Cost and Payment forHealth Care

Conceptual Framework and Resources

• Cost to provider? (hospital, physician, home health agency)

• Cost to whoever pays the bill? (government, commercial insurer, foundation, self-pay)

• Cost to society? (long-term economic impact)

Each of these involves different information sources.

What is “cost” in health care?

“I want to explore how much money in emergency department fees can be saved by a charitable foundation that pays for health care for the medically indigent, if the foundation can increase the number of patients receiving preventive care and reduce the number of ER visits.”

“Can a hospital increase its profit margin for MS-DRG 237 if it only performs a CT scan when certain factors are present, instead of on all patients?”

How will the info be used?

Children under the age of 18 Medicare beneficiaries People with COPD living in Baltimore City Pregnant women with income below the

poverty line Patients with diagnosis code XYZ

Who is the population of interest?

More Detail onInsurance Payment

Acute care hospital inpatient Physician’s office Emergency department Hospital outpatient Ambulatory Surgery Center (ASC) Home care

What is the setting?

Medicare Medicaid Commercial Insurance Self-Pay HMO Other?

Who is/are the payer(s)?

Technical/Facility fee

Professional/Physician fee

Global payment (technical + professional)

Payments may have components

State or region Urban or rural Local wage levels Teaching facility Multiple procedures in one visit (ASC) Variations of a procedure or diagnosis

(e.g., with or without contrast CT)

Payments may be adjusted for:

Amounts paid not publicly available Depends on contract between insurer and

each provider Depends on company and its provider and

payment models May be subject to

group/consortium/hospital system discounts

The problem ofcommercial insurance

Rates set by individual states

Info sometimes not available

Often payments are LESS THAN cost

The problem of Medicaid

“True Cost”

Provider vs. societal cost◦ With former, can do resource consumption study

(very facility-specific)◦ With latter, best to search the academic

literature, especially in the field of medical economics—though even here, studies are scarce

Issue of full vs. incremental cost

“True” cost considerations

Often used by researchers, because… True “accountant’s” cost difficult to

determine Only for services Medicare pays for Limited to the payer’s basis for payment

(hospital stay, 60 days of home health care, outpatient surgical procedure)

Medicare Payment as Proxy for Cost

Search the Business & Medicine core literature databases for relevant articles.

Search the web—You’ll sometimes find definitive sources, studies, etc.

Search the research of charitable foundations such as Kaiser Family Foundation and The Commonwealth Fund.

Search the website of the federal Agency for Healthcare Research and Quality (AHRQ)

Other Sources of Cost Info

1. The goal of the initiative in words2. The researcher’s/student’s definition of

cost3. Target patient population4. Location/venue of service5. Physician fee, facility fee, or both?

Summary of what I’d like to know

Procedure & Diagnosis Codes

The Key to Payment Amounts

Those famous DRG groupings, now called MS-DRGs by Medicare/Medicaid

Hospital Inpatient

Grouper

Medicare’s “Outpatient Prospective Payment System” (OPPS)◦ Uses APGs

Hospital Outpatient

ASC procedure codes (APCs), which are in turn based on APGs

Ambulatory Surgery Center (ASC)

ASC?

APG?ABC ?

CPTs (procedure codes) and HCPCS (Medicare version of CPTs)

Payment is different if in a facility or in a doctor’s office.

Many procedures are only reimbursable in one or the other location, others can be done in multiple locations and be paid for.

Physician Services

So Where Do I Find All This?

Find it in:

Business Research Guide◦ Business of Health Care Tab

The Health Care Reimbursement Guide

Health Care Reimbursement Guide

Health Care Reimbursement Guide

Health Care Reimbursement Guide

Laparoscopic Cholecystectomy with Cholangiography1. On the “Medicare” tab, click on “Ambulatory Surgical Center

(ASC) Fee Schedule Explained” to read about how ASC payments are calculated and made.

2. From the “Reimbursement Toolkit,” use AMA Website to look up CPT code (47563) and payment ($771.45 in facility) for physician component.

3. Also in the“Reimbursement Toolkit,” click on “Ambulatory Procedure Classifications.”

4. At the IRP website, click on “APC/HCPCS Assignment”5. Find the APC code equivalent to the CPT code above (00131).6. Still at the IRP website, click on “APC Payment Rates” and find

the facility payment for this procedure ($3,487.15).7. 2 + 6 = Total payment ($4,258.60).

An Example