2014 Revenue Cycle Components Will Affect Medicare Payment in 2016

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  At the time that Today’s Wound Clinic first published, hospital outpatient wound care departments (HOPDs) and qualified healthcare professionals (QHPs) who worked within HOPDs were just beginning to appreciate the complexities of the Medicare Outpatient Prospective Payment System (OPPS), which is better known as the Ambulatory Payment Classification (APC) system. Even though this author had been teaching the wound care industry that reimbursement was composed of three parts — coding, coverage, and payment — HOPDs and QHPs were typically focused on reporting the correct codes for the products, services, and procedures that they offered. In fact, one of the most common questions this author has answered has been: “What is the code for [a specific product, service, and/or procedure]?”

  Gradually, over the last seven years, HOPDs and QHPs have learned that coverage by the Medicare Administrative Contractor (MAC) that processes their claims is very important. In fact, readers of this column are probably tired of being told, “just because a code exists does not mean that it is covered by your MAC.” Most HOPDs and QHPs have now assigned someone to review their MAC’s pertinent local coverage determinations (LCDs) on a monthly basis. They look for four things: 1) changes to existing LCDs, 2) new draft LCDs that require provider comments, 3) future effective LCDs, and 4) retired LCDs. Then they share those LCDs with all of their clinical and operational team members so that everyone understands the current and future-effective coverage policies and comments on draft policies. However, HOPDs should also be vigilant about updating their charge sheets and charge description masters (CDMs). Each year, if not more often, HOPDs should:
    • eliminate codes and charges for products, services, and procedures that they discontinued;
    • add missing codes and charges for new products, services, and procedures that they begin to use;
    • correct mismatched codes and revenue codes;
    • review charges for accurate structure in the APC system and recognize how these charges impact rate-setting under OPPS; and
    • make sure the CDM is compliant with all applicable regulations of the Centers for Medicare & Medicaid Services (CMS) as well as other federal and state healthcare programs.

  In addition, HOPDs should review their process for 1) conducting internal audits to be sure the interface between the CDM and the billing software produces claims that truly reflect the units of service provided and 2) recognizing how charges impact rate-setting in future years under OPPS.

  It is easy to complain about how CMS does not set payment rates correctly, but HOPDs should realize that CMS uses the claims data that HOPDs submit to help set OPPS payment rates. Inaccuracies in coding, billing units, and lack of thoughtfulness in setting charges contribute to OPPS payment rates that are widely perceived as insufficient and inaccurate. The following interview with Mary Jo Braid-Forbes, MPH, an expert in how Medicare calculates payment rates; and Bonnie Kirschenbaum, MS, FASHP, FCSHP, a recognized industry leader in forging effective alliances between hospitals, physicians, pharmaceutical companies, and distributors, will help you understand how CMS uses your claims data, how you can improve the accuracy of your claims, and, hopefully, how you can positively influence future OPPS payment rates.

  Kathleen Schaum (KS): HOPDs and QHPs usually know the Healthcare Common Procedure Coding System (HCPCS) and Current Procedural Terminology (CPT) codes that represent the products, services, and procedures provided to their patients living with wounds. However, they are not always as meticulous about learning the full code descriptions and the units of service represented by each code. Please tell the readers why the units in code descriptors are important, especially for drugs and biologics.

  Bonnie Kirschenbaum (BK): Each product, service, and procedure code description includes a unique billing unit that is reported along with the HCPCS/CPT code. Several years ago, as the cost of products dramatically increased, CMS moved to the concept of using billing units, rather than package or vial sizes, for charge purposes. The actual dose of product or quantity of product administered/applied is converted into billing units that are then reported on the claim. This simple arithmetic calculation, if under-reported, is responsible for inaccurately low payments now and in the future.

  NOTE: State Medicaid programs may mimic CMS billing units or assign their own unique ones. Many commercial payers provide crosswalks that convert the actual dose ordered or size of product used into the appropriate billing units. If the HOPD is still attempting to calculate the conversions manually, the HOPD program director should consider using the crosswalks, when they are available. However, documentation of the actual dose or size of application is critical for these crosswalk programs to function.

