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FL HFMA Spring Conference
How to calculate a MS-DRG
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Theresa M. Ott, MBA JD
Theresa is the Manager of Reimbursement for Sarasota Memorial
Hospital where she has been employed since 2010. She has over 20
years of healthcare financial management experience, including 3
years as an independent consultant specializing in budget,
compliance, operations improvement and reimbursement. She is a
certified professional coder and certified healthcare financial
professional and has passed the bar in three states. Before moving to
Florida, Theresa worked in a number of large urban teaching hospitals
in the Philadelphia and Detroit markets. She is currently married with
two beautiful little girls.
Theresa M. Ott
Sarasota Memorial Hospital
1700 S. Tamiami Trail
Sarasota, FL 34239
(941) 917-7008
Theresa-Ott@smh.com
2
Recognition for High-Quality Care
Cardiac Care,
Spine Surgery,
Hip/Knee Replacement
Cardiac Services, Spine Surgery,
Total Joint Replacement
U.S. News
High Performer
-- Diabetes &
Endocrinology
-- Gastroenterology & GI
Surgery
-- Geriatrics
-- Nephrology
-- Orthopedics
-- Pulmonology
Cardiovascular Surgery, Bariatric Surgery,
Cardiac Intervention, Cardiac Rhythm
Heart Attack, Cardiac Pacemaker Implant, Craniotomy,
Stroke, Spinal Fusion, Transurethral Prostatectomy,
Vaginal Delivery, Pneumonia
How to Calculate a MS-DRG
Session Description:
Learn how to properly calculate a MS-DRG. As CMS implements provisions of the ACA, the calculation of a MSDRG has become more and more difficult. This session will go over the basic calculation of the operating and
capital components of a MS-DRG payment. We will review indirect medical education and disproportionate care
add-on payments. Lastly, value based purchasing and the hospital readmission reduction program adjustments
will be examined. Wrapping up will be a discussion of the future hospital acquired condition reduction coming
in FY15.
After This Session Attendees Will Be Able To:
• Understand the payment components of a MS-DRG
• Know what the base operating MS-DRG is and how to calculated it
• Know what IME, DSH, UCDSH, VBP, HRRP and HAC mean and how they impact a hospital’s MS-DRG
payment
• Know where and when these items are updated
• Understand the importance of payment verification with their MAC.
Prerequisites/Pre-Work: None
Tools & Takeaways: Access to excel spreadsheet with MS-DRG calculation.
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What is a MS-DRG
• Medicare Severity - Diagnostic Related Groups
• Began with discharges occurring on or after October 1, 2007
• CMS implemented MS-DRGs to better account for severity of illness
and resource consumption for Medicare beneficiaries.
• There are three levels of severity in the MS-DRG system based on
secondary diagnosis codes:
– MCC–Major Complication/Comorbidity, which reflect the highest level of severity;
– CC–Complication/Comorbidity, which is the next level of severity; and
– Non-CC–Non-Complication/Comorbidity, which do not significantly affect severity
of illness and resource use.
• Currently there are 749 plus 2 error MS-DRGs
Operating and Capital Payments
• The IPPS per-discharge payment is
based on two national base payment
rates or standardized amounts.
