1. ©2010 Coventry Health Care. All rights reserved. Proprietary – Do not copy, distribute or disclose without permission of Coventry Health Care. Provided by Coventry Health Care® California Medical Bill Reviewer Re-Certification Unit 4: Hospital Guidelines Module 1: Inpatient Hospital Guidelines

2. 2 CA Regulation Refresher – Inpatient Hospital March 2011 Overview Inpatient Hospital Guidelines… What Inpatient Hospital Services Are How Inpatient Fees are Determined Definition of Payment Billing Examples How Transfers are Billed Exceptions to the Inpatient Fee Schedule Lets start by reviewing what inpatient services are and how they are determined. Inpatient Hospital Guidelines… What Inpatient Hospital Services Are How Inpatient Fees are Determined Hello, we meet again! Today during our short visit well review what youve learned in the past two years about Inpatient Hospitals. As before, in this module, you will review current inpatient billing practices, how fees are determined and how services are billed.

3. 3 CA Regulation Refresher – Inpatient Hospital March 2011 History In 2003, the State of California revised the payment composition of the Inpatient Hospital Fee Schedule. The changes became effective for discharge services on or after January 1, 2004. California State Capitol Building Sacramento, CA Lets take a look…

4. 4 CA Regulation Refresher – Inpatient Hospital March 2011 Place holder If in doubt, remember… if the patient occupied a bed at midnight, it is an inpatient stay! A hospital bill is considered inpatient when a patient is admitted to a hospital, skilled nursing facility, or immediate care facility for bed occupancy, for the purposes of receiving inpatient services. What are inpatient services?

5. 5 CA Regulation Refresher – Inpatient Hospital March 2011 Determining Inpatient Fees Each hospital is given unique payment factors to determine reimbursement for specific procedures, rated in terms of cost and intensity, such as… Medicare ID Number (5 digit) Outlier Thresholds Cost-to-Charge Ratios Composite Factor and these factors are part of the Medicare Severity Diagnosis-Related Group (MS-DRG) system.

6. 6 CA Regulation Refresher – Inpatient Hospital March 2011 Diagnosis-Related Group DRG Relative Values… The Diagnosis-Related Group (DRG) system is used nation-wide togroup related diagnosis (es) and principle procedures performed. DRG Weight Geometric Mean Length of Stay Outlier Threshold It helps us classify patients based on principal diagnosis, surgical procedure, age, the presence of morbidities, complications and other pertinent data. The weighting factor for a diagnosis- related group assigned by CMS for the purpose of determining payment under Medicare. Basic fee + Hospital-specific Outlier Threshold =

7. 7 CA Regulation Refresher – Inpatient Hospital March 2011 Composite Factor New Technology Payment DRG Weight Operating cost Outlier Payment Capital cost The Composite Factor is calculated by adding the prospective operating cost and the prospective capital cost for the health facility. Operating cost Capital cost While excluding… DRG weight, Any applicable outlier, and New technology payment

8. 8 CA Regulation Refresher – Inpatient Hospital March 2011 Maximum Payment The Maximum payment for inpatient medical services is also known as the Basic Fee. The Basic Fee for inpatient medical services shall be determined by multiplying 1.20 by the product of the health facility's composite factor and the applicable DRG weight. Basic Fee = 1.20 x (Composite Factor x DRG wt.)

9. 9 CA Regulation Refresher – Inpatient Hospital March 2011 California Compensation Factor 1.20 Since health care in California is more expensive than the average state, the California Workers Compensation system applies a factor of 1.20 to Medicare values to compensate for this expense in the Golden State. Youll see this used in many of the calculations that follow. And now youll know why!

10. 10 CA Regulation Refresher – Inpatient Hospital March 2011 Example of a Basic Fee This is a bill for inpatient fees from St Rose Hospital. Youll see the items highlighted here factored into the calculation of the examples that follow. Hi, keep in mind the concepts we discussed, lets re- examine a few examples.

