Test Bank for Principles of Healthcare Reimbursement 5th Edition by Casto

Test Bank for Principles of Healthcare

Reimbursement 5th Edition by Casto

To download the complete and accurate content document, go to:

https://testbankbell.com/download/test-bank-for-principles-of-healthcare-reimburseme
nt-5th-edition-by-casto/

Visit TestBankBell.com to get complete for all chapters

Principles of Healthcare
Reimbursement

Instructor’s Manual
Chapter 6
Medicare-Medicaid Prospective
Payment Systems for Inpatients
Lesson Plan
Background and Instructional Delivery
Chapter 6 provides an extensive explanation of the Medicare prospective payment systems for
acute care hospitals and inpatient psychiatric hospitals. The basic language associated with
reimbursement under Medicare prospective payment systems is defined and discussed. Common
models and policies of payment under these two inpatient prospective payment are systems
explored in detail in this chapter.

Chapter Outline
Objectives
Key Terms
Introduction to Inpatient Prospective Payment Systems (PPSs)
Acute-Care Prospective Payment System
Conversion from Cost-Based Payment to Prospective Payment
Concept of Prospective Payment
Prospective Payment Legislation
Diagnosis Related Group Classification System
Classification System Development
Severity Refinement to DRGs
Structure of the DRG System
Assigning Medicare Severity Diagnosis Related Groups
Step One: Pre-MDC Assignment
Step Two: MDC Determination
Step Three: Medical/Surgical Determination
Step Four: Refinement
Invalid Coding and Data Abstraction
Provisions of the MS-DRG System
Disproportionate Share Hospital
Indirect Medical Education
High-Cost Outlier Cases
New Medical Services and New Technologies
Transfer Cases
IPPS Payment
Step One: Establishment of Initial Payment Rate
Step Two: Medicare-Severity Diagnosis-Related Group Assignment
Step Three: Policy Adjustments for Hospitals that Qualify
Step Four: Add-on for High Cost Outlier and New Medical Service and
Technology
Pricer Software
Maintenance of the MS-DRG System

Inpatient Psychiatric Facility Prospective Payment System

Patient-Level Adjustments
Length of Stay Adjustment
Medicare-Severity Diagnosis-Related Group Adjustment
Comorbid Conditions
Older Patients
Electroconvulsive Therapy
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

Facility-Level Adjustments
Wage Index Adjustment
Cost-of-Living Adjustment
Rural Location Adjustment
Teaching Hospital Adjustment
Emergency Facility Adjustment
Provisions of the Inpatient Psychiatric Facility Prospective Payment System
Outlier Payment Provision
Initial Stay and Readmission Provisions
Medical Necessity Provision
Payment Steps
References and Bibliography
Appendix 6A
Post-acute care transfer MS-DRGs for FY 2015

Activities with Keys

Theory into Practice
The Medicare Provider Analysis and Review (MedPAR) file is a database that the Centers for
Medicare and Medicaid Services maintains. For each year, it includes the records from all the
claims for hospital discharges of Medicare beneficiaries. The MedPAR file contains several
gigabytes of data per year. Rather than being an inert archive, these data can be used to improve
the quality of care for Medicare beneficiaries (Ash et al. 2003; Stringham and Young 2005).
The MedPAR file is an administrative database. The data include many administrative
fields, such as diagnosis and procedure codes, claim costs and charges, the diagnosis related
group (DRG) and—as of fiscal year 2008—MS-DRGs, and the length of stay. However, as an
administrative database, it has limitations to its usefulness as a means of assessing the quality of
patient care. The database does not include some clinical risk factors, such as the results of
diagnostic tests. The number of other diagnoses used to record complications and comorbidities is
restricted to twenty-five. The benefits of using the database, though, far outweigh the limitations.
Cost is minimal. The database already exists. No forms or procedures need to be created. No data
collectors need to be hired nor trained. Data collection occurs in the usual course of business.
Finally, though, research has found that the MedPAR file can be used to assess the quality of
patient care for both Medicare patients and other-payer patients (Needleman et al. 2003).
Ash and colleagues used MedPAR claims data to predict mortality in patients who had
suffered acute myocardial infarction (AMI). They studied the years 1995 through 1999 with more
than 300,000 cases per year (305,468; 308,997; 306,224; 304,882; 306,175; totaling 1,531,746).
The validation data showed up to 80 percent mortality one year post-AMI for cases in the highest
risk group. Moreover, the authors found that, prior to the AMI in the study, the patients had had a
previous AMI, diabetes, or congestive heart failure. This information about health status at
admission is important for the care of patients and for the improvement of care outcomes (Ash et
al. 2003).
Stringham and Young used the MedPAR file to examine rates of urinary tract infections
(UTI) at acute inpatient hospitals (Stringham and Young 2005). The authors noted that Medicare
makes additional payments for complications, even complications that are possibly preventable.
Frequently, the Medicare payment system has paired DRGs: one DRG for the condition and one
DRG for the condition with a complication or comorbidity (CC). The relative weight of the DRG
with the CC is higher than the relative weight for the DRG without the CC.

3
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

Nosocomial UTIs are an example of a potentially preventable complication. The authors

explained that more expensive anti-infective catheters and staff training can reduce the rate of
nosocomial UTIs.
The authors’ study was designed as follows:
• All patients discharged during October 1, 2001 through September 30, 2002 as reported
in the MedPAR file
• Identification of all cases with ICD-9-CM codes of 599.0 (urinary tract infection) or
996.64 (infection and inflammatory reaction due to indwelling urinary catheter)
• Elimination of cases in which urinary tract infection was the principal diagnosis or in
which the Major Diagnostic Category was 18 (Infectious and Parasitic Diseases)
The total cases that resulted with qualifying UTIs were 1,012,041 of the 12,502,700 discharges.
For the 1,000 hospitals with the most discharges in the MedPAR data set, the rate of secondary
UTI ranged from 3.10 percent to 15.49 percent.
The authors examined the cases of one New York hospital in detail. They found that the
hospital received approximately $675,000 more in Medicare payments because of the nosocomial
UTIs. The more expensive, anti-infective catheters would have cost approximately $50,000. The
authors hypothesized that payment policies of the Centers for Medicare and Medicaid Services
(CMS) discouraged the implementation of initiatives to reduce nosocomial complications.
Finally, the authors concluded that patients would benefit from improved quality of healthcare if
the CMS ceased paying extra for nosocomial infections.
The MedPAR file is a valuable tool to study the quality of patient care. Therefore, in
addition to being an abstract payment system for some people, Medicare’s prospective payment
system affects the health of all of us.

