3M Health Information Systems, Inc. © 2007 3M Health Information Systems, Inc. All Rights Reserved. Assessing the Financial Impact of MS-DRGs Healthcare

3M Health Information Systems, Inc.

© 2007 3M Health Information Systems, Inc. All Rights Reserved.

Assessing the Financial Impact of MS-DRGsHealthcare Financial Management Association-Utah ChapterSeptember 20, 2007

2© 2007 3M Health Information Systems, Inc. All Rights Reserved.


Major Changes Proposed in the Final Rule

DRG Reclassification and Relative Weight Recalibration Medicare Severity DRGs (MS-DRGs) Hospital-acquired Conditions (per the Deficit Reduction Act) Relative Weight Modifications Behavioral Offset Update to Long Term Care DRGs

Updates to payment related changes including: Wage Index Operating and GME costs Capital related costs Rates for excluded hospitals Operating and Capital Rates



October 1, 2007

MS-DRGs will be used for IPPS

New DRGs New reimbursement POA and other regulatory

changes



How does a grouper work?

It is similar to a known recipe:

+ + =

Identification of diagnoses and procedures

Coding the diagnoses and procedures

Grouping the diagnoses and procedures

DRG



What’s driving severity documentation and coding today?

Severity based reimbursement: changes in hospital payment by Medicare, Medicaid, and private payers

Provider profiling and performance transparency: Patients are “sicker” and we need to demonstrate how this impacts our ability to deliver quality care

Hospital report cards: Consumers want to compare providers (and have more methods to do so today)

Aging population and increasing life expectancy: the need to conserve limited resources for increasing demand

Quality focused care: providers need ways to measure and improve their performance





© 3M 2007. All rights reserved.

Key Regulatory Changes:

Regulation:

Provider Implications

Must learn new DRG system Must learn new CC and MCC

lists Must be ready by October 1

Creates Major CC subclasses Increases number of DRGs

from 538 to 745 Completely revised CC list

CMS adopts MS-DRGs:




What are MS-DRGs?

Update to 1994 Severity DRGs 3 Step Process:

Consolidate current DRGs into base DRGs Categorize each diagnosis as:

• Major CC (MCC)• CC• Non-CC

Subdivide each base DRG into subgroups based on CCs• No Subgroups• 3 groups (MCC, CC, non-CC)• 2 groups (MCC/CC, non-CC)• 2 groups (MCC, CC/non-CC)



Consolidation of DRGs:

115 pairs of DRGs that were subdivided based on presence of a CC

Major cardiovascular conditions 3 pairs of burn DRGs 43 pediatric DRGs that were defined by age <=17 Several DRGs relating primarily to pediatric or adult population that

have very low volume in the Medicare population Several elective surgery DRGs that have shifted to outpatient

settings Some clinically related DRGs that had volume, but no difference in

resource use MDC 14 & 15 were not consolidated due to low volume



MS DRGs Increases the Number of DRGs from 538 to 745

SubgroupsNumber of Proposed

Base MS-DRGs

Number of Proposed MS-DRGs

No Subgroups 53 53

Three subgroups 152 456

Two subgroups: major CC and CC; non-CC 43 86

Two subgroups: non-CC and CC; major CC 63 126

Subtotal 311 721

MDC 14, 15 22 22

Error DRGs 2 2

Total 335 745




MS vs. current CMS DRG Groups:Base Group, no splits

CMS V24 CMS DRG Descriptions MS v25 MS-DRG Descriptions 524 Transient ischemia 069 Transient ischemia

MS vs. current CMS DRG Groups:3 Groups - MCC, CC, non-CC

CMS V24 CMS DRG Descriptions MS v25 MS-DRG Descriptions 027 Traumatic Stupor & Coma,

coma > 1 hr082 Traumatic stupor & coma, coma >1

hr w MCC083 Traumatic stupor & coma, coma >1

hr w CC084 Traumatic stupor & coma, coma >1

hr w/o CC/MCC




MS vs. current CMS DRG Groups:2 Groups – with MCC, without MCC

CMS V24 CMS DRG Descriptions MS v25 MS-DRG Descriptions 103 Heart transplant or implant of

heart assist system001 Heart transplant or implant of heart

assist system w MCC002 Heart transplant or implant of heart

assist system w/o MCC

MS vs. current CMS DRG Groups:2 Groups – with CC/MCC, without CC/MCC

CMS V24 CMS DRG Descriptions MS v25 MS-DRG Descriptions 021 Viral meningitis 075 Viral meningitis w CC/MCC

076 Viral meningitis w/o CC/MCC




MS vs. current CMS DRG Groups:Exception to rules:

