmission definitions. At a high level, the inpatient payments from CMS will increase by a rate of just 0.7% from FY13. However, the FY14 inpatient payments for cath lab MS-DRGs are increasing by 3.3% from last year. Table 1 depicts the average FY14 inpatient payments for each CCL category and the reimbursement change from FY13.

Inpatient admission definition

The FY14 IPPS Final Rule seeks to bring clarity to inpatient hospital admissions. Known as the “2-Midnight Provision,” it further defines what constitutes an inpatient admission to a hospital. This provision addresses concerns about an increased percentage of long outpatient observation stays. The new guidance instructs physicians to formally order an inpatient admission if they expect a length of stay that would last two midnights or more after performing a procedure or diagnostic test.

Calendar year 2014 proposed OPPS update

On July 8, 2013, CMS released the Calendar Year 2014 (CY14) Outpatient Prospective Payment System (OPPS) Proposed Rule. The proposed changes are significant and are expected to be adopted with the Final OPPS Rule effective January 1, 2014. These changes will move the outpatient reimbursement system closer to a true prospective payment system, similar to IPPS. The changes would further promote the predicted shift towards a packaged payment system in accordance with CMS’s long-term goals of encouraging efficient service delivery while reducing costs. The CY14 Proposed Rule would increase overall outpatient payment rates by 1.8% and cath lab procedure payments by 24%. Table 2 outlines the CY14 proposed payment rate changes.

Comprehensive APCs

CMS proposes further payment consolidation by replacing the 29 highest cost, device-dependent service APCs (i.e., procedures that include a higher-cost device than the related paired procedural service) with 29 “comprehensive” APCs that closely resemble smaller IPPS DRGs. Cath lab procedure categories make up 41% of the 29 total proposed Comprehensive APCs. Services that belong to these APCs would receive one all-inclusive payment for the related groups of services typically performed together to completely deliver a service during one care encounter. Last year, CMS added composite APCs for 10 categories of service, including APC 8000 for cardiac EP evaluation and ablation services. APC 8000 includes the new CPT codes 93653, 93654, and 93656, which already incorporate both evaluation and ablation services, as well as the new add-on codes 93655 and 93657. Thus, cath labs performing ablation procedures receive one all-inclusive prospective payment for the comprehensive service (APC 8000), which factors in all individually represented components of the care encounter.

Packaged services

Currently, the OPPS is a blend between a prospective payment system (PPS) and a fee-for-service (FFS) system, since there are certain payments that are packaged for primary services (indicative of PPS), while other payments are individually disbursed based on the cost of a particular item, service, or procedure (indicative of FFS). The CY14 Proposed Rule plans to add seven new packaged categories into the APC procedure payment. These services will no longer be paid separately, but instead will be bundled with the primary procedure payment. Grouping related items for a particular service provides incentive to deliver quality patient care using the most cost-effective, efficient means. To ensure this is occurring within your institution, Corazon recommends that cath lab leadership review service patterns and contracted supply prices to ensure a focus is placed on driving efficient practices and flexible resource management. Table 3 lists the CY14 Proposed APC Payment Package Categories.

Final thoughts

It is apparent that the future of healthcare reimbursement will be focused on increased accountability for providing efficient, cost-effective, and high quality care. The current aim to accomplish this goal is through the grouping and bundling of services and supplies. The CY14 OPPS Proposed Rule includes significant changes, indicating that grouping services into bundles will be a future path for reimbursement. Corazon recommends cardiovascular service line leadership prepare now for the changing reimbursement structure by capitalizing on opportunities for gains in the efficiency of operations, and working to reduce and control costs with regularity.

Kristi is a consultant with Corazon, offering strategic program development in the heart, vascular, neuro and orthopedics specialties, as well as a full continuum of consulting, recruitment, interim management, and physician practice & alignment services across the country and in Canada. For more information, visit www.corazoninc.com, or call (412) 364-8200. To reach the Kristi, email kpowers@corazoninc.com.