11. 11 CA Regulation Refresher – Inpatient Hospital March 2011 Relative Weight You can identify the DRG using this column. The average Length of Stay in days for a procedure is listed this way. Relative Weight is a factor that compares a services time and difficulty to all other services. The more difficult and costly, the higher the weight. This information is found in the Fee Schedule. Look at 456. It shows up in an example later.

12. 12 CA Regulation Refresher – Inpatient Hospital March 2011 Hospital Composite Factors MEDICARE PROVIDER NO. NAMECompositeHospital Specific Outlier Threshold Cost-to- Charge Ratio 050002ST ROSE HOSPITAL $10,897.56$27,895.080.234 050009QUEEN OF THE VALLEY $ 7,009.97$ 30,106.620.289 050015NORTHERN INYO HOSPITAL $ 5,891.61$ 25,309.480.775 050017MERCY GENERAL HOSPITAL $ 7,381.89$ 28,444.310.215 050018PACIFIC ALLIANCE MEDICAL CENTER $10,569.18$ 26,543.750.548 050022RIVERSIDE COMMUNITY HOSPITAL $ 6,725.23$ 25,726.740.261 050024PARADISE VALLEY HOSPITAL $ 8,749.08$ 25,910.070.229 050025UNIV OF CALIFORNIA SAN DIEGO MED CTR $ 8,605.70$ 25,906.720.335 See how the these components appear in the Fee Schedule. Well be using St. Rose as an example.

13. 13 CA Regulation Refresher – Inpatient Hospital March 2011 Hospital Specific Outlier Threshold MEDICARE PROVIDER NO. NAME Composite Hospital Specific Outlier Threshold Cost-to- Charge Ratio 050002ST ROSE HOSPITAL $10,897.56$ 27,895.080.234 050009QUEEN OF THE VALLEY $ 7,009.97$ 30,106.620.289 050015NORTHERN INYO HOSPITAL $ 5,891.61$ 25,309.480.775 050017MERCY GENERAL HOSPITAL $ 7,381.89$ 28,444.310.215 050018PACIFIC ALLIANCE MEDICAL CENTER $10,569.18$ 26,543.750.548 050022RIVERSIDE COMMUNITY HOSPITAL $ 6,725.23$ 25,726.740.261 050024PARADISE VALLEY HOSPITAL $ 8,749.08$ 25,910.070.229 050025UNIV OF CALIFORNIA SAN DIEGO MED CTR $ 8,605.70$ 25,906.720.335 The Hospital Specific Outlier Threshold will be key here. Still using St Rose as the example.

14. 14 CA Regulation Refresher – Inpatient Hospital March 2011 MEDICARE PROVIDER NO. NAME Composite Hospital Specific Outlier Threshold Cost-to- Charge Ratio 050002ST ROSE HOSPITAL $10,897.56$ 27,895.080.234 050009QUEEN OF THE VALLEY $ 7,009.97$ 30,106.620.289 050015NORTHERN INYO HOSPITAL $ 5,891.61$ 25,309.480.775 050017MERCY GENERAL HOSPITAL $ 7,381.89$ 28,444.310.215 050018PACIFIC ALLIANCE MEDICAL CENTER $10,569.18$ 26,543.750.548 050022RIVERSIDE COMMUNITY HOSPITAL $ 6,725.23$ 25,726.740.261 050024PARADISE VALLEY HOSPITAL $ 8,749.08$ 25,910.070.229 050025UNIV OF CALIFORNIA SAN DIEGO MED CTR $ 8,605.70$ 25,906.720.335 As you can see, the Basic Fee is calculated by... 1)Multiplying, the DRG Weight by the Hospital Composite Factor, and then 2)Multiplying, the result by 1.20 Basic Fee Calculation Example for the St. Rose Spinal Fusion DRG 456 Weight (8.4910) x Hospital Composite Factor ($10,897.56) x 1.20 = $102,007.85 Example of a Basic Fee Now that youve seen how a Basic Fee is calculated, well build on what youve learned.

