Among the many issues facing hospitals during this national emergency, is interpreting the sweeping changes which are impacting care delivery, documentation, coding, billing and reimbursement. In this, and subsequent special editions of the HotStone, we will provide the significant reimbursement, regulatory and revenue cycle changes, helping you continue what you do best!
COST REPORT REIMBURSEMENT
Hospitals that are fully prospective for both inpatient and outpatient services should be attentive to five areas that could impact reimbursement; Direct Graduate Medical Education, Indirect Medical Education, Wage Index, sequestration and accelerated payments.
1. Direct Graduate Medical Education (“DGME”)
Medicare reimbursement for the cost of the hospital training residents and interns will continue to be based on the “Per-Resident-Amount” (“PRA”) established for each teaching hospital. Simply put, Medicare reimburses the hospital using a formula that multiplies the PRA by the allowable number of resident and intern FTEs. That result is multiplied by the Medicare utilization percentage determined by dividing the Medicare patient days by total hospital patient days.
It is unknown to what extent a hospital’s Medicare utilization will change during this crisis. For some hospitals, there could be an increase in Medicare utilization resulting from the elimination of elective procedures that typically had a non-governmental payor mix. As a result, the overall Medicare utilization as a percentage of patient days could increase. It will be important for hospitals to monitor swings in Medicare utilization and determine if the fluctuations will impact DGME payments.
2. Indirect Medical Education (“IME”)
CMS has not issued any guidance to address the reimbursement implications for IME. Providers will need to pay attention to the number of available beds, as this is a key factor in determining Medicare reimbursement. Specifically, any increases in beds available at the hospital will result in a reduction in the Medicare IME Payments whereas decreases would have a positive effect.
There are two reimbursement principles to consider in this equation: 1) individual beds within a unit that have been taken out of service for thirty or more consecutive calendar days, and 2) beds comprising an entire unit that has been closed for the preceding three months.
Where an individual bed was taken out of service and could not be made available for occupancy within twenty-four hours, and it has been in this condition for thirty consecutive days, it can be removed from the IME available bed count. The hospital must be able to provide documentation supporting why the bed could not be made available. Examples include, renovation and structural changes, occupancy of a second bed by a patient requiring isolation or other circumstances requiring the bed to be considered not available to provide patient care. Should the unit be reopened within the thirty day period, that bed will be considered available for the entire thirty days. As such, activating a bed during this national emergency could result in an increase in the beds available.
When a unit has been closed for the three preceding months, beginning on the first day for the next month, the unit will be considered closed and removed from available beds. If a patient is admitted to a bed in the closed unit during the three-month period, the beds are considered available for the entire period. For example, if a unit is closed and a patient is admitted on the last day of the three months, the unit is considered available and a new three-month period must be met.
This is an important distinction to monitor during, and evaluate after the moratorium on elective procedures subsides. To the extent possible, we recommend keeping any closed unit free from admissions until all other beds in the hospital have been filled since not using that unit could be in the best interest of the hospital. If your hospital has several units with low occupancy, it is also advantageous to consolidate admissions into certain units so that another unit can be closed, and the three-month period can commence, rendering those beds unavailable at a later date.
There may also be the need to expand the number of available beds should the hospital reach maximum occupancy. Non-certified beds such as a distinct observation unit, temporary beds set either on campus or at a remote location, or the leasing of or gaining access to beds in another facility such as an ambulatory surgical center may be considered when counting the beds for IME reimbursement. It is anticipated that CMS will issue guidance as to how these beds are treated for IME reimbursement.
3. Wage Index
Should the hospital begin to experience increases in utilization, it may be necessary to hire or enter into contracts for additional personnel. The cost of the additional staffing will be included on the Medicare cost report, as well as the additional costs incurred to support the staff such as housing/lodging, meals, childcare, transportation, fringe benefits and/or bonus payments. All of these additional costs may become a component of the hospital’s average hourly wage and the CBSA wage index. Depending on the staffing needs, the hospital’s average hourly wage could increase or decrease. If lower compensated individuals make up the additional staffing, it will bring the average hourly wage down negatively affecting the wage index and highly compensated individuals will increase AHW and wage index.
It is uncertain at this time how CMS will view the increases or decreases in the average hourly wages and wage index, particularly as some Governors are encouraging hospitals within close proximity to share personnel and resources, while clinical personnel are traveling from out of state to assist hospitals hardest hit by the virus. The Medicare calculation for the wage index uses the average hourly wage of the hospitals in a CBSA to the national average of all of the hospitals. As such, an increase in the wage index of an individual CBSA is to the detriment of all the remaining CBSA and rural areas.
This is an area we expect CMS to address in any guidance or rule making. There are several directions they may go that might include holding harmless, any hospitals experiencing a decline in the wage index, requiring hospitals that experience additional temporary costs during the national emergency period to document those costs and remove them from the cost report or decide that since all hospitals have been affected in some way, allowing the wage indices to compute including all the additional costs.
While uncertainty abounds, it is important to keep in mind these reimbursement principles, and track the associated beds and costs separately, so that your facility is able to leverage their financial position effectively.
4. Sequestration
Currently, CMS is reducing Medicare payments by 2%. Commencing May 1, 2020, hospitals should begin to see a 2% increase in the Medicare payments, which will continue until at least December 31, 2020. Because there was a defined time period required for the sequestration adjustment, CMS will in turn extend the sequestration period through 2030.
5. Accelerated Payments
Recognizing that there will be a disruption of cash flow to providers, CMS is expanding their accelerated payment program. The guidance issued by CMS can be found at the website below:
https://www.cms.gov/files/document/Accelerated-and-Advanced-Payments-Fact-Sheet.pdf
We recommend hospitals consider applying for the accelerated payment program. If you have any questions, please contact Jim O’Connell, Senior Principal at jimoconnell@sunstoneconsulting.com