  KS: Will you please provide a wound care-related example of the importance of reporting units correctly?
  Mary Jo Braid-Forbes (MJBF): For cellular and/or tissue-based products for wounds (CTPs [old term “skin substitutes”]), CMS currently determines which products are paid as part of the “high cost” and “low cost” package based on the average sales price per square centimeter (sq cm). The code descriptor unit of most CTPs is “per sq cm.” If HOPDs miscode the units on their claims or set the charges for whole pieces of CTPs rather than 1 sq cm, then CMS will calculate inaccurate costs per units. This could result in CTPs appearing in the incorrect APC payment package. HOPDs’ CDMs should reflect a charge for each unit described by the code, usually 1 sq cm for CTPs. Each claim for CTPs should report the correct number of units purchased for each application. Coding units incorrectly on claims is a very common mistake.

  KS: Please explain why HOPDs should know the total direct/indirect costs of products they purchase and services/procedures that are performed in their facility.
  BK: As CMS and many other commercial payers are creating a variety of reformed payment plans, they are depending on claims data from previous years and reference pricing to determine future reimbursement. If an HOPD under-reports any component of wound care, it gives the illusion that the care can be offered for a lower cost than is actually the case. Therefore, HOPDs must consider their total costs for each product/service/procedure, which should include total direct and indirect costs. HOPDs need to remember that their claims should include charges for the entire service, not just the purchase price of the products and supplies. It’s not purchasing data that’s being reported and analyzed by CMS, its claims data!

  KS: Please tell our HOPDs some of the things that could be contributing to inaccurate CMS cost estimates and leading to inaccurate OPPS payments for CTPs.
  MJBF:I would say the top three things that contribute to inaccurate CMS cost estimates are:
    1. HOPDs not setting charges on the CDM that reflect the HCPCS unit description;
    2. HOPDs not billing for the correct number of units used at each visit; and
    3. HOPDs not setting the charges for different products and services at the right level relative to each other.

  KS: Please tell the readers about setting charges. What mistakes do HOPDs commonly make when setting charges?
  MJBF:Knowing the actual cost of providing a service helps HOPDs set their charges for service appropriately. The actual cost of a service includes nursing time, time for other staff, and cost of special equipment and other supplies that are not billed separately. Ultimately, charges that are submitted on claims become the data that CMS uses to set national OPPS payment rates. Collectively, if HOPDs set their charges for a relatively “high cost” product/procedure/service lower than the charges for a “low cost” product/procedure/service, then over time the OPPS payment rates will reflect this and create inappropriate incentives to provide some products/procedures/services and not to provide others. Therefore, it is important that HOPDs set their charges for products/procedures/services that reflect the right relative costs of that product/procedure/service. For example: Doubling all charges for all procedures in an HOPD may not change OPPS payment rates at all.

  KS: Please explain how CMS uses the HOPDs’ claims to establish OPPS payment rates.
  MJBF:To set 2015 OPPS payment rates, CMS will use the HOPDs’ claims for services performed in 2013. To give HOPDs a sense of the journey, let’s follow a claim with its charges through the process. After the HOPD is paid for a service, the claim goes to a large CMS database in Baltimore, MD, where it joins all the other HOPDs’ claims for that year. To estimate the actual cost of a service, CMS matches each claim with the hospital’s cost report, an annual report submitted by the finance department that has information on the average markup for each outpatient department in each hospital. Using this average markup and the actual charges, CMS is able to estimate the HOPD’s actual cost. This claim is then combined with all other claims for the same service from all the other HOPDs for that year. Then, for each product/procedure/service performed in HOPDs, CMS calculates an average cost. Note that the actual calculation is a bit more complicated than just explained. The relative cost of all products/procedures/services is compared to a benchmark service (an office visit), which produces a “weight.” CMS then determines the total pool of dollars allowed for all OPPS services. The OPPS payment rate for each product/procedure/service is then set based on the relative weight of that product/procedure/service. This is the basic process. However, there is an additional threshold calculation for CTPs that determines whether a product is considered “high cost” or “low cost.”