15. 15 CA Regulation Refresher – Inpatient Hospital March 2011 Cost-to-Charge Ratio MEDICARE PROVIDER NO. NAME Composite Hospital Specific Outlier Threshold Cost-to- Charge Ratio 050002ST ROSE HOSPITAL $10,897.56$27,895.080.234 050009QUEEN OF THE VALLEY $ 7,009.97$ 30,106.620.289 050015NORTHERN INYO HOSPITAL $ 5,891.61$ 25,309.480.775 050017MERCY GENERAL HOSPITAL $ 7,381.89$ 28,444.310.215 050018PACIFIC ALLIANCE MEDICAL CENTER $10,569.18$ 26,543.750.548 050022RIVERSIDE COMMUNITY HOSPITAL $ 6,725.23$ 25,726.740.261 050024PARADISE VALLEY HOSPITAL $ 8,749.08$ 25,910.070.229 050025UNIV OF CALIFORNIA SAN DIEGO MED CTR $ 8,605.70$ 25,906.720.335 Cost-to-Charge Ratio is a value given to each hospital that compares their true cost to what they charge. Notice that this is the same table we used to show Hospital Composite Factor. Lets take a look…

16. 16 CA Regulation Refresher – Inpatient Hospital March 2011 Cost Admission cost are the total billed charges for an admission multiplied by the hospital's total cost-to-charge ratio. A patients cost does not include non- medical charges such as… Television and Telephone, Durable Medical Equipment for in-home use, Implantable Medical Devices, and/or Reimbursed Instrumentation Cost = Billed Charges x Cost-to-Charge Ratio

17. 17 CA Regulation Refresher – Inpatient Hospital March 2011 Cost Billed Charges $96,575.00 x Cost-to-Charge Ratio.234 = $22,598.55 Basic Fee DRG 456 Weight (8.4910) x Hospital Composite Factor ($10,897.56) x 1.20 = $102,007.85 Basic Fee + Cost Thankfully, this work is automated so you dont have to manually calculate these charges, but we illustrate them here using the St Rose example, should you ever have to determine them yourself.

18. 18 CA Regulation Refresher – Inpatient Hospital March 2011 Maximum Payment Should a facilitys cost exceed the outlier threshold, reimbursement would be at the Outlier Payment amount. If Facilitys Cost > Outlier Threshold, then… Reimbursement = Outlier Payment Amount If Facilitys Cost < Outlier Threshold, then… Reimbursement = Basic Fee This is a key concept in the billing examples that follow! Remember, this is where the Cost-to- Charge Ratios and Outlier Thresholds come into play!

19. 19 CA Regulation Refresher – Inpatient Hospital March 2011 Cost Outlier Case A hospitalization for which the hospital's cost exceeds the cost outlier threshold. Outlier Threshold = Basic Fee + Hospital-Specific Outlier Factor Basic Outlier Fee Payment A threshold helps determine when to pay a Basic Fee vs. an Outlier Payment. This protects facilities from suffering a significant loss on a case with unusually high cost. Youll see how to calculate an Outlier Payment shortly! Outlier Threshold

20. 20 CA Regulation Refresher – Inpatient Hospital March 2011 Hospital Specific Outlier Threshold MEDICARE PROVIDER NO. NAME Composite Hospital Specific Outlier Threshold Cost-to- Charge Ratio 050002ST ROSE HOSPITAL $10,897.56$ 27,895.080.234 050009QUEEN OF THE VALLEY $ 7,009.97$ 30,106.620.289 050015NORTHERN INYO HOSPITAL $ 5,891.61$ 25,309.480.775 050017MERCY GENERAL HOSPITAL $ 7,381.89$ 28,444.310.215 050018PACIFIC ALLIANCE MEDICAL CENTER $10,569.18$ 26,543.750.548 050022RIVERSIDE COMMUNITY HOSPITAL $ 6,725.23$ 25,726.740.261 050024PARADISE VALLEY HOSPITAL $ 8,749.08$ 25,910.070.229 050025UNIV OF CALIFORNIA SAN DIEGO MED CTR $ 8,605.70$ 25,906.720.335 The Hospital Specific Outlier Threshold will be key here. Still using St Rose as the example.