CMS V24 CMS DRG Descriptions MS v25 MS-DRG Descriptions 480 Liver and/or Intestinal

Transplant005 Liver transplant w MCC or intestinal

transplant006 Liver transplant w/o MCC





Regulation:


Behavioral offset:

CMS anticipates improved documentation and coding

Payments reduced 1.2% to account for this

Blending of relative weights MS-DRGs and CMS DRGs

Unless documentation and coding is improved a significant loss of payment will occur impacting operating margins



Behavioral Offset

Proposed Rule was 2.4% in FY2008 and FY2009 Final Rule is 1.2% in FY2008 and 1.8% in FY2009

and FY2010 This compromise to the proposed rule includes a 2

year phase in of the impact of MS-DRGs by blending the relative weights 50% base on CMS DRGs and 50% based on MS-DRGs





Regulation:


MS-DRGs are designed for payment of Medicare

patients:

Not applicable to other payers Not applicable for quality

Other payers will likely adopt other groupers

Hospitals need to maintain multiple groupers



IPPS Applicability

“The focus of CMS’ efforts is in developing and maintaining a DRG system that is appropriate for its Medicare population.”

“We do not believe that Medicare should undertake the effort and expense to maintain and update a DRG system that will have no application for Medicare beneficiaries.”





Regulation:


Payment weight methodology modified:

Second year of three year transition to cost based weights

Impact on aggregate payments will vary by hospital

Relative profitability across service line will change




Relative Weights

CMS will continue to implement the cost-based DRG relative weights under the 3-year transition period that began in FY2007

This year the relative weights will be recalibrated using a blend of 67 percent of the cost relative weight and 33 percent of the charge relative weight

By FY 2009, the relative weights will be 100 percent cost-based

The 50/50% blend of MS-DRGs and CMS DRGs in calculating the relative weight is on top of the transition to cost based weights





Regulation:


Present on Admission Indicator (POA):

New POA data element must be submitted to Medicare

Must begin coding POA Coder productivity will be

impacted




Deficit Reduction Act Requirements

Deficit Reduction Act (DRA)—(Pub. L. 109-171) Requires that the Present on Admission (POA) indicator be

collected for all Medicare patients— beginning Oct 1, 2007 Requires CMS to select two or more conditions that are high

cost/high volume. Requires CMS to begin excluding those conditions from the

calculation of the DRG when they are identified as not present on admission—beginning Oct 1, 2008.




Implementation Date for POA Data Collection

Deficit Reduction Act of 2005 (DRA) requires the POA indicator to be collected starting Oct. 1, 2007

Change Request #5499 instructs hospitals how to submit this data Current Form ASC X12N 837, v4010 does not have POA field Segment K3 in the 2300 loop, data element K301 should be

used Instructions on how to code the POA indicator are in the ICD-

9-CM Official Guidelines for Coding and Reporting





Regulation:


8 Post admission complications excluded from DRG assignment:

Post admission complications excluded from DRG assignment

Model potential financial impact and initiate continual improvement measures

Evaluate post admission complication rates in your facility


3M Health Information Systems, Inc.Hospital-Acquired Conditions not POA will not be included in MS DRG assignment beginning October 2008

Condition Considered in NPRM

Proposed in NPRM

Selected in FY 2008 Final Rule

May Be Considered in

Future Rulemaking

1. Serious Preventable Event- Object left in surgery

Yes Yes Yes N/A

2. Serious Preventable Event- Air embolism

Yes Yes Yes N/A

3. Serious Preventable Event- Blood incompatibility Yes Yes Yes N/A

4. Catheter Associated Urinary Tract Infections

Yes Yes Yes N/A

5. Pressure Ulcers (Decubitus Ulcers) Yes Yes Yes N/A

6. Vascular Catheter Associated Infection Yes No (No FY 2008

code)

Yes (Code Created for FY

2008) N/A

7. Surgical Site Infection-Mediastinitis after Coronary Artery Bypass Graft (CABG) surgery

Yes (All surgical site infections, not just Mediastinitis) No (No unique

codes)

Yes (Comments suggested

Mediastinitis which has unique

code)

N/A

8. Falls Yes No (Coding not unique)

Yes (Operational difficulties will be overcome by

FY 2009)

Expand to all hospital acquired injuries, adverse events




Summary

Regulation Provider ImplicationsCMS adopts MS-DRGs on October 1,2007 Learn new DRG system, new CC and MCC lists

Ensure software solutions are MS DRG ready

Educate cross functional team on MS DRGs

1.2% Behavioral Offset in anticipation of coding and documentation improvement

Educate HIM department about MS DRG coding implications

Ensure most accurate documentation and coding processes in place

MS-DRGs are designed for payment of Medicare patients: Other payers will likely adopt other groupers

Hospitals need to maintain multiple groupers

Continued transition from charge to cost based relative weights Analyze gap and impact analysis

Ensure software systems are ready for reimbursement calculations

Submit Present on Admission (POA) data to Medicare Ensure software tools are ready for POA collection

Educate HIM department on POA coding guidelines

Consider operational improvements for coder workflow

8 Post Admission complications identified for exclusion from DRG assignment (October 1, 2008)

Model potential financial impact, gap and initiate continual improvement measures.