• One that provides for operating expenses
and another for capital expenses
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National Operating MS-DRG Amounts
FY 2014 Federal Register Tables 1A & 1B
TABLE 1A. NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS;
LABOR/NONLABOR (69.6 PERCENT LABOR SHARE/30.4 PERCENT NONLABOR
SHARE IF WAGE INDEX GREATER THAN 1)
Full Update (1.7 Percent)
Reduced Update (-0.3 Percent)
Labor-related
Nonlabor-related
Labor-related
Nonlabor-related
$3,737.71
$1,632.57
$3,664.21
$1,600.46
TABLE 1B. NATIONAL ADJUSTED OPERATING STANDARDIZED AMOUNTS,
LABOR/NONLABOR (62 PERCENT LABOR SHARE/38 PERCENT NONLABOR
SHARE IF WAGE INDEX LESS THAN OR EQUAL TO 1)
Full Update (1.7 Percent)
Labor-related
$3,329.57
Reduced Update (-0.3 Percent)
Nonlabor-related Labor-related
$2,040.71
$3,264.10
Nonlabor-related
$2,000.57
MS-DRG Operating
National adjusted operating standardized amount if wage index less
than or equal to 1
Labor-related
Nonlabor-related
Total
$3,329.57
2,040.71
$5,370.28
62.0%
38.0%
100.0%
National adjusted operating standardized amount if wage index
greater than 1
Labor-related
Nonlabor-related
Total
$3,737.71
1,632.57
$5,370.28
69.6%
30.4%
100.0%
CBSA – Urban Core Based Statistical Areas
TABLE 4A.--WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR (GAF) FOR URBAN AREAS BY CBSA AND BY STATE--FY 2014 [Constituent counties
are listed in Table 4E.] (Wage Index Includes Rural Floor Budget Neutrality Adjustment
CBSA Code
15980
18880
19660
22744
23540
27260
29460
33124
34940
35840
36100
36740
37340
37380
37460
37860
38940
39460
42680
45220
45300
48424
Urban Area
Cape Coral-Fort Myers, FL
Crestview-Fort Walton Beach-Destin, FL
Deltona-Daytona Beach-Ormond Beach, FL
Fort Lauderdale-Pompano Beach-Deerfield Beach, FL
Gainesville, FL
Jacksonville, FL
Lakeland-Winter Haven, FL
Miami-Miami Beach-Kendall, FL
Naples-Marco Island, FL
North Port-Bradenton-Sarasota, FL
Ocala, FL
Orlando-Kissimmee-Sanford, FL
Palm Bay-Melbourne-Titusville, FL
Palm Coast, FL
Panama City-Lynn Haven-Panama City Beach, FL
Pensacola-Ferry Pass-Brent, FL
Port St. Lucie, FL
Punta Gorda, FL
Sebastian-Vero Beach, FL
Tallahassee, FL
Tampa-St. Petersburg-Clearwater, FL
West Palm Beach-Boca Raton-Boynton Beach, FL
State
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
Wage Index
0.8656
0.8730
0.8483
1.0048
0.9836
0.8916
0.8286
0.9836
0.9309
0.9191
0.8514
0.9008
0.8794
0.7980
0.7988
0.7980
0.9260
0.8943
0.8747
0.8425
0.8986
0.9402
GAF
0.9059
0.9112
0.8935
1.0033
0.9887
0.9244
0.8792
0.9887
0.9521
0.9439
0.8957
0.9310
0.9158
0.8568
0.8574
0.8568
0.9487
0.9264
0.9124
0.8893
0.9294
0.9587
CBSA – Rural Core Based Statistical Areas
TABLE 4B.--WAGE INDEX AND CAPITAL GEOGRAPHIC ADJUSTMENT FACTOR
(GAF) FOR ACUTE CARE HOSPITALS IN RURAL AREAS BY CBSA AND BY
STATE--FY 2014 (Wage Index Includes Rural Floor Budget Neutrality
Adjustment)
CBSA
Wage
Code
Rural Area
State Index GAF
10 Florida
FL 0.7980 0.8568
Wage Index and GAF
Wage Index (WI) and Capital Geographic
Adjustment Factor (GAF) for Urban Area by CBSA
CBSA Code 45300 Tampa-St. PetersburgClearwater, FL
Wage Index = 0.8986
GAF = 0.9294
MS-DRG Wage Adjusted Operating
Labor-related Nat. Oper. Amt.
Wage Index
Wage Adjusted Labor Component
Nonlabor-related Nat. Oper. Amt.