21. 21 CA Regulation Refresher – Inpatient Hospital March 2011 Outlier Threshold (Basic fee + Hospital-specific Outlier Factor) Basic Fee ($102,007.85) + Hospital Specific Outlier Factor ($27,895.08) = $138,932.49 Cost Billed Charges $96,575.00 x Cost-to-Charge Ratio.234 = $22,598.08 Basic Fee DRG 456 Weight (8.4910) x Hospital Composite Factor ($10,897.56) x 1.20 = $102,007.85 Outlier Threshold Calculation This calculation will help you determine whether to pay the basic fee or the outlier payment. In this case, do you pay the Basic Fee? Do you continue with the Outlier Calculation? Yes, because the cost does not exceed the Outlier Threshold. No, because the cost does not exceed the Outlier Threshold. Remember… if cost is greater than the outlier threshold, then you would calculate the outlier payment. If not, then youd pay the basic fee.

22. 22 CA Regulation Refresher – Inpatient Hospital March 2011 Example of Outlier Payment Youll see here the charges have increased, which will affect the overall payment. Okay, things are going to get interesting now. Were going to build on what you learned in the Basic example!

23. 23 CA Regulation Refresher – Inpatient Hospital March 2011 Example of an Outlier Payment In this case, do you pay the Basic Fee? Do you continue with the Outlier Calculation? No, because the Cost exceeds the Outlier Threshold. Cost Billed Charges $835,550.00 x Cost-to-Charge Ratio.234 = $195,518.70 Yes, because the Cost exceeds the Outlier Threshold. Basic Fee DRG 456 Weight (8.4910) x Hospital Composite Factor ($10,897.56) x 1.20 = $102,007.85 Facilities are entitled to a mark up when the Cost is greater than the Outlier Threshold. That mark up is called the Outlier Payment, which replaces the Basic Fee. Outlier Threshold is determined by combining the Basic Fee + Hospital Specific Outlier Factor. Outlier Threshold (Basic fee + Hospital-Specific Outlier Factor) Basic Fee ($102,007.85) + Hospital Specific Outlier Factor ($27,895.08) = $138,932.49

24. 24 CA Regulation Refresher – Inpatient Hospital March 2011 Math Check Okay, lets break this down… only when the Cost exceeds the Outlier Threshold, do you perform the Outlier Calculation to determine the Outlier Payment. The Outlier Payment is determined by… 1)Subtracting, the Outlier Threshold from the Cost, 2)Multiplying, the difference by 0.8 (a state-mandated reduction factor), and 3)Adding, the Basic Fee Take some time to think this one through and review as needed. Also, the order of mathematical operations is important here. (Cost – Outlier Threshold) x 0.8 + Basic Fee = Outlier Payment Cost $195,518.70 Outlier Threshold $138,932.49 Outlier Payment Calculation (Cost – Outlier Threshold) x 0.8 + Basic Fee $195,518.70 -$138,932.49 $56,595.21 x 0.8 = $45,276.16 +$102,007.85 (Basic Fee) Outlier Payment = $147,284.01

25. 25 CA Regulation Refresher – Inpatient Hospital March 2011 Implants, Devices, Hardware, Instrumentation To complicate billing, there are some DRGs that shall be separately reimbursed for implants, devices, hardware, or instrumentation. The billed amount for these items should be subtracted from the billed charge, before determining the cost. Implants, Devices, Hardware, and Instrumentation Reimbursement Documented Paid Cost + 10% + Sales Tax, Shipping, and Handling* *A Markup Maximum of $250 Applies Separately Reimbursable DRGs 028-030, 040-042, 453-460, 471- 473, 495-497 and 546

26. 26 CA Regulation Refresher – Inpatient Hospital March 2011 Example of Outlier Payment with Implants See, were building on what you learned in the last three examples!