References

Ash, Arlene S., M.A. Posner, J.Speckman, S. Franco, A.C. Yacht, and L. Bramwell. 2003. Using
claims data to examine mortality trends following hospitalization for heart attack in Medicare.
Health Services Research 38(5):1253-1262.
Needleman, J., P.I. Buerhaus, S. Mattke, M. Stewart, and K. Zelevinsky. 2003. Measuring
hospital quality: Can Medicare data substitute for all-payer data? Health Services Research 38(6
Part 1):1487-1508.
Stringham, J. and N. Young. 2005. Using MedPAR data as a measure of urinary tract infection
rates: Implications for the Medicare inpatient DRG payment system. Perspectives in Health
Information Management 2(12):1-14.
Lecture
Microsoft PowerPoint (.ppt) slides are available on the Assembly on Education Community of
Practice (CoP) Web site. These slides may be used as lecture guides.

Class Discussion
The Theory into Practice section, Real-World Case, Application Exercises, and questions in the
Check Your Understanding sections located throughout the chapter can be used to stimulate class
discussions or online chats.

4
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

Application Exercises
1. IPF PPS: Use the information found in Figures 1 and 2 (below), Tables 6.5-6.9 and
Figure 6.7 from the textbook to complete Table 1 and Workbooks A&B in order to
determine the IPF PPS reimbursement for this encounter. This exercise is printed in
the Student Workbook. Additionally an Excel file is provided if you would like your
students to complete via Excel.

Figure 1: Facility Information

Bed size: 350 beds Location: Columbus, Ohio
Classification: Rural Wage Index: .9806
Full Service ED: Yes Per-diem unadjusted rate (RY 2015): $728.31

Figure 2: Claim Information

Admit Date: January 1, 2015 Discharge Date: January 15, 2015 LOS: 14 days
Patient Age: 62
Principal Diagnosis: 295.34* Paraphrenic schizophrenia, chronic with acute
exacerbation
Secondary Diagnosis: 301.6 Dependent personality disorder
Secondary Diagnosis: 250.02 Type II diabetes mellitus uncontrolled
MS-DRG: 885 Psychoses
ECT treatments: 90870 3 units $315.55 per unit (RY 2015)
*Diagnosis not converted to ICD-10-CM because service dates for this claim are prior to
implementation of ICD-10-CM/PCS

IPFPPS Payment Determination Steps (Use Figure 6.7 from the textbook.)

Table 1
Step Methodology Total
A (per-diem rate * labor portion * WI) $494.93
$728.31 * .69.3 * .9806 = 494.93
B If COLA then (per-diem rate * non-labor share * COLA) $223.59
If non-COLA then (per-diem rate* .29683)
$728.31*0.307 = 223.59
C Sum results of step 1 and step 2 $718.52
494.93+223.59 = 718.52
D Use Worksheet A (see below) 1.3144
E Multiply result of step 3 times result of step 4 $944.42
718.52 * 1.3144 = 944.42
F If full service ED then choose higher Day 1 adjustment in step 7 higher
If not full service ED then choose lower Day 1 adjustment in step 7
G Use Worksheet B (see below)
H Sum of day rates calculated in Worksheet B $13,788.48

5
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

I If COLA then ((ECT pymt rate * labor portion * WI)+(ECT pymt $933.91
rate * non-labor portion * COLA)) * units of service
If non-COLA then ((ECT pymt rate *labor portion * WI) + (ECT
pymt rate * non-labor portion)) * units of service
[(315.55*0.693*0.9806)+(315.55*0.307)] * 3
[214.43 + 96.87] * 3
311.30 * 3 = 933.91
J Sum results of step 8 and 9 $14,722.39
13,788.48 + 933.91 = 14,722.39

Worksheet A
A. Enter adjustment factor if rural location: 1.17
B. Enter adjustment factor if teaching facility: none Enter PPS
C. Enter adjustment factor for DRG: 1.00 adjustment
Step Four D. Enter adjustment factor for comorbidity: 1.05 factor in
E. Enter adjustment factor for age: 1.07 Table 1
Multiply applicable adjustment factors together 1.3144 row four.
to determine PPS adjustment factor:

Worksheet B
Day Adjustment Adj. Factor * adjusted per-diem rate
Factor (step 5) ($944.42)
Day one 1.31 $1,237.19
Day two 1.12 $1,057.75
Day three 1.08 $1,019.97
Day four 1.05 $991.64
Day five 1.04 $982.19
Step Day six 1.02 $963.30
Seven Day seven 1.01 $953.86
Day eight 1.01 $953.86
Day nine 1.00 $944.42
Day ten 1.00 $944.42
Day eleven 0.99 $934.97
Day twelve 0.99 $934.97
Day thirteen 0.99 $934.97
Day fourteen 0.99 $934.97

6
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

2. IPPS: High cost devices are used in many inpatient surgery cases. The Safe-Cross®,
radio frequency total occlusion crossing system, is such a device.

The Safe-Cross® guidewire is present on the following claim. First, complete an

inpatient payment calculation to determine whether this claim would qualify for a
high cost outlier add-on payment. Second, calculate the total reimbursement for this
claim, including the additional amount that the facility would receive for the high cost
outlier if applicable. Does this facility have a profit or loss for this encounter?