Base Operating MS-DRG
$3,329.57
0.8986
2,991.95
2,040.71
$5,032.66
MS-DRG Adjustments
• Value Based Purchasing
• Hospital Readmission Reduction Program
• Disproportionate Share
• Indirect Medical Education
Hospital Value Based Purchasing
•
Initially required in the Affordable Care Act and further defined in
Section 1886(o) of the Social Security Act
•
Quality incentive program built on the Hospital Inpatient Quality
Reporting (IQR) measure reporting infrastructure
•
Next step in promoting higher quality care for Medicare beneficiaries
•
Pays for care that rewards better value, patient outcomes, and
innovations, instead of just volume of services
•
Funded by a 1% withhold from participating hospitals’ DiagnosisRelated Group (DRG) payments
Value Based Purchasing
Positive VBP Factor or Factor Greater than 1.0
Value Based Purchasing Factor
VBP Factor less 1.0
Base Operating DRG
VBP Factor less 1.0
VBP Adjustment
1.0022792174
0.0022792174
$5,032.66
X 0.0022792174
$11.47
Value Based Purchasing
Negative VBP Factor or Factor Less than 1.0
Value Based Purchasing Factor
VBP Factor less 1.0
Base Operating DRG
VBP Factor less 1.0
VBP Adjustment
.99828881748
-0.0017111822
$5,032.66
X -0.0017111822
($8.61)
Hospital Readmission Reduction Program (HRRP)
• Section 3025 of the Affordable Care Act added section
1886(q) to the Social Security Act establishing the
Hospital Readmissions Reduction Program
• Requires CMS to reduce payments to IPPS hospitals
with excess readmissions, effective for discharges
beginning on October 1, 2012.
• The regulations that implement this provision are in
subpart I of 42 CFR part 412 (§412.150 through
§412.154).
Readmission Adjustment Factor
Negative Factors or Factor Less than 1.0
Readmission Adjustment Factor
.9990
Readmission Adj. Factor less 1.0
-0.0010
Base Operating DRG
RA Factor less 1.0
Readmission Adjustment
$5,032.66
X -0.0010
($5.03)
Operating Disproportionate Share (DSH)
• The Medicare DSH adjustment provision under section
1886(d) (5) (F) of the Act was enacted by section 9105
of the Consolidated Omnibus Budget Reconciliation Act
(COBRA) of 1985 and became effective for discharges
occurring on or after May 1, 1986.
• Additional payments for hospitals that provide care for a
disproportionate share of low-income patients.
Operating DSH Formula
Provider Type
DPP %
Formula
Cap
>15% but <20.2%
>= 20.2%
2.50% + [.650 X (DPP – 15.0%)]
5.88% + [.825 X (DPP – 20.2%)]
No Cap
>15% but <20.2%
2.50% + [.650 X (DPP – 15.0%)]
> = 20.2%
5.88% + [.825 X (DPP – 20.2%)]
Urban 100+ Beds
Medicare Dependent Hospitals
Rural Referral Centers (RRC)
Other Rural 500+ Beds
Urban 0-99 Beds
Other Rural 0-499 Beds
Not to Exceed 12%
Disproportionate Percentage
Disproportionate Percentage (DPP)
Medicaid %
FY 2011 Published SSI%
Disproportion Share Payment %
25.15%
10.89%
36.04%
DSH Operating Adjustment Factor
Disproportion Share Payment % (DPP)
Less
Subtotal
Multiplication Factor
Subtotal
Plus
DSH Operating Adj. Factor
36.04%
20.20%
15.84%
82.50%
13.07%
5.88%
18.95%
DSH Operating Payment
Base Operating DRG
DSH Adjustment Factor
Operating DSH Amount
ACA DSH Reduction Factor
Net Operating DSH Amount
Uncompensated Care DSH
Total Op. DSH and UC DSH
$5,032.66
18.95%
953.69
25.00%
238.42
604.91
$843.33
Uncompensated Care DSH
Changes to Medicare DSH: Section 3133 of the Affordable Care Act
•
Section 3133 of the Affordable Care Act amends the Medicare DSH adjustment provision under
section 1886(d) (5) (F) of the Act, and establishes 1886(r) which provides for an additional
payment for a hospital’s uncompensated care.
•
Effective for discharges occurring on or after FY 2014, hospitals will receive 25 percent of the
amount they previously would have received under the current statutory formula for Medicare
DSH.
