Net Revenue Matters. Risk Mitigation in Today s Healthcare Environment. The Critical Role of Analytics in Managing the Strategic Decision Process

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1 Net Revenue Matters February 2014 Risk Mitigation in Today s Healthcare Environment The Critical Role of Analytics in Managing the Strategic Decision Process By Jack Duffy, EVP We have all heard the expression Betting the farm - farmers understand that a poor decision on diversifying crop selection, planting dates, water and weather can determine the success and future of their farm. The significance of the economic drivers being rolled out in the Affordable Care Act creates a bet the farm environment in healthcare board rooms and executive suites. Historically strategic plans could be constructed using multiyear horizons, but today s decisions are being compressed in ever-shorter windows with the consequence of a failure capable of destroying hundred year old Inside this issue: Steps to Insure Two Midnight Rule Compliance 2 NCD for Cardiac Pacemakers 3 The OIG Work Plan Has Arrived! 3 institutions and key community resources. Fortunately a new set of risk management and decision support tools are coming to the market to assist healthcare leaders in making these critical decisions. Under the general label of Analytics, many software development and consulting entities have introduced products designed to support the strategic planning and decision support process using a new approach. We often see analytic product advertisements that start with a fundamental definition of their analytics perspective. Many products struggle to distinguish themselves from previous versions of reports, dashboards, graphs, and other decision support tools. The first question you pose may be Is the new kid on the block better than the old kid? Let s consider some of the attributes that could help you answer this question. 1. Analytics products use common source files (e.g., 835, 837, UB-04 and itemized bills) that are readily available. They will build new, or use existing data repositories or data warehouses and send information to users. 2. Analytics solutions leverage historical internal data sets and integrate them with external data. To be of any sustaining value, strong links must be made to document the cost of care directly to specific reimbursement relationships. Evidence or value-based healthcare needs to deliver a consistent output and quality outcomes (including readmission rates) which need to be analyzed against cost inputs. 3. The majority of analytics products are delivered as a Software as a Service (SaaS) model on the secure Internet providing low-cost, faster, and more flexible solutions with a quick ROI. 4. Analytics output are not limited to desktop devices and will travel with the healthcare leaders and managers on a wide range of mobile devices. They feature flexible alerts and are extremely sensitive to changes in payer strategy or government policy shifts. 5. Finally, analytics products cost less than the traditional decision support software it replaces and requires minimum information Continued on page 5 CentraMed 2714 Loker Avenue West, Suite 200 Carlsbad, CA

2 Industry Trends &Updates 3. Empower the facilities utilization review (UR) team with assistance in compliance of these rules. Steps to Insure Two Midnight Rule Compliance The two midnight rule affects both outpatient/ observation and inpatient status. It is designed to limit the use of observation status for Medicare patients, which results in higher out-of-pocket costs for Medicare beneficiaries. The 2014 Inpatient Prospective Payment System (IPPS) final rule, published August 2, 2013, established new requirements for coverage of Medicare Part A inpatient hospital claims, such as the type of documentation needed to support an admission that lasts at least two midnights. The rule also outlined actions hospitals must undertake to determine medical necessity before admitting Medicare Part A patients. CMS issued sub regulatory guidance on September 5, 2013 that further specified the steps hospitals need to take to admit a patient under Medicare s inpatient admission rules. This guidance addressed issues related to the two midnight provisions of the IPPS final rule, including what details to include in an admission order, the timing of that order, and how to handle verbal orders. The physician role in determining whether hospital inpatient services are reasonable and necessary includes estimating the length of hospitalization that beneficiaries will require. Compliance will take a team effort. These are the top three steps to help prepare for compliance with the two midnight rule: 1. Provide tools for certification either electronically or manually 2. Educate the physicians on the specific requirements spelled out by CMS Critical to this effort is the use of a manual optional certification form or embedding questions from this form within electronic orders. This can be initiated at the beginning of care and reviewed after the first midnight to help physicians and UR answer two key questions: what is the reason for the admission and can the physician attest that the patient needs two medically appropriate midnights, as an inpatient, to resolve the condition? The certification tool is a gift in this regard since it queues the physician to provide the needed information all in the same document necessary for compliance of the first question. The second question is satisfied with the physician certifying or attesting to his estimated length of stay required to complete care of the beneficiary. This can be accomplished all at once if the physician knows that the patient s care will require more than two midnights at the beginning of the hospitalization, or in stages as the patient s course of care unfolds. Utilization review staff should be empowered by the facility to guide the physician through this relatively new process. UR must realize that Interqual and Milliman guidelines are great reference guides for quality care but have never been mandated or required for inpatient status of a Medicare beneficiary. Now more than ever the physician s declaration of the two midnight criteria trumps those guidelines. In fact, the Interqual and Milliman guidelines are not in any way associated with the two midnight benchmark guidance. CMS has never endorsed or followed Interqual or Milliman guidelines. The two midnight rule is based solely on the documented, clinically necessary reason that the patient needs hospital care, and that care requires, in the physician s opinion, that the patient stays two midnights Net Revenue Matters - February 2014