27. 27 CA Regulation Refresher – Inpatient Hospital March 2011 Example of an Outlier Payment with Implants In this case, do you pay the Basic Fee? Do you continue with the Outlier Calculation? No, because the Cost exceeds the Outlier Threshold. Yes, because the Cost exceeds the Outlier Threshold. Basic Fee DRG 456 Weight (8.4910) x Hospital Composite Factor ($10,897.56) x 1.20 = $102,007.85 Cost Billed Charges ($835,550.00 – Implant Charge $3,607.00) x Cost-to-Charge Ratio.234 = $194,674.66 Implants = $3,607.00 Amount for implant/hardware includes documented Cost + 10% (10% not to exceed $250) + actual shipping/handling and tax Outlier Threshold (Basic fee + Hospital-specific Outlier Factor) Basic Fee ($102,007.85) + Hospital Specific Outlier Factor ($27,895.08) = $138,932.49 Outlier Case if cost exceed the outlier threshold, it is a cost outlier case. Basic fee (102,007.85) + [0.8 X (cost – cost outlier threshold = 44,593.73) = 146,601.58

28. 28 CA Regulation Refresher – Inpatient Hospital March 2011 Math Check Again with all this math, things can get tricky. Dont be fooled though; just take your time and it will all make sense! Cost $194,675.83 Outlier Threshold $138,932.49 Outlier Payment Calculation (Cost – Outlier Threshold) x 0.8 + Basic Fee $194,675.83 -$138,932.49 $55,74.34 x 0.8 = $44,594.67 +$102,007.85 (Basic Fee) $146,602.52 Implants + $3,607

29. 29 CA Regulation Refresher – Inpatient Hospital March 2011 Outlier Case if cost exceed the outlier threshold, it is a cost outlier case. Basic fee (102,007.85) + [0.8 X (cost – cost outlier threshold = 44,593.73) = 146,601.58 Basic Fee DRG 456 Weight (8.4910) x Hospital Composite Factor ($10,897.56) x 1.20 = $102,007.85 Cost Billed Charges ($835,550.00 – Implant Charge $3,607.00) x Cost-to-Charge Ratio.234 = $194,674.66 Implants = $3,607.00 Outlier Payment = $150,209.52 Heres our Outlier Payment, after performing the calculations. Example of an Outlier Payment with Implants Outlier Threshold (Basic fee + Hospital-specific Outlier Threshold) Basic Fee ($102,007.85) + Hospital Specific Outlier Factor ($27,895.08) = $138,932.49

30. 30 CA Regulation Refresher – Inpatient Hospital March 2011 How Transfers are Billed Sometimes a hospital needs to transfer a patient to a different facility. Another facility may be better equipped to respond to a patients condition for services such as rehabilitation or burn therapy. TRANSFER Ah… The Patient Transfer section. a less familiar but equally important service to review. Lets take a look.

31. 31 CA Regulation Refresher – Inpatient Hospital March 2011 How Transfers are Billed Reimbursement to the transferring hospital is calculated by multiplying the number of days stayed by the fee schedules per diem rate (per diem rate = the maximum reimbursement divided by the average length of stay specific to the DRG used). Transfer Reimbursement Calculation #Days Stayed X Per Diem Rate/Avg. Length of Stay per DRG TRANSFER

32. 32 CA Regulation Refresher – Inpatient Hospital March 2011 How Transfers are Billed TRANSFER IMPORTANT!! The first day is reimbursed at twice the per diem rate! In no event should the transferring hospital be reimbursed more than the maximum reimbursement, which is equal to the Basic Fee. The facility receiving the patient should bill and be reimbursed as normal under the Inpatient Fee Schedule.

33. 33 CA Regulation Refresher – Inpatient Hospital March 2011 Geometric Mean Length of Stay For this Three-day Transfer example, well use DRG 56. Remember, the transfer reimbursement calculation is #Days Stayed X Per Diem Rate/Avg. Length of Stay per DRG Lets take a look…

34. 34 CA Regulation Refresher – Inpatient Hospital March 2011 Three-day Stay Total Reimbursement $ 7,501.64 + 7,501.64 = $15,003.28 Additional Days 2 days @ $3,750.82 = $7,501.64 First Day Two times the per diem rate $3,750.82 x 2 = $7,501.64 Per Diem Rate Basic Fee divided by the Geometric Mean Length of Stay (LOS) $21,379.70/ 5.7 = $3,750.82 Basic Fee DRG 56 Weight (1.6349) x Hospital Composite Factor ($10,897.56) x 1.20 = $21,379.70 Example of a Transfer Fee This does not exceed the maximum DRG allowable. However, more than a three-day stay would.

