Q&A about the financial impact of MS-DRGs

On July 17 and 19, I conducted two webinars on the “Financial Impact of MS-DRGs.” Webinar attendees had the opportunity to ask me questions at the end of the presentation. Below are highlights of the questions and answers.

Question: Is Medicare or anyone else going to support Version 24?

Answer: Once MS-DRGs are implemented, V24 (the current DRG system) will be no longer supported. Ingenix does offer code mapping in its grouper software, but in terms of updates to the V24 CMS grouper, we know of no one who will continue to support it for new codes.

Q: Are commercial carriers currently implementing MS DRGs in their contracts?

A: Yes. Many commercial carriers are mandated by their contracts to follow Medicare reimbursement policies. So, if MS-DRGs become a reality, they will have to implement MS-DRGs in their contracts. To learn more about ramifications of this, Ingenix is hosting two webinars on the Contracting Implications of MS-DRGs on Aug. 7 at 11 a.m. ET, and Aug. 9 at 3 p.m. ET.

Q: When will the Final Rule will be released and when is it scheduled to take effect?

A: The final rule is due to be released Aug. 1, 2007, and the effective date will be Oct. 1, 2007, according to the Proposed Rule.

Q: Is CMS going to retain V25 next year?

A: To our best understanding, V25 with MS-DRGs will be implemented next year and V24 (CMS DRGs) will cease to be used by Medicare at that point. However, even if Medicare decides to table severity adjustment for a year, grouper rules are always updated for Medicare’s fiscal year, which begins on October 1. Whether or not CMS implements severity adjustment in FY 2008,

Q: Will organizations be required to use the Present on Admission (POA) indicator starting Oct. 1?

A: CMS issued instructions May 15 regarding the reporting of the POA indicator. For fiscal year 2008, the POA indicator does not have any reimbursement implications. CMS is tasked with finding two to three conditions that WILL be impacted by present on admission indicator for fiscal year 2009. However, hospitals should begin reporting the POA indicator for every diagnosis on a Medicare inpatient acute care hospital claim with discharges beginning on or after Oct. 1, 2007. Hospitals must report the POA indicator by Jan. 1, 2008. Hospitals that fail to provide the POA code for discharges on or after Jan. 1, 2008 will receive a remittance advice remark code informing them that they failed to report a valid POA code. Direct data entry (DDE) screens cannot be updated to include a space for entering POA information until Jan. 1, 2008. Therefore, hospitals that submit claims via DDE cannot begin submitting the POA indicator until Jan. 1, 2008. In addition,

Q: How do you group your claims using V25? Was it from CMS?

A: We read and implemented the proposed rule regulations by reading the proposed rule and doing our best to understand what was to be implemented. There ended up being a number of unresolved issues that we questioned CMS about (the information in the proposed rule was either not specific enough OR was contradictory to the proposed rule MedPAR file that they released). Ingenix has developed a grouper that works under the specifications outlined in the Proposed Rule. Ingenix has made the online version of this grouper free of charge for hospitals to test their data. It can be found here. The grouper will be updated after the Final Rule is published.

Q: Has Ingenix released a V25 grouper?

A: We plan to release V25 grouper after the Final Rule has been released, likely by the middle of September 2007.

Q: Are ICD-9 procedures codes going to have any affect on grouping?

A: Yes. The existing CMS (V24) grouping methodology is affected by ICD-9 procedure codes. This existing methodology is the basis for assigning the base category DRG (before splitting on severity) in the new MS-DRG proposed methodology. Therefore ICD-9 procedures will continue to have an affect on grouping. In addition, there are a number of changes in CMS’s methodology around ICD-9 procedure use in the new MS-DRG methodology. For example, ICD-9 procedure code 64.0, Circumcision, is no longer considered a procedure code under the new methodology.

Q: Do we know the probability of MS-DRGs being adopted by CMS this year?

A: Based on the fact that most comments to CMS have been supportive of the methodology change, and that CMS has been under pressure to implement a severity system for a number of years, I believe that CMS will be likely to adopt MS-DRGs for this year. The one area where they are getting push back is the 2.4 percent decrease in rates. This is the one area where I believe they are likely to back off. (Note: Subsequent to my answering of this, the U.S. House of Representatives voted 412-12 to prevent CMS from doing the 2.4 percent decrease AND to have CMS postpone the implementation of MS-DRGs for one year. This is not yet binding, as the bill has to still pass the Senate and be signed by the President. However, it may add some controversy to the Final Rule, which is due out August 1.)

Q: How can hospitals test large amounts of their historical data to estimate the financial impact MS-DRGs if we do not have the actual grouper?

A: Ingenix has made available a grouper based on the Proposed Rule for assignment of DRGs and analysis. (Note that this is only on a service basis, and the software can not be purchased). Assuming that the Final Rule is implemented, we will have a Final Rule grouper available on or around the middle of September.

Q: Can we get a copy of this presentation?

A: A copy of the presentation will be available on our e-Commerce Website —www.shopingenix.com. We’ll post on this blog when the presentation becomes available. Webinar attendees should have already received their copy.