  KS: If CMS bases the OPPS payment rates on the claims HOPDs submit, why aren’t OPPS payment rates always adequate for the HOPDs to recoup their actual costs?
  MJBF:HOPDs must put a lot of thought and work into billing correctly, especially for complicated products such as CTPs, and they do not always bill in a way that results in accurate estimates of costs. There are also methodological issues with how CMS does the calculations, but those are beyond the scope of what we can discuss here. For clarification, speak with your chief financial officer.

  KS: Why should HOPDs consider their cost-to-charge ratio (average markup) when they set their charges, especially for procedures that include products whose costs are not insignificant?
  MJBF:As previously discussed, the charges HOPDs submit on their claims become the data that CMS uses to set OPPS payment rates. Procedure, product, and service codes usually have different revenue codes and will be matched to different departmental markups. CMS estimates costs by multiplying the charges on the claims by the cost-to-charge ratio (average markup) for each HOPD corresponding to the revenue code reported with the HCPCS code. CMS calculates the cost-to-charge ratios for each HOPD from the cost report submitted annually by the finance department of each hospital. For example: Most CTPs are billed using the 0636 pharmacy department revenue code. Let’s say a CTP actually costs a hospital $50 per sq cm. If the cost-to-charge ratio (average markup) for the pharmacy department is 0.25, then the charge for the product would need to be $200 for CMS to calculate the correct estimate of cost. NOTE: CMS does not see the actual invoiced costs. CMS takes the $200 charge from the claim and multiplies it by the cost-to-charge ratio. So, a $200 charge multiplied by a 0.25 cost-to-charge ratio would arrive at the $50 cost. If the charge for that CTP were set higher or lower, then the cost estimates that CMS uses for the OPPS “high cost” and “low cost” package payment rates would also be higher or lower.

  KS: Bonnie, would you like to say anything about setting charges?
  BK: All products that are used and all procedures/services that are performed must be accurately documented and reported on claims to give the payer a clear and complete picture of what’s involved in providing each wound care service. Attempts to do this often are met with pushback from the revenue cycle team that may not want to be bothered reporting items for which a separately payable charge is not going to be forthcoming. Yet it’s this very collection of information that is needed for CMS to determine an accurate “bundled” or “packaged” payment rate.

  KS: Now that the comment period for the draft 2015 OPPS rule has closed, is there anything HOPDs should submit to improve the proposed 2015 OPPS rates?
  MJBF:Unfortunately, there is not much that can be done to improve the 2015 OPPS rates. Because it takes time to collect and analyze the HOPD claims data from all of the hospitals, CMS uses the claims from 2013 to set the 2015 payment rates.

  BK: HOPDs should know which products/procedures require prior authorizations or are covered by LCDs or National Coverage Determinations (NCDs). They should follow the requirements and document correctly in a timely fashion to ensure payment. Consider all that goes into the care of a wound and ensure that this gets into your payment “bundle.”

  KS: OK. Since OPPS payment rates are based on claims submitted two years prior, what should HOPDs do in 2014 to improve OPPS payment for 2016?
  MJBF:HOPDs can do two things to help CMS set appropriate OPPS payment rates in 2016:
    1. Set the charges for services within the HOPD in a manner that considers how charges impact rate-setting. For example: For CTPs, set charges that reflect the units described by the code (usually 1 sq cm) and the relative cost of the products compared with other products in the department (eg, if a product costs twice as much per sq cm, then the charges for that product should be twice as high).
    2. Bill the correct number of units. Convert the product package size to the number of units (usually sq cm). A common mistake is to bill 1 unit for 1 package of a CTP instead of the sq cm units furnished to the patient.