35. 35 CA Regulation Refresher – Inpatient Hospital March 2011 Math Check In our Three-day Transfer Fee Example … DRG 56 Weight = 1.6349 Hospital Composite Factor = $10,897.56 Basic Fee Calculation DRG Weight x Composite Factor x 1.20 1.6349 x $10,897.56 x 1.2 = $21,379.70 Geometric Mean LOS $21,379.70/5.7 = $3,750.82 First Day (2x Per Diem) $3,750.82 x 2 = $7,501.64 Additional Days $3,750.82 x 2 = $7,501.64 Three-day Stay = $15,003.28 Remember, the Transfer Fee is calculated by multiplying the number of days stayed times the fee schedules per diem rate. The per diem rate is equal to the maximum reimbursement divided by the average length of stay, specific to the DRG used. Once youve checked the Fee Schedule, the math falls into place. 1)Calculate the Basic Fee, 2)Calculate the Per Diem, 3)Remember that the First Day is charged at twice the Per Diem, and then add the Additional Days. In our Three-day Transfer Fee Example … DRG 56 Weight = 1.6349 Hospital Composite Factor = $10,897.56 Basic Fee Calculation DRG Weight x Composite Factor x 1.20 1.6349 x $10,897.56 x 1.2 = $21,379.70 Three-day Stay = $15,003.28

36. 36 CA Regulation Refresher – Inpatient Hospital March 2011 For this Ten-day Transfer example, an acute care patient is discharged to a rehabilitation hospital or rehab unit, with DRG 480 applied. Geometric Mean Length of Stay

37. 37 CA Regulation Refresher – Inpatient Hospital March 2011 Additional Days (DRG 480 Additional Days = 50% of Amount Paid + (50% of Per Diem Rate x # Addl. Days)) 50% of Basic Fee (Amount Paid) = $18,958.48 9 days @ $2,430.57 = $21,875.13 First Day Twice the per diem rate $4,861.14 x 2 = $9,722.28 Per Diem Rate $ 37,916.96 / Geometric Mean Length of Stay (7.8) = $4,861.14 Basic Fee (Amount Paid) DRG 480 Weight (2.8995) x Hospital Composite Factor ($10,897.56) x 1.20 = $37,916.96 Example of a Transfer Fee 10-day Stay = $40,833.61 This exceeds the maximum DRG allowable. In this case, pay the Basic Fee.

38. 38 CA Regulation Refresher – Inpatient Hospital March 2011 In our Ten-day Transfer Fee Example … DRG 210 Weight = 1.9059 Hospital Composite Factor = $10,011.37 Basic Fee (Amount Paid) Calculation DRG Weight x Composite Factor x 1.20 1.9059 x $10,011.37 x 1.2 = $22,896.80 Math Check In our Ten-day Transfer Fee Example … DRG 480 Weight = 2.8998 Hospital Composite Factor = $10,897.56 Basic Fee (Amount Paid) Calculation DRG Weight x Composite Factor x 1.20 2.8998 x $10,897.56 x 1.2 = $37,916.96 Per Diem Rate $37,916.96/7.8 = $4,861.14 First Day (2x Per Diem) $4,861.14 x 2 = $9,722.28 Additional Days $18,958.48 + ($2,430.57 x 9) = $40,833.61 (DRG 480 Additional Days = 50% of Amt. Pd. + 50% of Per Diem Rate) Ten-day Stay = $40,833.61 Per Diem Rate $37,916.96/7.8 = $4,861.14 First Day (2x Per Diem) $4,861.14 x 2 = $9,722.28 Additional Days $18,958.48 + ($2,430.57 x 9) = $40,833.61 (DRG 480 Additional Days = 50% of Amt. Pd. + 50% of Per Diem Rate) Ten-day Stay = $40,833.61 Oops, looks like this exceeds the DRG maximum, so the provider will be paid the Basic Fee!

