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Medicare BasicsDetermining the Relative Value of Outpatient ServicesTo find the cost of outpatient services, we recommend that Medicare reimbursement rates developed by CMS be used. Medicare regulations report a relative value for CPT codes for physician, anesthesiology, and laboratory procedures. A conversion factor translates these relative values into a reimbursement amount. This relative value is converted to a reimbursement rate by multiplying the relative value by a conversion factor. As an example, for the year 2009, Medicare paid physician and laboratory providers about $36.07 for each unit of relative value; anesthesiologists were reimbursed about $20.92 per unit. Show
Medicare Relative ValuesMedicare has adopted the Resource Based Relative Value System to reimburse providers for services provided to Medicare patients. Care is characterized by a CPT code. Each CPT code has an associate set of relative values (RVUs), consisting of Facility, Physician Work, and Malpractice RVUs.
Services Not Reimbursed by MedicareMany of the CPT codes used by VA do not appear on the list of services that are reimbursable by Medicare. There are several reasons for this, including the following:
In general, we believe that a cost should be assigned to all services, even if they are not reimbursable by Medicare. It is the challenge of the analyst to make as few assumptions as possible in assigning the RVU (and thus estimate the cost). We consider each of these problems in turn.
The analyst can assign an RVU by assuming that the unlisted code represents a typical procedure of its type. Thus the RVU would be the weighted mean RVU of the procedures of that type, with the weight the relative frequency the procedure is used by VA. Using this method we would assign an RVU to 85999 "Unlisted hematology and coagulation procedures", based on the VA weighted mean RVU for hematology and coagulation procedures, that is, all procedures reported in the range of CPT codes 85002-85810. Estimating What Medicare Would Have Paid for a VA Inpatient Hospital StayVA cannot bill Medicare for care provided to Veterans. However, calculation of a hypothetical Medicare reimbursement is useful to cost analysts who are interested in estimating the resources used to provide VA inpatient care. Medicare reimburses both hospitals and providers for the cost of inpatient stays. Hospital paymentMedicare reimburses hospitals based on the Diagnosis Related Group (DRG) that is assigned to the hospital stay. Medicare determines the national average charge for each DRG and expresses them as relative values; these are known as DRG weights. A schedule of DRG weights is published annually by Medicare; these are available from the Federal Register and from the Center for Medicare and Medicaid web site. Medicare pays a standard amount for each unit of DRG weight. Medicare makes additional payments to hospitals for capital, to compensate them for outlier cases, for the indirect and direct costs of medical education, and to assist hospitals that have a disproportionate share of indigent and Medicaid patients. Here is one method of estimating the Medicare reimbursement. This method assumes that the additional payments for capital, outliers, medical education, and disproportionate share, should be assigned to stays in proportion to their DRG weight. This assumption will result in a estimate that is likely to mean very near the national average Medicare payment for that DRG. This assumption means that the cost estimate won't reflect the effect of the hospital's own medical education or wage costs, which do influence Medicare reimbursement. This example uses data from 1996. The sources of information used to calculate these payments included:
It was determined that the average Medicare payment per DRG weight in 1996 was $5,267. The table lists the components that entered this payment calculation. Components that entered this payment calculation
Standard payment rate Additional payments These additional payment rates were calculated from the 1997 projected data published by ProPAC. Total amount paid on the basis of standard payments was estimated by taking "operating payments" and subtracting outlier, IME, and DSH payments. Capital and direct GME were assumed not to be operating payments. Alternate calculation methods. Using the $8 billion capital estimate in the ProPAC report gives a 13.63% capital cost, or $519.00 per DRG weight. Using the 5.28% outlier payments implied in the ProPAC report suggests a $201.11 outlier payment cost. Using this method, the total Medicare payment per DRG weight in FY 1996 is $5,281. The CMS web site reports $87.5 billion in payments to acute hospitals for inpatient care in FY95, and that inpatient costs grew at an annual rate of 5.2% during the period 1990-1996. Also reported is the number of discharges by DRG in the Medpars data, and the schedule of DRG weight per discharge. These were used to determine that Medicare paid for 11.7 million discharges; these had an average DRG weight of 1.422, yielding a total of 16.7 million DRG weights. These data suggest an average payment of $5,509 per DRG weight in FY96. Since some discharges are excluded from the report (to avoid disclosing patient data) this figure represents an upper bound of the cost. Estimating A Medicare Outpatient Facility PaymentMedicare reimburses providers and facilities separately. Outpatient facility payments cover the costs pertaining to outpatient care, such as the use of operating and recovery rooms for ambulatory surgery. The payments are limited to certain types of care and to specific types of facilities. Facilities eligible for Medicare facility payments include the following:
How do I get data on outpatient facility payments?The one readily available data source for outpatient facility payments is the Medicare Outpatient Prospective Payment System. In August 2000, Medicare switched from fee-for-service reimbursement to a prospective payment system. Under prospective payment, Medicare assigns each current procedural terminology (CPT) code on the patient record to an Ambulatory Payment Classification (APC) group. Medicare bases the reimbursement rates on studies of the number, type, and cost of services provided. The method for applying APCs and the Medicare payment rates is available on the Medicare web page. Documentation for the HERC Outpatient Average Cost Datasets provides a more detailed discussion. Last updated: April 10, 2021 What is the MCR initiative?Medicare Contracting Reform (MCR) Initiative. Established to integrate the administration of Medicare Parts A & B fee-for-service benefits with new entities called Medicare administrative contractors (MACs); MACs replace Medicare carriers, DMERCs and fiscal intermediaries.
Which is the percentage the patient pays for covered services?The percentage of costs of a covered health care service you pay (20%, for example) after you've paid your deductible. The maximum amount a plan will pay for a covered health care service.
Which coding system is used to report procedures and services on claims quizlet?Current Procedural Terminology (CPT): Coding system published by the American Medical Association that is used to report procedures and services performed during outpatient and physician office encounters, and professional services provided to inpatients.
What is a global concept that includes the collection of patient information documented by a number of providers at different facilities regarding one patient?electronic health record (EHR) global concept that includes the collection of patient information documented by number of providers at different facilities regarding one patient. electronic medical record (EMR)
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