Unbiased Analysis of Today's Healthcare Issues

Medicare Reimbursement Information III

Written By: Jason Shafrin - Sep• 02•09

Today, we will focus on hospital care outside of the traditional Inpatient hospital care setting. Again, this information is culled from MedPAC reports.

Outpatient Hospital Services

  • Outpatient hospital care, from injections to complex procedures, accounted for $19 billion of total Medicare spending in 2007
  • Originally, outpatient reimbursement was cost based and copayments amounted to about 50% of total payments. Now, Medicare uses the Outpatient prospective payment system (OPPS) and copyament rates have decreased to 28% of total payments. There are carve outs for three additional items that fall outside the OPPS system: i) pass-through payments for new technologies, ii) outlier payments for unusually costly services, and iii) hold-harmless payments for cancer and children’s hospitals and rural hospitals with 100 or fewer beds that are not sole community hospitals
  • Payments from Medicare to the hospital are based on the ambulatory payment classifications (APC). New technologies can be placed in a “new technology” classification for up to 3 years. Payments outside of the APC system include: CMS pays i) corneal tissue acquisition costs, ii) blood and blood products, and iii) many drugs.

Home Health Services

  • Beneficiaries of home health services receive visits from skilled professionals to provide the following services: skilled nursing care, physical, occupational, and speech therapy, medical social work, and home health aide services.
  • About 2.9 million beneficiaries used home health care in 2006. Medicare pays for home health care with both Part A and Part B funds; in 2006, total payments were $14.1 billion. Beneficiaries pay not copayments for these services.
  • Medicare pays home health agencies based on 60-day episodes. The exact value or cost of home health benefits is inherently difficult to define. Medicare uses one of 153 home health resource groups (HHRGs) to determine payment rates. The HHRGs are based on clinical (e.g., IV needed, wound present, ulcer present) functional (e.g., dressing, bathing, toileting needs) and the number of visits needed.
  • Outlier payments are available when costs exceed 167% of the base pay. Home health agencies receive 80% of the difference between the HHRG base rate and their reported cost.

Hospice Care

  • Hospice care is available for Medicare beneficiaries whose life expectancy is six months or less. However, by agreeing to hospice care, patients forego the right to curative treatment. Medicare will pay for medical care for illnesses that are unrelated to their terminal illness. Beneficiaries occasionally pay a $5 hospital copayment, but are largely protected form out-of-pocket expenses within the hospice setting.
  • Between 2000 and 2005, hospice use increased by 11% per year. In addition, as of December 2007, 51 percent of hospice agencies were for profit, compared to 27 percent in 2000. Medicare payment for hospice grew from $2.9 billion in 2000 to over $10 billion in 2007.
  • Benefits cover skilled nursing services, drugs, physical and occupational therapy, counseling and other services.
  • Hospice agencies receive a set daily rate for their services. The vast majority of hospice cases receive the routine home care (RHC) base payment, but five percent do receive higher daily rates for more complicated cases. This base payment is adjusted geographically to reflect wage differences between regions. Payments are also capped; total payments over total number of beneficiaries may not exceed $22,386.

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