•
The remainder, equal to 75 percent of what otherwise would have been paid as Medicare DSH
will become available for an uncompensated care payments after the amount is reduced for
changes in the percentage of individuals that are uninsured.
•
Each Medicare DSH hospital will receive an uncompensated care payment based on its share
of insured low income days (that is, the sum of Medicaid days and Medicare SSI days) reported
by Medicare DSH hospitals.
SMH Meeting Community Needs
Legend:
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Heritage Harbour Health Care Center and Urgent Care
University Parkway
Health Care Center
University Parkway
Urgent Care Center
Corporate Offices
Breast Health Center
Bayside Center
Heart & Vascular Services
Cape Surgery
Sarasota Memorial
Hospital and ER
Bee Ridge Urgent Care
Stickney Point
Urgent Care Center
Institute for Advanced Medicine
HealthFit
Nursing & Rehab Center
Blackburn Point Health Care Center
Venice Urgent Care Center
North Port ER and
Health Care Center
First Physician Group Offices
Indirect Medical Education (IME)
• Section 1886(d)(5)(B) of the Act provides that prospective
payment hospitals that have residents in an approved
graduate medical education (GME) program receive an
additional payment for a Medicare discharge to reflect the
higher patient care costs of teaching hospitals relative to
non-teaching hospitals.
• The regulations regarding the calculation of this additional
payment, known as the indirect medical education (IME)
adjustment, are located at 42 CFR §412.105.
Indirect Medical Education (IME)
The IME adjustment factor is calculated using a hospital's ratio of
residents to beds, which is represented as r, and a multiplier, which is
represented as c, in the following equation:
c x [(1 + r)^.405 - 1]
The multiplier c is set by Congress. Thus, the amount of IME payment
that a hospital receives is dependent upon the number of residents
the hospital trains and the current level of the IME multiplier. Since
2003, c = 1.35.
Indirect Medical Education (IME)
Interns & Residents
Available Beds
Ratio of Residents to Beds
1 Plus Ratio of Residents to Beds
Exponential Factor
Product
Product less 1
Multiplier
IME Adjustment Factor
100
500
20.0%
1.2000
.4050
1.0766
.0766
1.3500
.1035
IME Operating Payment
Base Operating DRG
IME Adjustment Factor
Operating IME Amount
$5,032.66
10.35%
$ 520.66
Total Operating MS-DRG (Subject to Case Mix)
Operating MS-DRG
$5,032.66
VBP Adjustment
-8.61
Readmission Adjustment
-5.03
Operating DSH (excl. UC DSH)
238.42
Operating IME
520.66
Total Operating MS-DRG Subject to Case Mix $5,778.10
National Capital MS-DRG Amounts
FY 2014 Federal Register Tables 1D
TABLE 1D. CAPITAL STANDARD FEDERAL PAYMENT
RATE
National
$429.31
Puerto Rico
$209.82
MS-DRG Capital Payment Formula
IPPS Capital Payment:
(Standard Federal Rate) x (GAF) x (Capital COLA
Adjustment for Hospitals Located in Alaska and
Hawaii) x (1 + DSH Adjustment Factor + IME
Adjustment Factor) x (MS-DRG Weight)
Capital Disproportionate Share
A hospital qualifies for a capital DSH adjustment
if it is located in a large urban or other
urban area, has at least 100 beds, and has a DSH
percentage greater than 0.
[2.7183^(.2025*DPP)]-1
DSH Capital Adjustment Factor
Disproportion Share Payment %(DPP)
Multiplication Factor
Exponential Factor
Capital DSH Factor
Cap. DSH Factor Raised to Exp. Factor
Minus
DSH Capital Adj. Factor
.7183^(.2025*DPP)]-1
36.04%
20.25%
7.30%
2.7183%
107.57%
100.00%
7.57%
Capital Indirect Medical Education
412.322 Indirect medical education adjustment factor.
(a) Basic data. CMS determines the following for each hospital:
(1) The hospital's number of full-time equivalent residents as determined under
§412.105(f).