3 Know where the risks of abuse are the greatest and educate, audit internally and re-educate as needed. Outpatient procedures in a Cardiac Cath. Lab or outpatient surgeries where patients stay longer than the routine 6-hour recovery period need particular attention from the UR staff, and perhaps additional education for the physicians involved. An average of 60 percent of all facility inpatient and outpatient (observation) admissions, nationwide, are initiated in the emergency room. In most hospitals, ED physicians do not have admitting privileges; instead, they have bridge or transition privileges, meaning they must get the attending physician to agree to the patient status they recommend. The certification form can be a valuable tool in helping to document the decisions the ED physician made after speaking with the attending physician. Many hospitals are realizing the benefits of having internal physician advisers. These advisers need to become experts on this two midnight rule and all its components. They can help support the UR staff and educate other physicians to help them understand what must be included on the certification form, in the medical record, and in the discharge summary to support the physician s rationale that a patient requires two midnights in the hospital. Planning is great, compliance greater. Be sure to check the CMS website frequently for updates and open forum calls on the two midnight rule. Systems/Monitoring-Programs/Medicare- FFS-Compliance-Programs/Medical-Review/ InpatientHospitalReviews.html NCD for Cardiac Pacemakers On February 12, 2014, the Centers for Medicare and Medicaid (CMS) published MLN Matters Article # MM8525 regarding the revised National Coverage Determination (NCD) on single chamber and dual chamber permanent cardiac pacemakers. This NCD, , concludes that implanted permanent cardiac pacemakers, single chamber or dual chamber, are reasonable and necessary for the treatment of non-reversible symptomatic bradycardia due to sinus node dysfunction and second and/or third degree atrioventricular block. Symptoms of bradycardia are symptoms that can be directly attributable to a heart rate less than 60 beats per minute. (For example: syncope, seizures, congestive heart failure, dizziness, or confusion.) Indications and limitations of coverage, medical necessity, CPT-4 codes, ICD-9-CM and ICD-10-CM diagnostic and procedure codes, documentation requirements, and billing guidance for both facility and professional settings are outlined in this NCD. It s important to note the use of modifier KX (requirements specified in the medical policy have been met) to attest that documentation supports medical necessity as outlined in the NCD. NCD is effective for claims with dates of service on or after August 13, 2013, with an implementation date of July 7, Additional information can be found in CMS Transmittals R161NCD and R2872CP. The OIG Work Plan Has Arrived! The Officer of Inspector General has finally released the 2014 work plan! Some of the areas of interest for hospitals are as follows: Reconciliations of Outlier Payments In the area of Policies and Practices, the OIG will review the Medicare outlier payments to hospitals in order to determine whether CMS performed the necessary reconciliations in a manner timely enough to enable Medicare contractors to perform final settlement of the hospitals associated cost reports. The OIG will also determine whether the Medicare contractors referred all hospitals that meet the criteria for outlier reconciliations to CMS. Outliers are additional payments that Medicare provides to hospitals for beneficiaries who incur unusually high costs. CMS reconciles outlier payments on the basis of the most recent cost-to-charge ratio from hospitals associated cost reports. Outlier payments also may be adjusted to reflect the time value Net Revenue Matters - February 2014

