One of our goals is to use this blog as a forum to share information -- including reports from other sources -- that the industry might find useful during the transition to MS-DRGs. I recently came across an article that provided some good analysis of the IPPS Proposed Rule. Although the article was published in late April, there is a wealth of information in it that I haven’t seen posted elsewhere.

The article is written by Larry Goldberg, who is the senior advisor for health care legislative and regulatory matters at Grant Thornton, LLC, a global accounting, tax and business advisory firm. At 27 pages, the article is quite long, but it’s worth browsing through the article to find the following sections:
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When coding inpatient encounters, one simple letter will have a big impact on hospital profitability starting in October 2008. The letter "N" indicates conditions that occurred after admission and signifies a hospital-acquired condition -– and the potential of a financial loss on that case.

CMS issued instructions May 15 regarding the reporting of the present on admission (POA) indicator. 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 January 1, 2008. Hospitals that fail to provide the POA code for discharges on or after January 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 January 1, 2008. Therefore, hospitals that submit claims via DDE cannot begin submitting the POA indicator until January 1, 2008.
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Hospitals that correctly prepare for MS-DRGs may realize substantial benefits, according to an article that quotes our very own Dean Farley. Highlights of the article include:

MS-DRGs offer two significant advantages to hospitals
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The 2.4 percent rate reduction in CMS’s IPPS Proposed Rule is raising concerns among members of Congress. In a letter sent May 3 to CMS acting Administrator Leslie V. Norwalk, 23 U.S. senators expressed their disapproval, stating that "these draconian cuts in reimbursements, which are based on conjecture, will impose an added burden on all hospitals."

A separate letter signed by 77 U.S. representatives and sent to Norwalk on May 4, stated that there is no legal mandate or precedent for making reductions of "this magnitude -- without any empirical evidence of actual and measurable changes in coding."
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If you’ve been carefully analyzing the impact that MS-DRGs will have on your organization, you might need to reexamine your data.

CMS reported the discovery of an error in the way DRG relative weights were calculated in its FY 2008 IPPS Proposed Rule. CMS issued the report May 17th and posted the corrected data tables on its Web site, which can be accessed by clicking here and here.
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The Centers for Medicare and Medicaid Services (CMS) sent purchasers of its MedPAR limited data sets the following notice, dated Monday, May 14:

We have... received requests from the public for access to the Grouper that CMS used to develop the FY 2008 proposed changes to the MS-DRGs and the relative weights. Since the grouper cannot be made available prior to August each year, as an alternative, we are providing the previous year’s (in this case FY 2005) Expanded Modified MedPAR file which contains the current and new proposed MS-DRG assignments.

Clearly there is a large interest in MS-DRG grouping and analysis. As both hospitals and payers prepare for this change, it is imperative that they understand how the change in grouping systems is going to affect them from both an operational and financial perspective.
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Medicare Severity DRGs (MS-DRGs) are getting a lot of attention right now, on this weblog and in the media (see here and here). But MS-DRGs are not the only important aspect of the 1200-page proposed rule. My colleague Cheryl D’Amato has already discussed proposed “present on admission” requirements on this blog (see here and here). I’ll discuss another important point from the proposed rule: new quality measures.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) required that base reimbursement under the inpatient prospective payment program (IPPS) be reduced by 0.4% for hospitals not submitting data on a set of ten CMS-established quality indicators.
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Six powerful hospital associations sent a letter early this month to Leslie Norwalk, CMS's acting administrator, asking the organization to eliminate two cost-cutting elements from its 2008 proposed rule.

The associations took issue with a proposal that would cut inpatient payments by 2.4 percent in both 2008 and 2009 and with a proposal that would reduce capital payments in urban areas.
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In my previous post, I discussed the CMS proposal for determining if beneficiaries acquired a condition or complication during their hospital stay. I also discussed the section of the Deficit Reduction Act (DRA) that required the identification of hospital-acquired conditions and the fact that beginning October 1, 2008, codes representing some of these conditions would not be considered during DRG assignment unless they were present on admission. In this post, I’ll discuss the specific hospital-acquired conditions that CMS is proposing to meet the DRA requirement.

CMS has partnered with the Centers for Disease Control and Prevention (CDC) to identify potential high-volume, hospital-acquired conditions that hospitals could have reasonably prevented, and to propose financial penalties for when they occur. CMS has also solicited input from hospitals associations and other organizations. CMS applied the following criteria to select these conditions:
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When CMS outlined MS-DRGs, a new set of Diagnosis-Related Groups, I can imagine some in the industry breathed a sigh of relief. Because rather than proposing a wholesale change from the 24-year-old DRG system, CMS used that familiar system as a starting point.

But while their choice of methodology will certainly make the change easier for some to handle, CMS has introduced a number of new changes in the DRG methodology. Understanding these changes is critical.
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To err is human. To forgive is divine. But to pay for hospital errors is no longer tolerable.

In this post, I’ll discuss the CMS proposal for determining if beneficiaries acquired a complication during their hospital stay. In a later post, I’ll discuss how CMS is proposing to deal with some specific hospital-acquired conditions.
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