The 2015 IPPS high-cost outlier threshold is $24,758; the hospital specific CCR is:
0.429; the hospital base rate is $6,200.00.

Inpatient Claim
Admit Date: January 1, Discharge January 10, Length of 9 days
2015 Date: 2015 Stay:
Principal
410.71 Subendocardial infarction, initial episode of care
Diagnosis*:
Secondary
414.01 Coronary atherosclerosis of native coronary artery
Diagnosis:
Secondary
427.1 Paroxysmal ventricular tachycardia
Diagnosis:
Secondary
272.0 Pure hypercholesterolemia
Diagnosis:
Principal 00.66
Percutaneous transluminal coronary angioplasty
Procedure:
Secondary
36.07 Insertion of drug-eluting coronary artery stent
Procedure:
Secondary
39.29 Other vascular shunt or bypass
Procedure:
Secondary
37.22 Left heart cardiac catheterization
Procedure:
MS-DRG: Percutaneous cardiovascular procedure with drug-eluting stent with major
246 complication/comorbidity or 4+vessels/stents
RW: 3.2368
*Diagnosis and procedures not converted to ICD-10-CM/PCS because service dates for
this claim are prior to implementation of ICD-10-CM/PCS

7
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

Claim Detail
Revenue Revenue Code Description Charge
Code
110 Room & board – private $8,375.00
120 Room & board – semi private $3,700.00
200 Intensive care – general $5,910.00
206 Intensive care – intermediate ICU $2,780.00
250 Pharmacy – general $1,486.66
255 Pharmacy – drugs incident to radiology $728.13
258 Pharmacy – IV solutions $1,583.60
259 Pharmacy – other pharmacy $7,766.18
270 Medical/surgical supplies – general $8,256.00
272 Medical/surgical supplies – sterile supply $8,366.25
272 The Safe-Cross® guidewire $15,000.00
278 Medical/surgical supplies – other implants $28,623.00
301 Laboratory –chemistry $2,739.00
302 Laboratory – Immunology $648.00
305 Laboratory – Hematology $2,335.00
323 Laboratory – Arteriography $2,491.00
360 Operating room – general $23,875.00
361 Operating room – minor surgery $517.00
370 Anesthesia - general $209.00
390 Blood and blood component admin, process, storage - gen $668.00
410 Respiratory services – general $21.00
420 Physical therapy - general $314.00
430 Occupational therapy – general $441.00
480 Cardiology – general $5,629.00
481 Cardiology – cardiac cath lab $6,249.00
483 Cardiology - echocardiology $1,786.00
710 Recovery room – general $1,648.00
730 EKG/ECG - general $1,098.00
921 Other diagnostic services – peripheral vascular lab $359.00
TOTAL CHARGE: $143,601.80

IPPS Outlier: If the cost of the case is greater than the fixed-loss cost threshold then an
outlier add-on payment is warranted. The fixed-loss cost threshold equals the MS-DRG
payment + the HC outlier threshold amount for the applicable year.

Outlier Add-on Amount is equal to 80% of the difference between the cost of the case
and the fixed-loss cost threshold.

Outlier paid if: cost of claim > reimbursement of claim + threshold

Cost = charge * hospital specific cost to charge ratio

Cost = $143,601.80 * 0.429

8
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

Cost = $61,605.17

Claim reimbursement = MS-DRG relative weight * hospital base rate

Claim reimbursement = 3.2368 * $6,200.00
Claim reimbursement = $20,068.16

Outlier = $61,601.80 > $20,068.16 + 24,758

Outlier = $61,601.80 > $44,826.16
Yes – this claim qualifies for a high cost outlier payment

HC outlier payment = 80% * (cost – (claim reimbursement + threshold))

HC outlier payment = 80% * ($61,601.80 – $44,826.16)
HC outlier payment = 80% * $16,775.64
HC outlier payment = $13,420.51

TOTAL reimbursement for claim = claim reimbursement + HC outlier payment

TOTAL reimbursement for claim = $20,068.16 + 13,420.51
TOTAL reimbursement for claim = $33,488.67

LOSS = Cost – Total payment

LOSS = $28,116.50

Outlier payment reduces loss from $41,537.01 to $28,116.50.

3. IPPS: Calculating Case Mix Index. This exercise includes three data sets. The first is
intended to be an example that the Instructor can walk the students through in class.
The second and third data sets are for student homework. When relative weights for
FYs later than 2015 become available, you can have your students update the MS-
DRG relative weights by locating IPPS Table 5 on the CMS website.

CMI Calculation Example

Collect the applicable relative weight and volume for each MS-DRG included in
study period.

MS- Weighted
DRG MDC TYPE MS-DRG Title 2015 RW Vol Volume
PANCREAS, LIVER & SHUNT
405 07 SURG PROCEDURES W MCC 5.5387 15
PANCREAS, LIVER & SHUNT
406 07 SURG PROCEDURES W CC 2.8067 55
PANCREAS, LIVER & SHUNT
407 07 SURG PROCEDURES W/O CC/MCC 1.9472 78

9
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

Calculate the weighted volume for each MS-DRG by multiplying the MS-DRG relative
weight by the Volume.

MS- 2015 Weighted

DRG MDC TYPE MS-DRG Title RW Vol Volume
PANCREAS, LIVER & SHUNT
405 07 SURG PROCEDURES W MCC 5.5387 15 5.5387 x 15
PANCREAS, LIVER & SHUNT
406 07 SURG PROCEDURES W CC 2.8067 55 2.8067 x 55
PANCREAS, LIVER & SHUNT
407 07 SURG PROCEDURES W/O CC/MCC 1.9472 78 1.9472 x 78

MS- 2015 Weighted

DRG MDC TYPE MS-DRG Title RW Vol Volume
PANCREAS, LIVER & SHUNT
405 07 SURG PROCEDURES W MCC 5.5387 15 83.0805
PANCREAS, LIVER & SHUNT
406 07 SURG PROCEDURES W CC 2.8067 55 154.3685
PANCREAS, LIVER & SHUNT
407 07 SURG PROCEDURES W/O CC/MCC 1.9472 78 151.8816

Once all of the weighted volumes have been calculated sum them.