4 of money for overpayments and underpayments. Without reconciliations and final settlements, the cost reports remain open and funds may not be properly returned to the Medicare Trust Fund. Preserving the Medicare trust fund is a huge concern for us all. The issue date is FY There will be various reviews; this work is already in progress. New Inpatient Admission Criteria for the Two Midnight Benchmark This is a new area that the OIG is looking at in regard to the Policies and Practices in order to determine the impact of new inpatient admission criteria on hospital billing, Medicare payments, and beneficiary payments. This review will also determine how billing varied among hospitals in FY Previously, the OIG work found overpayments for short inpatient stays, inconsistent billing practices among hospitals, and financial incentives for billing Medicare inappropriately. This new review is based on the instruction of the two midnight benchmark. Beginning in FY 2014, new criteria states that physicians should admit for inpatient care those beneficiaries who are expected to need at least two nights of hospital care. Beneficiaries whose care is expected to last less than two nights should be treated as outpatients. The new criteria represent a substantial change in the way hospitals bill for inpatient and outpatient stays. The expected issue date: FY CMS is still working through the complex processes and hosting open door forum calls to get the instructions clear on what hospitals are supposed to do to be compliant. Stay tuned for further instructions. Subscribe to the CMS Open Door Forum listserv at CMS.gov to receive s detailing when these calls are going to take place. Medicare Costs Associated With Defective Medical Devices The OIG will review the policies and practices of Medicare claims to identify the costs resulting from additional utilization of medical services associated with defective medical devices to determine the impact of the cost on the Medicare Trust Fund. This work is in progress for FY Analysis of Salaries Included in Hospital Cost Reports This is a new area currently under review. The expected issue date is FY 2015, although the OIG work is already in progress. Policies and Practices are being reviewed as well as data from Medicare cost reports and hospitals in order to identify salary amounts included in operating costs reported to, and reimbursed by Medicare. The goal is to determine the potential impact on the Medicare Trust Fund if the amount of employee compensation that could be submitted to Medicare for reimbursement on future cost reports had limits. Context Employee compensation may be included in allowable provider costs only to the extent that it represents reasonable remuneration for managerial, administrative, professional, and other services related to the operation of the facility and furnished in connection with patient care. (CMS s Provider Reimbursement Manual, Part 1, Pub. No. 15-1, Ch ) Medicare does not provide any specific limits on the salary amounts that can be reported on the hospital cost report. Impact of Provider-Based Status on Medicare Billing Policies and Practices The OIG will be determining the impact of subordinate facilities in hospitals billing Medicare as being hospital-based (provider-based) and the extent to which such facilities meet CMS s criteria. Context Provider-based status allows a subordinate facility to bill as part of the main provider. Provider-based status can result in additional Medicare payments for services furnished at provider-based facilities and may increase beneficiaries coinsurance liabilities. In 2011, the Medicare Payment Advisory Commission (MedPAC) expressed concerns about the financial incentives presented by provider-based status and stated that Medicare should seek to pay similar amounts for similar services Net Revenue Matters - February 2014

5 The goal is to make this payment system consistent across the board. This work is in progress FY Comparison of Provider-Based and Free- Standing Clinics In the area of Policies and Practices the OIG will review and compare Medicare payments for physician office visits in provider-based and free-standing clinics to determine the difference in payments made to the clinics for similar procedures. The potential impact on the Medicare program of hospitals claiming provider-based status for such facilities will also be assessed. Context Provider-based facilities often receive higher payments for some services than do freestanding clinics. The requirements to be met for a facility to be treated as a provider-based facility are at 42 CFR (d). The expected issue date is FY Additionally, the OIG will be looking at Hospital billing and payments for inpatient claims for mechanical ventilation. Work is in progress now and the expected issue date is CY Selected inpatient and outpatient billing requirements and payments are being looked at to identify compliance and possible overpayments. These are just a few of the areas that are being looked at by the OIG for CY For more information on the OIG Work Plan visit http/oig.hhs.gov Risk Mitigation - Continued from page 1 services support. Outputs are cycled daily or in real time, rather than periodically, and provide timely information that can be tied to multiple strategic initiatives. It is clear to this writer that an investment in analytics is a required risk management tool. The issues related to declining inpatient admissions, physician integration and organizational consolidation are too important to not invest in contemporary tools to manage these processes. Analytics should be positioned to allow for scenarios to be run using current data to measure the impact of the rapidly changing environment. A contemporary example could be the decision to discontinue a service that has no chance of being economically viable. What happens to the remaining services and relationships based on this decision? Are there links that need to be considered, and is the elimination of a service going to provide the intended cost savings or can other provisions support a community required service? Please continue to consider CentraMed when identifying analytics solution partners. CentraMed has quietly but effectively positioned its software portfolio to meet the goals described herein. When it s your organizations turn to bet the farm, go forward with the most comprehensive view of organizational consequences and the timeliest use of critical information. Save the Date: 20th Annual AAMAS Convention CentraMed would like to encourage all members of the Revenue Management/Integrity departments to consider attending the 20th annual AAMAS (American Association of Medical Auditing Specialists) convention in St. Louis, Missouri. Pre-Conference Workshops: April 7-9, 2014 Main Conference Sessions: April 10-11, 2014 CMAS Exam Administration: April 9, 2014 For more information please visit: Net Revenue Matters is a monthly publication of CentraMed and is offered as an informational service. Due to the nature of this publication, examples cited and advice given must often be general in nature and may not apply to a particular facility or situation. Thus, CentraMed does not warrant or guarantee that the information contained witihin will be applicable or appropriate in all situations. Each facility will need to evaluate its specific opportunities and take such action as to best meet its business needs. To find out more about a given subject or for information tailored to your specific circumstances, contact a CentraMed professional. If you have questions or would like to submit information for a future newsletter, please contact: Nicole Koenig nkoenig@centramed.co Net Revenue Matters - February 2014