39. 39 CA Regulation Refresher – Inpatient Hospital March 2011 Sole Community Hospitals There are sole community hospitals, located in rural areas. Due to the limitation of services, the operating component of the composite rate shall be allowed at the higher of the prospective operating cost. Sole community hospitals also include hospitals that are the sole source of care within a certain radius of the community. Do you recall the exceptions to the Inpatient Fee Schedule? Maybe not, in that case well re-examine which hospitals are entitled to higher fees.

40. 40 CA Regulation Refresher – Inpatient Hospital March 2011 New Technology Pass-through Also, there are cases known asNew technology pass-through, which warrant additional payments for new medical services and technologies. To qualify as a new technology, it must demonstrate a substantial clinical improvement over technologies otherwise available, and absent an add-on payment, it would be inadequately paid under the regular DRG payment.

41. 41 CA Regulation Refresher – Inpatient Hospital March 2011 Exempt Items Some items are exempt from the Inpatient Fee Schedule, like … O Bills from facilities that do not have a Medicare O number/composite factor O Critical access hospitals O O Childrens hospitals O O Cancer hospitals O O Veterans hospitals O O Long term care hospitals O O DME supplied for home use (should be excluded from IPFS) O O Preadmission services, such as blood work and other tests O rendered by the facility more than 24 hours before admission are excluded from this schedule, but are reimbursable under the OMFS (if applicable).

42. 42 CA Regulation Refresher – Inpatient Hospital March 2011 Exempt Items Also exempt from the Inpatient Fee Schedule … O Rehabilitation hospital or rehabilitation units of an acute care O hospital, psychiatric hospital or psychiatric unit of an acute care hospital, are exempt from the maximum reimbursement formula for inpatient services. When certain revenue codes are billed in conjunction with psychiatric or rehabilitation hospital type inpatient stays, the maximum inpatient reimbursement formula is not be applied.

43. 43 CA Regulation Refresher – Inpatient Hospital March 2011 PPO Contracts and Inpatient Bills It is critical that you familiarize yourself with the contract rates and the information pertaining to the Inpatient Fee Schedule, as any mistake can be a costly one! During this time PPO Developers were frantically renegotiating with facilities to ensure Lesser of language (lesser of fee schedule rate or the contracted rate) was included in the contracts so we were not bound to reimburse at a fee higher than the fee schedule allows. In January 2002, a bill (AB 1177) was passed, stating that a contract rate supercedes the fee schedule.

44. 44 CA Regulation Refresher – Inpatient Hospital March 2011 DRG and Facility Composite Factors Change Important! Both DRG Weights and Facility Composite Factors are subject to change without notice. Make sure you use the correct data applicable for the date of service. The discharge date is used for determination.

45. 45 CA Regulation Refresher – Inpatient Hospital March 2011 Summary Due to the limitation of services at sole community hospitals, the operating component of the composite rate shall be allowed at the higher of the prospective operating cost. Reimbursements to transferring hospitals is calculated by multiplying the number of days stayed times the fee schedules per diem rate, with the first day reimbursed at twice the per diem rate. Some items are exempt from the Inpatient Fee Schedule. A contract rate supercedes the fee schedule. Inpatient services apply when a hospital patient occupies a bed at midnight. The Medicare Severity Diagnosis Related Group (MS-DRG) system is used in determining reimbursement. Due to the limitation of services at sole community hospitals, the operating component of the composite rate shall be allowed at the higher of the prospective operating cost. Reimbursements to transferring hospitals are calculated by multiplying the number of days stayed times the fee schedules per diem rate, with the first day reimbursed at twice the per diem rate. Some items are exempt from the Inpatient Fee Schedule. A contract rate supercedes the fee schedule.

46. 46 CA Regulation Refresher – Inpatient Hospital March 2011 In Closing… The Inpatient Hospital Fee schedule is adjusted to conform to any relevant changes in the Medicare payment schedule no later than 60 days after the effective date of those changes. Updates will be posted on the Division of Workers Compensation web page http://www.dir.ca.gov/dwc/feeschedules. The updates to the Inpatient Hospital Fee schedule will be effective every year on October 1.