MS- 2015 Weighted

DRG MDC TYPE MS-DRG Title RW Vol Volume
PANCREAS, LIVER & SHUNT
405 07 SURG PROCEDURES W MCC 5.5387 15 83.0805
PANCREAS, LIVER & SHUNT
406 07 SURG PROCEDURES W CC 2.8067 55 154.3685
PANCREAS, LIVER & SHUNT
407 07 SURG PROCEDURES W/O CC/MCC 1.9472 78 151.8816
TOTALS 148 389.3306
CMI

To calculate the CMI for the data set, divide the Total Weighted Volume by the Total
Volume.

MS- 2015 Weighted

DRG MDC TYPE MS-DRG Title RW Vol Volume
PANCREAS, LIVER & SHUNT
405 07 SURG PROCEDURES W MCC 5.5387 15 83.0805

10
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

PANCREAS, LIVER & SHUNT

406 07 SURG PROCEDURES W CC 2.8067 55 154.3685
PANCREAS, LIVER & SHUNT
407 07 SURG PROCEDURES W/O CC/MCC 1.9472 78 151.8816
TOTALS 148 389.3306
389.3306 /
CMI 148

MS- 2015 Weighted

DRG MDC TYPE MS-DRG Title RW Vol Volume
PANCREAS, LIVER & SHUNT
405 07 SURG PROCEDURES W MCC 5.5387 15 83.0805
PANCREAS, LIVER & SHUNT
406 07 SURG PROCEDURES W CC 2.8067 55 154.3685
PANCREAS, LIVER & SHUNT
407 07 SURG PROCEDURES W/O CC/MCC 1.9472 78 151.8816
TOTALS 148 389.3306
CMI 2.6306

The CMI for this data set is 2.6306. Be sure to carry enough precision (decimal points)
for the required use.

Data Set Two – CMI Calculation for Top MS-DRGs

11
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

Weighted
MS-DRG MS-DRG Title MDC TYPE RW Volume Volume
Major joint replacement or reattachment of
470 lower extremity w/o MCC 8 SURG 2.1137 420 887.754
Esophagitis, gastroent & misc digest
392 disorders w/o MCC 6 MED 0.7388 332 245.2816

194 Simple pneumonia & pleurisy w CC 4 MED 0.9688 295 285.796

Perc cardiovasc proc w drug-eluting stent
247 w/o MCC 5 SURG 2.0586 280 576.408

293 Heart failure & shock w/o CC/MCC 5 MED 0.6762 246 166.3452

313 Chest pain 5 MED 0.6138 233 143.0154

292 Heart failure & shock w CC 5 MED 0.9824 232 227.9168

690 Kidney & urinary tract infections w/o MCC 11 MED 0.7794 219 170.6886
Chronic obstructive pulmonary disease w/o
192 CC/MCC 4 MED 0.719 218 156.742

871 Septicemia w/o MV 96+ hours w MCC 18 MED 1.8072 213 384.9336
Nutritional & misc metabolic disorders w/o
641 MCC 10 MED 0.7051 209 147.3659

291 Heart failure & shock w MCC 5 MED 1.5097 193 291.3721

885 Psychoses 19 MED 1.0217 188 192.0796

312 Syncope & collapse 5 MED 0.7423 177 131.3871

Circulatory disorders except AMI, w card
287 cath w/o MCC 5 MED 1.129 173 195.317

195 Simple pneumonia & pleurisy w/o CC/MCC 4 MED 0.7044 172 121.1568
Cardiac arrhythmia & conduction disorders
310 w/o CC/MCC 5 MED 0.5493 171 93.9303

603 Cellulitis w/o MCC 9 MED 0.8447 143 120.7921

379 G.I. hemorrhage w/o CC/MCC 6 MED 0.6776 137 92.8312

Chronic obstructive pulmonary disease w
191 CC 4 MED 0.937 131 122.747
Intracranial hemorrhage or cerebral
65 infarction w CC 1 MED 1.0643 128 136.2304

683 Renal failure w CC 11 MED 0.9512 116 110.3392

189 Pulmonary edema & respiratory failure 4 MED 1.2136 114 138.3504

69 Transient ischemia 1 MED 0.6985 110 76.835

Intracranial hemorrhage or cerebral
66 infarction w/o CC/MCC 1 MED 0.753 102 76.806

Totals 4952 5292.4213

CMI 1.068744204

12
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

The CMI for this data set is 1.0687. Be sure to carry enough precision (decimal
points) for the required use.