(2) The hospital's average daily census is determined by dividing the total number of
inpatient days in the acute inpatient area of the hospital by the number of days in the
cost reporting period.
(3) The measurement of teaching activity is the ratio of the hospital's full-time
equivalent residents to average daily census. This ratio cannot exceed 1.5.
(b) Payment adjustment factor. The indirect teaching adjustment factor equals [e (raised to the
power of .2822 × the ratio of residents to average daily census)−1].
IME Capital Adjustment Factor
IME Factor to be raised by R/ADC
Interns & Residents
Average Daily Census ADC
Residents / ADC
Multiplication Factor
Cap. IME Calc. [2.7183 ^ (.2882 x (100/375)]-1
2.7183
100
375
.2667
.2882
7.82%
Capital Payments
Federal Capital Rate
GAF
GAF Adjusted Fed. Rate
$429.31
.9294
399.00
Capital DSH %
Capital DSH Amount
.0757
30.21
Capital IME %
Capital IME Amount
.0782
31.19
Total Capital Payments
$460.39
MS-DRG Payment
Operating MS-DRG
VBP Adjustment
Readmission Adjustment
Operating DSH (excl. UC DSH)
Operating IME
Capital MS-DRG
Capital DSH
Capital IME
Total MS-DRG (subject to Case Mix)
Uncompensated Care DSH
Total MS-DRG Payment
$5,032.66
-8.61
-5.03
238.42
520.66
399.00
30.21
31.19
$6,238.50
604.91
$6,843.41
MS-DRG 236
Coronary Bypass W/O Cardiac Cath W/O MCC
Total MS-DRG Payment
Less DSH UC Payment
MS-DRG (subject to Case Mix)
DRG 236 Case Mix
CMI Adjusted Subtotal
Add DSH UC Payment
Total Payment
$6,843.41
604.91
6,238.50
3.8011
23,713.15
604.91
$24,318.06
Outlier Payments
• Section 1886(d)(5)(A) of the Act provides for Medicare payments to
Medicare-participating hospitals in addition to the basic prospective
payments for cases incurring extraordinarily high costs.
• To qualify for outlier payments, a case must have costs above a
fixed-loss cost threshold amount (a dollar amount by which the costs
of a case must exceed payments in order to qualify for outliers).
• The regulations governing payments for operating costs under the
IPPS are located at 42 CFR 412.80 through 412.86
Transfer Policy
Transfers Between Inpatient Prospective Payment System (IPPS) Hospitals
•
The full prospective payment is made to the final discharging hospital, and payment to the
transferring hospital is based upon a per diem rate. The per diem rate equals the prospective
payment rate divided by the average length of stay for the specific DRG into which the case falls
and multiplied by the patient's length of stay at the transferring hospital.
Post Acute Transfer Rule
•
The prospective payment is reduced to the discharging hospital when the discharge is to a post
acute setting. The payment to the transferring hospital is based upon a per diem rate as in the
example above. The hospital receives twice the per diem rate for the first day and the per diem for
each subsequent day not to exceed the total DRG payment.
•
There are 24 special pay post acute transfer DRGs. The payment is equal to ½ of the total DRG
payment plus a per diem for the first day and .50% of the per diem for each subsequent day not to
exceed the total DRG payment.
Federal Register
• IPPS Final Rule
• IPPS Correction Notices
– Uncompensated Care DSH
• OPPS Final Rule
– Value Base Purchasing
Hospital Acquired Conditions FY 2015
The hospital-acquired condition (HAC) reduction program will reduce
fiscal year (FY) 2015 Medicare payments by up to 1% for hospitals
that perform poorly on measures of adverse events, including
pressure ulcers and health care-associated infections (HAIs).
HAC penalty applies to 1% of total payments, whereas penalties
under the value-based and readmissions program are levied on base
payments. The HAC penalties include disproportionate-share hospital
payments, as well as indirect medical education payments.
Archie Bunker Math
http://www.youtube.com/watch?v=da0eaiZ0CKw
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Thank you
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