Evaluate post admission complication rates in your facility.



Financial Changes in the next three years

2008 2009 2010

Behavioral offset

1.2% 1.8% 1.8%

Cost vs charge

67/33 100% 100%

Complication not calculated in DRG

0% impact If not POA, not calculated

If not POA, not calculated

CMS/MS DRG weight blend

50/50 50/50 Full MS DRG




Complications/Comorbidities

Major CCs (MCC) were designated if: they were a CC for CMS, they were a Major CC in AP-DRGs they were an APR DRG severity 3 (major) or severity 4 (extensive)

Non-CC: non-CC diagnosis in CMS and in AP-DRGs APR DRG default severity level 1 (minor)

CC: any diagnosis that did not meet either of the above two criteria




Summary of 3M™ APR DRGs

MDC/APR MDC

Subdivide each APR DRG

into subclasses

Four Severity of Illness Subclasses

1. Minor

2. Moderate

3. Major

4. Extreme

Four Risk of Mortality Subclasses

1. Minor

2. Moderate

3. Major

4. Extreme

316 APR DRGs

1,258 Subclass Cells 1,258 Subclass Cells




Examples of 3M™ APR DRG Subclasses

Risk of Mortality Secondary Diagnosis-Cardiac Dysrhythmias1 Minor Premature Beats 2 Moderate Sinoatrial Node Dysfunction 3 Major Paroxysmal Ventricular Tachycardia 4 Extreme Ventricular Fibrillation

Severity of Illness Secondary Diagnosis-Diabetes Mellitus1 Minor Uncomplicated Diabetes 2 Moderate Diabetes w Renal Manifestation 3 Major Diabetes w Ketoacidosis4 Extreme Diabetes w Hyperosmolar Coma




Complications/Comorbidities Reduced CC list from 3,326 to 2,583 diagnoses codes in 2006; now there are

4,922 codes that are either a Major CC or a CC: Major CC 1,580 codes CC 3,342 codes

Patients under V 24 had at least one CC 77.6% of the time, under the proposed MS-DRG system, this will be reduced to 40.34%.

Chronic diseases were removed from the CC list unless there was a significant acute manifestation: Mitral valve disorders CHF Stage I-II chronic renal failure Chronic UTI




MS-DRG Categories

MS-DRGs with no qualifiers Chest Pain

Chest PainCMS DRG 143

RW .5637$2,749 Chest Pain

MS-DRG 313RW .5550

$2,707




MS-DRG Categories

MS-DRGs with 3 potential groups (MCC-CC-NCC)

Congestive Heart Failure(No qualifiers required)

CMS DRG 127RW 1.0490

$5,117

MS-DRG 291Heart Failure w MCC

RW 1.4760$ 7,200

MS-DRG 292 Heart Failure w CC

RW 1.0169$4,960

MS-DRG 293 Heart Failure w/o MCC or CC

RW .7265$3,544




MS-DRG Categories

MS-DRGs with MCC or w/o MCC

CABG with Cath w Major CVCMS DRG 547

RW 6.1390$29,946

CABG with Cath w MCCMS-DRG 233RW 7.1350

$34,805

CABG with Cath w/o MCCMS-DRG 234RW 4.6211

$22,542

CABG with Cath w/o Major CVCMS DRG 548

RW 4.6440$22,653




MS-DRG Categories

MS-DRGs with CC/MCC or w/o CC/MCC

Major Joint/Limb Reattachment UE

CMS DRG 491RW 1.7203

$8,392

Major Joint/Limb Reattachment UE w CC/MCCMS-DRG 483RW 2.1931

$10,698

Major Joint/Limb Reattachment UE w/o CC/MCCMS-DRG 484RW 1.6862

$8,225




MS-DRGs Demand Increased Coding Precision

“In determining the CC subclass assigned to a diagnosis, imprecise codes were, in general, not assigned to the MCC or CC subclass.”