Data Set Three – CMI Calculation for MDC 5

MS- Relative Weighted
DRG MDC TYPE MS-DRG Title Weight Volume Volume
HEART TRANSPLANT OR IMPLANT OF HEART
001 PRE SURG ASSIST SYSTEM W MCC 25.3920 25 634.8000
HEART TRANSPLANT OR IMPLANT OF HEART
002 PRE SURG ASSIST SYSTEM W/O MCC 15.6820 32 501.8240
215 05 SURG OTHER HEART ASSIST SYSTEM IMPLANT 15.4348 54 833.4792
CARDIAC VALVE & OTH MAJ
CARDIOTHORACIC PROC W CARD CATH W
216 05 SURG MCC 9.5238 12 114.2856
CARDIAC VALVE & OTH MAJ
217 05 SURG CARDIOTHORACIC PROC W CARD CATH W CC 6.3291 24 151.8984
CARDIAC VALVE & OTH MAJ
CARDIOTHORACIC PROC W CARD CATH W/O
218 05 SURG CC/MCC 5.5693 60 334.1580
CARDIAC VALVE & OTH MAJ
CARDIOTHORACIC PROC W/O CARD CATH W
219 05 SURG MCC 7.7067 23 177.2541
CARDIAC VALVE & OTH MAJ
CARDIOTHORACIC PROC W/O CARD CATH W
220 05 SURG CC 5.2056 45 234.2520
CARDIAC VALVE & OTH MAJ
CARDIOTHORACIC PROC W/O CARD CATH
221 05 SURG W/O CC/MCC 4.6347 78 361.5066
CARDIAC DEFIB IMPLANT W CARDIAC CATH
222 05 SURG W AMI/HF/SHOCK W MCC 8.6570 25 216.4250
CARDIAC DEFIB IMPLANT W CARDIAC CATH
223 05 SURG W AMI/HF/SHOCK W/O MCC 6.2924 62 390.1288
CARDIAC DEFIB IMPLANT W CARDIAC CATH
224 05 SURG W/O AMI/HF/SHOCK W MCC 7.6733 44 337.6252
CARDIAC DEFIB IMPLANT W CARDIAC CATH
225 05 SURG W/O AMI/HF/SHOCK W/O MCC 5.8610 98 574.3780
CARDIAC DEFIBRILLATOR IMPLANT W/O
226 05 SURG CARDIAC CATH W MCC 6.9573 67 466.1391
CARDIAC DEFIBRILLATOR IMPLANT W/O
227 05 SURG CARDIAC CATH W/O MCC 5.4493 85 463.1905
OTHER CARDIOTHORACIC PROCEDURES W
228 05 SURG MCC 7.3113 45 329.0085

13
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

229 05 SURG OTHER CARDIOTHORACIC PROCEDURES W CC 4.4606 68 303.3208

OTHER CARDIOTHORACIC PROCEDURES W/O
230 05 SURG CC/MCC 4.0755 97 395.3235
231 05 SURG CORONARY BYPASS W PTCA W MCC 7.7247 45 347.6115
232 05 SURG CORONARY BYPASS W PTCA W/O MCC 5.5976 72 403.0272
233 05 SURG CORONARY BYPASS W CARDIAC CATH W MCC 7.3493 68 499.7524
CORONARY BYPASS W CARDIAC CATH W/O
234 05 SURG MCC 4.8816 105 512.5680
CORONARY BYPASS W/O CARDIAC CATH W
235 05 SURG MCC 5.7089 45 256.9005
CORONARY BYPASS W/O CARDIAC CATH W/O
236 05 SURG MCC 3.7952 71 269.4592
237 05 SURG MAJOR CARDIOVASC PROCEDURES W MCC 5.0843 32 162.6976
238 05 SURG MAJOR CARDIOVASC PROCEDURES W/O MCC 3.4241 28 95.8748
AMPUTATION FOR CIRC SYS DISORDERS EXC
239 05 SURG UPPER LIMB & TOE W MCC 4.7590 5 23.7950
AMPUTATION FOR CIRC SYS DISORDERS EXC
240 05 SURG UPPER LIMB & TOE W CC 2.7594 6 16.5564
AMPUTATION FOR CIRC SYS DISORDERS EXC
241 05 SURG UPPER LIMB & TOE W/O CC/MCC 1.4111 8 11.2888
PERMANENT CARDIAC PACEMAKER IMPLANT
242 05 SURG W MCC 3.7242 32 119.1744
PERMANENT CARDIAC PACEMAKER IMPLANT
243 05 SURG W CC 2.6695 45 120.1275
PERMANENT CARDIAC PACEMAKER IMPLANT
244 05 SURG W/O CC/MCC 2.1555 89 191.8395
245 05 SURG AICD GENERATOR PROCEDURES 4.6485 77 357.9345
PERC CARDIOVASC PROC W DRUG-ELUTING
246 05 SURG STENT W MCC OR 4+ VESSELS/STENTS 3.2368 68 220.1024
PERC CARDIOVASC PROC W DRUG-ELUTING
247 05 SURG STENT W/O MCC 2.0586 104 214.0944
PERC CARDIOVASC PROC W NON-DRUG-
248 05 SURG ELUTING STENT W MCC OR 4+ VES/STENTS 3.0411 78 237.2058
PERC CARDIOVASC PROC W NON-DRUG-
249 05 SURG ELUTING STENT W/O MCC 1.8808 125 235.1000
PERC CARDIOVASC PROC W/O CORONARY
250 05 SURG ARTERY STENT W MCC 2.9885 100 298.8500
PERC CARDIOVASC PROC W/O CORONARY
251 05 SURG ARTERY STENT W/O MCC 2.0399 124 252.9476
252 05 SURG OTHER VASCULAR PROCEDURES W MCC 3.2646 52 169.7592
253 05 SURG OTHER VASCULAR PROCEDURES W CC 2.5532 31 79.1492
254 05 SURG OTHER VASCULAR PROCEDURES W/O 1.7304 22 38.0688

