HOSPITAL PAYMENT MODERNIZATIONCONNECTICUT’S OPPORTUNITY FOR CHANGENovember 2013

MERCER 2April 18, 2023 2MERCER

Discussion Agenda

• Project Goals

• Overview of Conceptual Underpinnings of DRG and APC

• Suggested Evaluation Criteria

• Current Project Direction

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MERCER 3April 18, 2023 3MERCER

Project Goals

• Design, develop and implement a complete rebuild of both hospital payment systems

• Implement new prospective payment systems that are ICD-10 capable

• Systems that are more precise in the recognition of acuity for both IP and OP hospital services

• Provide payment structures that promote proper delivery of health care in the most appropriate setting

• Promote more predictable and transparent payment processes for hospitals

• Revenue neutrality at the hospital level will be a primary goal

• Over time, migration to more equitable payment systems will likely not result in revenue neutrality at the hospital level.

• Implement payment methods that can support quality health outcomes and efficiency

• Create systems that establish a sound financial basis for the changing environment including state and federal policy goals

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MERCER 4April 18, 2023

Conceptual Underpinnings – Inpatient DRG Systems

• Each DRG to contain patients with a similar pattern of resource intensity

• Each DRG to contain patients who are similar from a clinical perspective (i.e., each group should be clinically coherent)

• DRGs based on routinely collected information from hospital abstract systems

• A manageable number of DRGs, which encompass all patients seen on an inpatient basis

• Based on age, principal diagnosis, secondary diagnoses and the surgical procedures performed

MERCER 5April 18, 2023 5MERCER

Conceptual Underpinnings: Some Examples of DRG Pricing

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• Hospital Specific (or Peer Group, or Statewide) Base Rate $4,000

– Knee Replacement / Severity 1 Relative Weight 2.0347

Hospital Payment $8,139

– Knee Replacement / Severity 4 Relative Weight 5.3662

Hospital Payment $21,465

– Normal Delivery / Severity 1 / Relative Weight 0.4672

Hospital Payment $1,869

MERCER 6

Conceptual Underpinnings: APR-DRG versus Medicare

  PDX: 56211 Diverticulitis of colon

Proc: 4571 Multiple segmental resection of large intestine

  Case 1 Case2 Case 3 Case 4 Description

Secondary Diagnoses

56941 56941

5609

 

56941

5609

4299

4260

56941

5609

4299

4260

5849

Ulcer of anus & rectum

Unspecified intestinal obstruction

Acute myocarditis

Atrioventricular block, complete

Acute renal failure, unspecified

Medicare DRG

APR-DRG

149 wo CC

221 SOI 1

148 w CC

221 SOI 2

148 w CC

221 SOI 3

148 w CC

221 SOI 4

Major small and large bowel

Medicare DRG

APR-DRG

25,14725,988

59,51938,209

59,51966,597

59,519

130,750

 

Table 1 Example claims assigned to the DRG systems

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MERCER 7April 18, 2023 7MERCER

Conceptual Underpinnings – Outpatient APC Systems

• Ambulatory Payment Classifications (APCs) classify hospital outpatient services (some services, such as Laboratory, are excluded)

• APCs are conceptually similar and to DRGs in terms of the resources required to provide each service

• Will support ICD-10

• Payment amounts for each APC are based on estimates of the costs associated with providing any of the services assigned to an APC

• Hospitals continue line item billing using HCPCS/CPT codes and claims administrator receives the claims and applies the appropriate APC payment rates to the HCPCS codes

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MERCER 88

Conceptual Underpinnings: Some Examples of Fee Schedule APCs

APC Group TitleRelative Weight

Payment Rate

0006 Level I Incision & Drainage 1.4194 $99.38

0008 Level III Incision and Drainage 20.5466 $1,438.59

0041 Level I Arthroscopy 29.6307 $2,074.62

0048 Level I Arthroplasty or Implantation with Prosthesis 60.6006 $4,243.01

0083Coronary Angioplasty, Valvuloplasty, and Level I Endovascular Revascularization of the Lower Extremity 65.9825 $4,619.83

0108Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes 424.7747 $29,741.03

0227 Implantation of Drug Infusion Device 192.8554 $13,502.96

0341 Skin Tests 0.0814 $5.70

0604 Level 1 Hospital Clinic Visits 0.7682 $53.79

0608 Level 5 Hospital Clinic Visits 2.5210 $176.51

0609 Level 1 Type A Emergency Visits 0.7174 $50.23

0630 Level 5 Type B Emergency Visits 3.7599 $263.25

MERCER 9April 18, 2023 9MERCER

Suggested Evaluation Criteria

• Systems should:

– Align payments to the services provided, including differences in acuity

– Enable Incentives to provide efficient care in the most appropriate settings

– Enhance payment predictability for providers and the State

– Maintain access to high quality services

– Provide transparent methodologies that are easy to understand and replicate

– Be designed to be periodically updated

– Accommodate future models and policies, including shared savings, health neighborhoods, incentive pools and episode bundling

• In the end, systems should promote high value, quality-driven health care services

MERCER 10April 18, 2023 10MERCER

Options Considered

• Inpatient

– Current Method (no change, keep recent Meld approach)

– Current Method with Case Mix Adjustment added

– DRG Method

• Outpatient

– Current Method (fee schedule and cost to charge ratios)

– Fee Schedule APC

– Enhanced APG

10MERCER

MERCER 11April 18, 2023 11MERCER

Project Direction: Move to DRG and APC Models

• Incentives clear and aligned

– Acuity considered

• Better able to link to policy initiatives

– Can adjust payment levels easily (i.e. <100% to develop incentive pool)

– Able to implement P4P

• Multi-payer initiatives possible

• Easier to administer for state and hospitals

• Easier to update

• Stakeholders are supportive

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