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 February 2008
Medicare to Cease Payment on "Never Events"
 In approximately six months, the Centers for Medicare and Medicaid Services (CMS) will discontinue its reimbursement for inpatient admissions that are a consequence of or that result in "preventable" conditions. It is the first of many directives, in the eyes of CMS, that are aimed to move "Medicare from a passive payer simply processing claims to an active purchaser with a stake in quality in efficiency." Some of the noted conditions that will no longer be paid include:
- The removal of objects mistakenly left inside patients during covered surgical procedures
- Certain infections that were not present upon admission, including vascular catheter-associated infections as well as catheter-associated urinary tract infection
- Services required due to the transfusion of the incorrect blood type
- Air embolisms and subsequent required treatment
- Mediastinitis after coronary artery bypass graft (CABG) surgery
- Treatment of bedsores acquired during a covered inpatient admission
- Injuries resulting from falls while admitted for a payable condition
- Surgery on the wrong body part or patient
With the country's current Medicare budget at a staggering 400 billion dollars annually, CMS stated that the new policies are an effort to:
"Improve the accuracy of Medicare's payment under the acute care hospital inpatient prospective payment system (IPPS), while providing additional incentives for hospitals to engage in quality improvement efforts."
The U.S. Congress has been researching possible cuts for years, culminating with the release of MedPac's report to Congress in 2007 entitled "Promoting Greater Efficiency in Medicare." The Deficit Reduction Act of 2005 mandated that all Medicare-participatory facilities must begin reporting on secondary diagnoses for all enrollees, and that CMS would discontinue payment on these diagnoses if they were not present upon admission. The judgment does not take into account the fact that a portion of these conditions are inevitable and not at all preventable by hospital staff.
The hindrance for hospitals nationwide will begin with the additional costs incurred as a result of this decision. Tests that were not normally run upon admission will have to be ordered to ensure proper documentation of secondary diagnoses, or the lack thereof, prior to a patient being admitted for a Medicare-payable stay. Staff must be educated on both the importance and the necessity of proper notation of all symptoms prior to admission. These costs alone could prove to be astronomical.
While the impact of Medicare's upcoming change in stance on "preventable" conditions can be calculated using an analysis of diagnoses present at admit versus those at discharge on previous Medicare inpatient stays, the financial impact of the CMS decision may not be that simple. With the majority of payors following at least a portion of Medicare's guidelines, this verdict is bound to impact the managed care landscape. Proactive work to ensure this decision doesn't affect revenue is essential. It is imperative that providers act now to protect both their existing and upcoming contracts from language that would allow this Federal decision to impact their reimbursement on inpatient claims. Inclusion of language preventing such denials or amendments stating the same may help all healthcare providers from being caught in the government's latest legislation on private healthcare. Your bottom line may thank you for addressing the issue now!
Do you Give Every Insurance Company a Discount?
Hopefully not simply out of pure kindness?!
If your facility doesn't frequently ask itself this question, you might be giving away money. Typically, discounts are granted to health insurance companies in exchange for patient volume. Contracted plans generate volume for your facility when they promote your hospital in their membership documents, on their website, and when members contact them. In return for this "steerage" and prompt payment, they are granted a discount as defined in the contact between the facility and the plan.
But what if the plan isn't generating additional patient volume for your facility? Why should they receive a discount?
Many hospitals contract with, and therefore provide discounts to, plans that have very small membership in the hospital's geographic area. Perhaps this is because the plan has a nationally-recognized name, or maybe the hospital has simply always had a contract with the plan. But why? If there are very few members in the area, there is insufficient steerage. Many of the patients treated in your facility may be from out of the area and simply had no other options when they needed care.
If your hospital is currently granting significant discounts to plans that do not generate significant patient volume, it might be appropriate to review these contracts for either renegotiation or even termination.
A good method for identifying plans for review is to generate a report of every plan and their corresponding total payments and your billed charges. Rank the plans by their portion of your total billed charges, and then calculate each plan's reimbursement rate as a percentage of billed charges. Those that represent a high portion of your charge volume, but have low reimbursement should be evaluated for renegotiation. Those with low patient volume and low reimbursement should be considered for termination. If you are a current Health Check client, this information is presented and analyzed in your year-end reports.
Every hospital has a different set of factors it faces when dealing with managed care contracting. There is no "one size fits all" strategy. And no hospital can simply terminate all of its contracts with health plans. But that doesn't mean that hospitals shouldn't take a closer look at which plans they give discounts to.
US Healthcare Spending Up in 2006
According to the Centers for Medicare and Medicaid Services (CMS), total U.S.  healthcare spending increased 6.7% during 2006, up from 6.5% during 2005. Hospital spending, which represents 31% of total healthcare spending, increased 7% during the same time frame.
Total spending reached $2.1 trillion, or about $7,000 per American, during 2006. This represents approximately 16% of the country's gross domestic product (GDP). CMS projects that total spending will almost double to $4.3 trillion by 2017, which will represent 19.5% of the projected 2017 GDP.
A major cause for the increase over the next decade will be the entry of Baby Boomers into the Medicare program. Medicare spending is expected to more than double in the next ten years, from $427 billion in 2007 to $884 billion in 2017. At that point, Medicare spending will represent 20% of all healthcare spending in America.
Wonder how much the health insurance companies are taking in? Their premiums increased 5.5% during 2006, which was the smallest annual rise since 1997.
Clinical Denials on the Rise
Health Check has identified a growing trend of medical denials among insurance companies nationwide. Increasingly, plans are denying stays, or portions of stays, with little or no explanation as to why. Often, the stays had even been pre-authorized.
Health Check identifies unpaid days during its line-by-line audit of its clients' zero balance inpatient accounts. Once these underpayments are identified, we pursue reimbursement for the additional days- often by submitting medical appeals written by our staff of Nurse Auditors.
By demonstrating the medical necessity of treatments and the fact that services were provided in good faith, these appeals have been highly successful in generating additional reimbursement for our clients.
If your facility is not already monitoring denied days, a system of identifying and reviewing these accounts should be implemented. Nurse Auditors can be difficult to find and expensive to employ, but they are a good investment, as the additional revenue generated by clinical appeals can be significant- often higher than $100,000 per account.
If you are interested in learning more about Health Check's Nurse Auditors or medical appeal services, please contact Susan Thiel, Senior Vice President and Chief Nurse Auditor.
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