14
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

CC/MCC
UPPER LIMB & TOE AMPUTATION FOR CIRC
255 05 SURG SYSTEM DISORDERS W MCC 2.6051 3 7.8153
UPPER LIMB & TOE AMPUTATION FOR CIRC
256 05 SURG SYSTEM DISORDERS W CC 1.6986 2 3.3972
UPPER LIMB & TOE AMPUTATION FOR CIRC
257 05 SURG SYSTEM DISORDERS W/O CC/MCC 1.0558 1 1.0558
CARDIAC PACEMAKER DEVICE REPLACEMENT
258 05 SURG W MCC 2.7613 24 66.2712
CARDIAC PACEMAKER DEVICE REPLACEMENT
259 05 SURG W/O MCC 1.9924 34 67.7416
CARDIAC PACEMAKER REVISION EXCEPT
260 05 SURG DEVICE REPLACEMENT W MCC 3.7456 66 247.2096
CARDIAC PACEMAKER REVISION EXCEPT
261 05 SURG DEVICE REPLACEMENT W CC 1.8552 78 144.7056
CARDIAC PACEMAKER REVISION EXCEPT
262 05 SURG DEVICE REPLACEMENT W/O CC/MCC 1.3978 81 113.2218
263 05 SURG VEIN LIGATION & STRIPPING 1.8664 5 9.3320
OTHER CIRCULATORY SYSTEM O.R.
264 05 SURG PROCEDURES 2.8292 21 59.4132
265 05 SURG AICD LEAD PROCEDURES 2.8641 25 71.6025
ENDOVASCULAR CARDIAC VALVE
266 05 SURG REPLACEMENT W MCC 8.9920 20 179.8400
ENDOVASCULAR CARDIAC VALVE
267 05 SURG REPLACEMENT W/O MCC 6.7517 21 141.7857
ACUTE MYOCARDIAL INFARCTION,
280 05 MED DISCHARGED ALIVE W MCC 1.7289 23 39.7647
ACUTE MYOCARDIAL INFARCTION,
281 05 MED DISCHARGED ALIVE W CC 1.0247 10 10.2470
ACUTE MYOCARDIAL INFARCTION,
282 05 MED DISCHARGED ALIVE W/O CC/MCC 0.7562 11 8.3182
ACUTE MYOCARDIAL INFARCTION, EXPIRED
283 05 MED W MCC 1.6753 13 21.7789
ACUTE MYOCARDIAL INFARCTION, EXPIRED
284 05 MED W CC 0.7703 33 25.4199
ACUTE MYOCARDIAL INFARCTION, EXPIRED
285 05 MED W/O CC/MCC 0.5065 21 10.6365
CIRCULATORY DISORDERS EXCEPT AMI, W
286 05 MED CARD CATH W MCC 2.1240 11 23.3640
CIRCULATORY DISORDERS EXCEPT AMI, W
287 05 MED CARD CATH W/O MCC 1.1290 16 18.0640
288 05 MED ACUTE & SUBACUTE ENDOCARDITIS W MCC 2.7138 24 65.1312

15
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

289 05 MED ACUTE & SUBACUTE ENDOCARDITIS W CC 1.6991 60 101.9460

ACUTE & SUBACUTE ENDOCARDITIS W/O
290 05 MED CC/MCC 1.2476 45 56.1420
291 05 MED HEART FAILURE & SHOCK W MCC 1.5097 30 45.2910
292 05 MED HEART FAILURE & SHOCK W CC 0.9824 12 11.7888
293 05 MED HEART FAILURE & SHOCK W/O CC/MCC 0.6762 31 20.9622
294 05 MED DEEP VEIN THROMBOPHLEBITIS W CC/MCC 1.0480 5 5.2400
295 05 MED DEEP VEIN THROMBOPHLEBITIS W/O CC/MCC 0.6926 6 4.1556
296 05 MED CARDIAC ARREST, UNEXPLAINED W MCC 1.2347 7 8.6429
297 05 MED CARDIAC ARREST, UNEXPLAINED W CC 0.6475 12 7.7700
CARDIAC ARREST, UNEXPLAINED W/O
298 05 MED CC/MCC 0.4227 13 5.4951
299 05 MED PERIPHERAL VASCULAR DISORDERS W MCC 1.4094 14 19.7316
300 05 MED PERIPHERAL VASCULAR DISORDERS W CC 0.9770 21 20.5170
PERIPHERAL VASCULAR DISORDERS W/O
301 05 MED CC/MCC 0.6776 24 16.2624
302 05 MED ATHEROSCLEROSIS W MCC 1.0311 44 45.3684
303 05 MED ATHEROSCLEROSIS W/O MCC 0.6101 51 31.1151
304 05 MED HYPERTENSION W MCC 1.0016 13 13.0208
305 05 MED HYPERTENSION W/O MCC 0.6272 23 14.4256
CARDIAC CONGENITAL & VALVULAR
306 05 MED DISORDERS W MCC 1.3687 21 28.7427
CARDIAC CONGENITAL & VALVULAR
307 05 MED DISORDERS W/O MCC 0.7698 20 15.3960
CARDIAC ARRHYTHMIA & CONDUCTION
308 05 MED DISORDERS W MCC 1.2107 30 36.3210
CARDIAC ARRHYTHMIA & CONDUCTION
309 05 MED DISORDERS W CC 0.7865 6 4.7190
CARDIAC ARRHYTHMIA & CONDUCTION
310 05 MED DISORDERS W/O CC/MCC 0.5493 1 0.5493
311 05 MED ANGINA PECTORIS 0.5662 3 1.6986
312 05 MED SYNCOPE & COLLAPSE 0.7423 2 1.4846
313 05 MED CHEST PAIN 0.6138 14 8.5932
OTHER CIRCULATORY SYSTEM DIAGNOSES W
314 05 MED MCC 1.9195 20 38.3900
OTHER CIRCULATORY SYSTEM DIAGNOSES W
315 05 MED CC 0.9613 30 28.8390
OTHER CIRCULATORY SYSTEM DIAGNOSES
316 05 MED W/O CC/MCC 0.6210 50 31.0500
TOTALS 3527 13912.6558
CMI 3.9446

16
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

The CMI for this data set is 3.9446. Be sure to carry enough precision (decimal points)
for the required use.

Questions from Text with Keys

Check Your Understanding Questions

Check Your Understanding 6.1

1. Discuss two of the four guiding principles of prospective payment.

Payment rates are to be established in advance and fixed for the fiscal period to
which they apply.
Payment rates are not automatically determined by the hospital’s past or
current actual cost.
Prospective payment rates are considered to be payment in full.
The hospital retains the profit or suffers a loss resulting from the difference
between the payment rate and the hospital’s cost, creating an incentive for cost
control.