  KS: It seems very important that CDMs, computer charge systems, and electronic medical records (EMRs) be maintained with the correct billing units and charges.
  BK: Yes, these electronic documents must be in sync for the correct ordering, dispensing, documentation, and subsequent charging of products, services, and procedures to occur.

  KS: I am a big proponent of conducting internal audits to insure that 1) the work performed in HOPDs is correctly entered into the charge entry system, 2) their CDMs work correctly for each billed product/service/procedure, and 3) their claims actually reflect the correct codes, units, and appropriate charges. Do you have a similar opinion?
  BK: I totally agree. Internal audits usually reveal patterns of either overbilling or underbilling. If an audit uncovers any overpayment, the known retention of that overpayment may create a False Claims Act risk. When overbilling or underbilling occurs more than a few times and begins to form a pattern, it points to more than human error. Consistent and repetitive mistakes that revolve around overbilling may lead to a “fraud” accusation. As stated previously, underbilling not only harms the HOPD financially, it has a negative impact on all other HOPDs throughout the country.

Summary

  In 2014, CMS packaged the payment for many HOPD products, services, and procedures together:
    • All levels of clinic visits were packaged into one OPPS rate.
    • All add-on procedure codes were packaged into their base procedure codes.
    • All CTPs were packaged into their application procedures.

  As stressed by our experts, HOPDs should still itemize all the separate codes with appropriate charges on their claims and recognize the relationship between billed charges and future rate-setting under OPPS. HOPDs should also pay particular attention to including both their direct and indirect costs when setting charges. This is especially important for procedures with products and supplies whose costs are not insignificant. HOPDs should remember that if a product, service, and/or procedure costs twice as much as another product, service, and/or procedure, the charges for both products, services, and/or procedures generally should reflect this relative proportion.

  HOPDs should also verify that the correct HCPCS and CPT codes, billing units, and appropriate charges are in their CDMs, charge entry systems, and/or EMRs. In addition, HOPDs should correctly report the total number of units for each product, service, and/or procedure (eg, total number of sq cm of the CTP actually furnished for each application and, if permitted under payer policies, the amounts unavoidably wasted as well). NOTE: In 2012, HOPDs collectively reported only 62% of the units of CTPs that they actually purchased for each application. In addition, an amazing number of HOPD claims reported a unit of “1” for the number of sq cm purchased. It appears that in these cases either the HOPD or the billing department thought they should report a unit of “1” because they used 1 piece, but they should have reported the total number of sq cm furnished (including wastage where permitted) for the application. Last, but not least, HOPDs today should build regular internal auditing of their revenue cycles into their operations. It is no longer good enough just to focus on submitting the correct codes and following LCDs/NCDs.

  HOPDs must focus on submitting appropriate charges to CMS in order to receive adequate OPPS payment two years from now.

  Mary Jo Braid-Forbes is president of Braid-Forbes Health Research LLC, a consulting firm specializing in analysis of Medicare claims data in support of comments on Medicare payment policy and market research. Visit www.braidforbes.com or email mjbraidforbes@braidforbes.com for more information.

  Bonnie Kirschenbaum is a healthcare consultant with senior management experience in the pharmacy section of large corporate healthcare organizations, teaching hospitals, and the pharmaceutical industry. She has a particular interest in reimbursement issues and in using technology to solve issues, and routinely consults, speaks, and writes on this subject. She may be reached at bkirschen@aol.com.

  Kathleen D. Schaum is president and founder of Kathleen D. Schaum & Associates Inc., Lake Worth, FL. She may be reached for questions and consultations at 561-964-2470 or kathleendschaum@bellsouth.net.

Correction: In the April 2014 edition of Business Briefs, “CTPs: From Coding & Payment Changes (Then) to Coverage Changes (Now),” the Table inadvertently did not include an “X” (designating positive coverage by JH Novitas Solutions Inc.) in the box for Q4121 THERASKIN.® You can view that corrected Table online at www.todayswoundclinic.com/articles/business-briefs-ctps-coding-payment-changes-then-coverage-changes-now.