Proposed IPPS hinges on accurate documentation

More changes coming under health care reform

Cuts in reimbursement and new reporting of quality measures contained in the proposed rule for the Inpatient Prospective Payment System (IPPS) make it more important than ever for documentation to be accurate and complete, says Deborah Hale, CCS, president of Administrative Consultant Services LLC, a health care consulting firm based in Shawnee, OK.

The Centers for Medicare & Medicaid Services (CMS) announced that the proposed rule does not reflect the provisions of the Affordable Care Act, which was passed by Congress too late to be included. CMS is expected to announce information on the implementation of the policies and payment rates included in the health care reform legislation at a later date.

A number of provisions in the new legislation will have an impact on the IPPS, but due to the timing of the legislation, CMS was unable to incorporate provisions in the proposed rule, according to information released by CMS.

In issuing its proposed rule for fiscal year 2011, CMS recommended updating hospital rates for inflation but reducing payment rates to address changes in hospital document and coding practices as a result of the MS-DRG system.

The proposed rule includes a 2.4% market basket payment update for hospitals that report quality data. However, the payment update for inflation will be offset by a -2.9% adjustment to recoup half of the increase in hospital aggregate payments in fiscal years 2008 and 2009 that it contends occurred because hospitals changed their documentation and coding of patient diagnoses in a manner that leads to an increase in aggregate payments without corresponding growth in actual patient severity.

"Coupled with other IPPS changes, CMS projects a payment reduction of 0.1% for most hospitals for fiscal year 2011," Hale says.

Hospitals that do not report quality data will receive the market basket update, minus 2% for not reporting and the additional -2.9% adjustment.

CMS anticipates that 96% of participating hospitals will receive the full update this year.

However, according to the American Hospital Association (AHA), the proposed rule doesn't include the 0.25% market basket cut that is mandated by health care reform legislation.

When that cut goes into effect, the average payment to hospitals will be reduced by 0.35% compared to fiscal year 2010 payments, according to the AHA.

"Plain and simple, this policy will undermine hospitals' ability to care for patients and communities across the country. We strongly urge CMS to rethink their analysis regarding the coding offset and hope to work with the agency to eliminate these cuts and protect health care that patients and communities need and deserve," says Rich Umbdenstock, AHA president and CEO.

The reasons behind the proposed market basket cuts go back to fiscal year 2008, when CMS replaced the 538 DRGs with 745 MS-DRGs. The agency added one MS-DRG in fiscal year 2009, bringing the total to 746.

The adoption of the MS-DRG system was intended to be budget-neutral, but the Medicare Actuary estimates that the cumulative effect of the documentation and coding increased spending by 5.8% in fiscal years 2008 and 2009.

By law, CMS must recoup the excess spending during fiscal years 2008 and 2009 by FY 2012.

CMS is proposing to make the payment adjustment of 2.9% to recoup half of what it says are excess payments. The agency proposed an adjustment last year but, after reviewing comments on the proposed rule, did not adopt it in the final rule.

The coding and documentation improvement adjustments were based on claims data that showed an increase in the capture of major complications and comorbidities (MCCs) since the onset of the MS-DRG system, Hale says.

"Hospitals without effective coding audit strategies, query processes, or clinical documentation improvement programs in place to assure optimum capture of MCCs and complications and comorbidities [CCs], may find the 2.9% reduction particularly difficult to swallow," Hale says.

Those hospitals will still receive the reduction for coding and documentation improvement despite the fact that their coding and documentation may not have improved.

In the proposed rule, CMS aims to add 45 measures to the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU), but only 10 of those measures will be considered in determining a hospitals' update for FY 2012.

The remaining 35 measures, many of which are reported through registries, would be included in the FY 2013 update. The use of registries would prevent hospitals from having to report the same data twice.

CMS is proposing to retire one measure: mortality for selected surgical procedures.

The list of hospital-acquired conditions for which hospitals do not receive MCC or CC payment when the condition was not present on admission was expanded to accommodate new ICD-9 codes in the existing 10 categories, Hale says.

CMS is making eight of these categories part of the hospital quality data reporting requirements, which means the results will be available to the public on the Hospital Compare website, she points out.

"This makes accurate documentation more important than ever," she adds.

The proposed rule includes only one new MS-DRG, which splits bone marrow transplants into two groups to provide a substantial reimbursement increase for allogeneic transplants in comparison to autologous bone marrow transplants, Hale adds.

"The most significant changes to the MCC/CC list are a downgrade in acute renal failure from an MCC to a CC and a downgrade in fecal impaction from a CC to a non-CC," she says.

The final rule will go into effect Oct. 1.

[For more information, contact Deborah Hale, CCS, president of Administrative Consultant Services LLC, e-mail:]