2. In the four-step MS-DRG assignment process, if a coder is able to assign the MS-
DRG in step one, the pre-MDC assignment, all subsequent steps in the process are:
Ignored

3. List two refinement questions that help coders group together patients with like
resource consumption.
Is a CC present? Is a major complication or complex diagnosis present? What is
the patient’s sex? What is the patient’s discharge disposition? For neonates,
what is the birth weight of the baby?

4. How are Medicare base payment rates increased to reflect inflation?

The base-year payment rate is updated using an update factor established by
Congress to account for inflation (market basket). Also, the labor-related share
is adjusted by the wage index for the hospital’s geographic area.

5. How is the discharge disposition used in the execution of PACT payment?

The discharge disposition identifies where the patient goes for care after
discharge. If the discharge disposition indicates that the patient is to receive
post-acute care (i.e. home health) then the encounter is routed through the
PACT pathway for possible payment reduction if all criteria are satisfied.

17
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

Check Your Understanding 6.2

1. Which piece of legislation charged CMS with creating a prospective payment system
for the inpatient psychiatric setting? What were the requirements that were included
in the law?
The Balanced Budget Refinement Act of 1999 (BBRA) required the development
of a per-diem prospective payment system (PPS) for inpatient psychiatric
services provided in IPFs. Specifically, the BBRA charged CMS with developing
a classification system that would reflect the resource consumption and,
therefore, cost differences among various IPFs.

2. What type of prospective payment system is used in the IPF PPS?

Per diem methodology

3. What is the formula for the ECT adjustment for a facility with a wage index of .9812?
ECT formula:(ECT payment x labor% x WI) + (ECT payment x nonlabor%)
($315.55 x .69294 x .9812) + ($315.55 x .30706)
($215.55) + ($96.90)
$312.45 – please note that this amount is calculated using FT 2015
figures

4. What are the two categories of adjustments in the IPF PPS?

Patient level adjustments and facility level adjustments

5. List and discuss two of the provisions of the IPF PPS.

• Outlier payment provision: Outlier add-on payments are provided for high
cost encounters where the cost exceeds the threshold.
• Stop-Loss provision: Stop-Loss provision was used as the phase-in period for
this PPS.
• Initial Stay and Readmission provision: Because facilities have a higher
adjustment at the beginning of the admission, CMS implemented the
readmission provision to prevent premature discharge of patients and then
readmission of them. If a patient is discharged and then readmitted within
three days, the two admissions count as one admission.
• Medical Necessity provision: Medical necessity must be established for each
patient upon admission to the IPF.

18
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

Review Quiz
1. List at least two major reasons that Medicare administrators turned to the
prospective payment concept for Medicare beneficiaries.
Medicare payments to hospitals grew annually by 19 percent; the Medicare
hospital deductible had expanded, placing a burden on beneficiaries; the
solvency of the Medicare Trust Fund was endangered by escalating costs;
expenditures for hospital inpatient care jeopardized Medicare’s ability to
fund other necessary health programs; Medicare’s payments for comparable
services were vastly different across hospitals nationwide; and the cost-based
system imposed burdensome reporting requirements.

2. How do MS-DRGs encourage inpatient facilities to practice cost management?

Because DRGs are a fully packaged system, the predetermined payment for
each MS-DRG is full payment for all hospital services performed during an
encounter, so facilities accept profit or loss based on the cost of providing the
services.

3. Why was a severity of illness refinement performed on the DRG system? Was it
supported by the healthcare community?
The severity of illness refinement allows cases with a higher severity of illness
ranking to be more appropriately reimbursed. Yes, the refinement was
supported by the healthcare community.

4. List the steps of MS-DRG assignment.

1. Pre-MDC Assignment
2. MDC Determination
3. Medical/Surgical Determination
4. Refinement

5. Why does the IPF PPS length-of-stay adjustment factor grow smaller during the
patient encounter?
The length-of-stay adjustment was implemented because data showed that
per-diem costs for psychiatric cases decreases as LOS increases.

6. Describe at least two of the patient-level adjustments for IPF PPS claims and why
they are used.
Patient level adjustments include: Length of stay, MS-DRG adjustment,
Comorbid conditions, age, and electroconvulsive therapy.
LOS adjustment was provided because the first days of the stay are more
costly than later days within a confinement period. Different encounters, as
classified by MS-DRGs, utilize different levels of resources and therefore
warrant an adjustment. Costly comorbidities necessitated an adjustment. An
adjustment was implemented for older patients because regression analysis
shows the cost per day as increasing with increasing patient age. Another
adjustment was implemented for patients receiving electroconvulsive

19
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

therapy, the cost of which is associated with longer stays and increased use of
ancillary services.

7. What is the labor portion of the IPF PPS per diem rate? What is the non-labor
portion of the IPF PPS per diem rate?
69.3 percent is the labor portion and 30.7 percent is the non-labor portion.

8. Why was the initial stay and readmission provision included in the IPF PPS?
CMS did not want to provide an incentive for facilities to prematurely
discharge patients and then subsequently re-admit them because the length
of stay adjustment is weighted heavier for the beginning days for an
admission.

9. Describe the medical necessity provision of the IPF PPS.

Medical necessity must be established by the physician at the start of the
inpatient psychiatric admission. Medical necessity must be re-evaluated and
established for admissions that extend past the 18th day.

10. When performing the payment determination for IPF PPS admissions, which step
comes first—WI adjustment or application of the patient and facility level
adjustments?
Wage index adjustment

Test Bank with Key

Instructions: For each item, complete the statement correctly or choose the most
appropriate answer.

1. Which of the following concepts is a guiding principle for prospective payment?

a. A hospital’s payment rate is determined the hospital’s part or current actual costs.
b. Hospitals may balance bill the patient so that their total payment is equal to their
cost for providing the care.
c. Hospitals will not suffer a loss because their costs are always covered due to
balance billing and outlier payments.
d. Payment rates are established in advance of the healthcare delivery and are
fixed for the fiscal period to which they apply.