Non CCHeart Failure NOS 428.9

Non CCCongestive Heart Failure NOS428.0

CCSystolic & Diastolic Heart Failure428.40

CCChronic Diastolic Heart Failure428.32

CCChronic Systolic Heart Failure428.22

CCSystolic Heart Failure NOS428.20

CCLeft Heart Failure428.1

Major CCAcute On Chronic Diastolic Heart Failure428.33

Major CCAcute Diastolic Heart Failure428.31

Major CCAcute On Chronic Systolic Heart Fail428.43

Major CCAcute Systolic & Diastolic Heart Failure428.41

Major CCAcute Systolic Heart Failure428.21




Why is documentation and coding improvement so critical?Example: In MS DRGs the precise type of heart failure dramatically impacts payment

In prior versions of the CMS DRGs all heart failure codes were a CC so distinctions related to the type of heart failure did not impact DRG assignment

428.1 Left Heart Failure

428.20 Systolic Heart Failure NOS

428.22 Chronic Systolic Heart Failure

428.30 Unspecified Diastolic Heart Failure

428.32 Chronic Diastolic Heart Failure

428.40 Systolic & Diastolic Heart Failure

428.42 Chronic combined Systolic and Diastolic Heart Failure

With MCCWith CCWithout CC or MCC

428.21 Acute Systolic Heart Failure

428.23 Acute on Chronic Systolic Heart Failure

428.31 Acute Diastolic Heart Failure

428.33 Acute on Chronic Diastolic Heart Failure

428.41 Acute Systolic & Diastolic Heart Failure

428.43 Acute on Chronic Systolic Heart Failure

428.0

Congestive Heart Failure Not Otherwise Specified

428.9

Heart Failure Not Otherwise Specified

Major Small & Large Bowel Procedures

$14,732(1.8415)

$23,148(2.8935)

$36,047(4.5059)

Payment

Payment Weight

MS-DRG 331 MS-DRG 329MS-DRG 330



Some conditions that are no longer CCs

CHF Chronic blood loss

anemia Dehydration COPD

Chronic Renal Failure Stage I-III

Seizure Disorder Angina (stable) Atrial Fibrillation Hyperkalemia




UTI vs. Septicemia Example

CMS DRG 320 MS-DRG 688 MS-DRG 871PDx: Urosepsis PDx: Urosepsis PDx: SepticemiaSDx: Dehydration SDx: Dehydration SDx: Dehydration COPD COPD COPD

UTI Malnutrition

Decubitus Hip Shock

RW .8769 RW .7018 RW 1.8632$4,278 $3,423 $9,089

APR DRG 463 No change APR DRG 720SOI Subclass 2 SOI Subclass 4RW .5973 RW 3.3739ROM Subclass 2 ROM Subclass 4Peer Mortality: .8% Peer Mortality: 42.4%

DRGWith CC

No longer CCs

Major CC, but only if

site specified

In current CMS system, Septicemia

was reimbursed at

$7,803



The Challenge

Physician Documentation is recorded in

CLINICAL terms

Documentation for coding, profiling & compliance must contain specific

DIAGNOSTIC terms

Breakdown between the two

languages




Common Documentation Issues

Unable to Code Acceptable to Code

LUL Infiltrate LUL Pneumonia

Hgb 5.2; Transfused Acute or Chronic Blood Loss Anemia

Emaciated; Total Protein/Albumin Low; Nutrition Supplements Started Malnutrition

ABG 7.22/68/44; Will Treat Accordingly Respiratory Failure, Acidosis, Alkalosis, Etc.

Will Rehydrate Patient Dehydration

BP 70/40 on Dopamine for Support Shock

Cardiac Enzymes Elevated; EKG Positive Acute MI

No Overt CHF; Will Continue Lasix and Lanoxin Compensated CHF

Unable to Void; Cathed for 600 cc Urinary Retention

Sputum Gram Stain with Large Amount Gram-Negative Rods; Will Cover with Rocephin Questionable Gram-Negative Pneumonia



Gender: Female Age: 55Disposition: Died LOS: 11 Days

Principal Diagnosis: 431 Intracerebral hemorrhage

Case 1 Case2LOS

Case 3 Case 4 Description

Secondary Diagnoses

7872942731

78729427312867

787294273128675070

787294273128675070

78001

Other dysphagia Atrial fibrillationAcquired coagulation factor defPneumonitis due to inhalation of food or vomitus (MCC)Coma

MS-DRG 66 w/o CC/MCC 65 w/CC 64 w/MCC 64 w/MCC Intracranial hemorrhage or cerebral infarction

Reimbursement $5,025 $5,805 $7,546 $7,546

APR SOI 2 2 3 4

APR ROM 2 2 3 4

Expected Mortality Rate

14% 14% 39% 76%



Questions

Documents

3M Health Information Systems, Inc. © 2007 3M Health Information Systems, Inc. All Rights Reserved. Assessing the Financial Impact of MS-DRGs Healthcare