2. Which piece of legislation called for the first hospital inpatient prospective payment
system? This piece of legislation also allowed some hospital setting to retain their
cost-based payment systems.
a. Tax Equity and Fiscal Responsibility Act (TEFRA)
b. Balanced Budget Act (BBA)
c. Balanced Budget Refinement Act (BBRA)
d. False Claims Act

20
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

3. What is the average of the sum of the relative weights of all patients treated during a
specified time period?
a. Case mix index
b. Outlier pool
c. Share
d. Mean qualifier

4. What is the basis of the “labor-related share”?

a. Cost-of-living adjustment
b. Facilities’ costs related to payrolls, benefits, and professional fees
c. Market-basket index
d. Disproportionate share percentage

5. Which is the correct formula for wage index adjustment?

a. (payment rate * non-labor portion * WI) + (payment rate * labor portion)
b. (payment rate * labor portion * WI) + (payment rate * non-labor portion)
c. (payment rate * WI)
d. (payment rate * non-labor portion * WI) + (payment rate * labor portion * COLA)

6. In which government publication are the details about the various PPS introduced,
commented on and finalized?
a. Federal Register
b. Program transmittals
c. Medicare Claims Processing Manual
d. Medicare Learning Network documents

7. The MS-DRG payment includes reimbursement for all of the following inpatient
services except:
a. Physician hospital visit
b. Surgery
c. Laboratory tests
d. Medications

8. Mr. Brown was admitted to the hospital with severe chest pains. During his encounter
he underwent a coronary artery bypass procedure (CABG) due to coronary artery
disease (CAD). What is the first step in determining the MS-DRG assignment for this
encounter?
a. Determine if the case is a medical or surgical case
b. Identify the major diagnostic category for coronary artery disease
c. Determine if the coronary artery bypass procedure is one of the Pre-MDC
procedures
d. Identify if the Mr. Brown had a complication/comorbid condition

21
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

9. What is the general term for software that assigns inpatient diagnosis related groups?
a. Encoder
b. Grouper
c. Aligner
d. Scrubber

10. Which IPPS provision is provided to facilities that experience a financial hardship
because they provide treatment for patients who are unable to pay for the services?
a. Underserved facility
b. Financial hardship hospital
c. Percentage income payment facility
d. Disproportionate share hospital

11. Which of the following IPPS provisions provides the hospital with a hospital specific
reimbursement amount?
a. Indirect medical education
b. High cost outlier cases
c. New medical services and new technology
d. A &B
e. B & C

12. Which Medicare contractor reimburses acute care hospitals on behalf of Medicare?
a. Quality improvement organization (QIO)
b. Recovery audit contractor (RAC)
c. Medicare administrative contractor (MAC)
d. All of the above

13. What is the rate year (RY) for IPPS?

a. January – December
b. April – March
c. July – June
d. October - September

14. In MS-DRGs, for what is the case-mix index a proxy?

a. Risk of mortality
b. Difficulty of treatment
c. Consumption of resources
d. Prognosis

15. In the IPPS, what is the term for each hospital’s unique standardized amount based on
its costs per Medicare discharge?
a. Base payment rate
b. Diagnosis related group
c. Carrier amount
d. Cost outlier

22
Principles of Healthcare Reimbursement: Instructor’s Manual
Chapter 6

16. A Medicare patient was discharged from one acute IPPS and admitted to another
acute IPPS hospital on the same day. How will the two acute IPPS hospitals be
reimbursed?
a. The first hospital receives a per-diem payment derived from the potential MS-
DRG and the second hospital receives the full MS-DRG.
b. The same MS-DRG payment is made to both hospitals based on the principal
diagnosis and procedures (if applicable) at the second hospital.
c. Each hospital receives the same MS-DRG payment based on the principal
diagnosis and procedures (if applicable) at the first hospital.
d. The appropriate and potentially different MS-DRG payments are made to each
hospital based on the patient’s principal diagnosis and procedures (if applicable)
at each hospital.

17. Which reimbursement methodology is used in the Inpatient Psychiatric Facility

Prospective Payment System?
a. Case rate
b. Per diem rate
c. Global payment
d. Reasonable cost

18. Which of the following is not a facility-level adjustment under the IPF PPS?
a. Wage index
b. Electroconvulsive therapy
c. Rural location
d. Cost-of-living adjustment

19. Within the IPF PPS which of the following statements is true?
a. The cost for psychiatric cases decreases as the length of stay increases
b. Electroconvulsive therapy is provided for every patient
c. It is less expensive to treat a 75 year old patient than a 55 year old patient
d. All of the above are false

20. Under the IPF PPS which states are included in the cost of living adjustment
(COLA)?
a. Alaska and California
b. Hawaii and Alaska
c. California and Hawaii
d. Hawaii and New York

21. Which of the following is not a patient level adjustment used in the IPF PPS?
a. Length of stay
b. Comorbidity
c. MS-DRG
d. Full service emergency department

23
Test Bank for Principles of Healthcare Reimbursement 5th Edition by Casto

Principles of Healthcare Reimbursement: Instructor’s Manual

Chapter 6

22. Mary Smith was admitted to IPF Hospital A on April 1. She is discharged on April 5.
Mary Smith is readmitted to IPF Hospital B on April 7 and continues the hospital stay
until April 10. What length-of-stay adjustment day should be used to calculate the
payment for the first day payment for IPF Hospital B?
a. Day 1
b. Day 5
c. Day 7
d. Day 9

23. When comparing Medicare’s IPPS and IPF PPS which of the following statement is
false?
a. Both PPS use wage index adjustments to account for differences in the cost of labor
b. Both PPS have a high cost outlier provision
c. Both PPS utilize a case rate reimbursement methodology
d. Although different, both PPS provide supplemental reimbursement for physician
education programs

24

Visit TestBankBell.com to get complete for all chapters