Basic ICD-10-CM/PCS Coding 2013 Edition

1. Basic ICD-10-CM/PCS Coding2013 Edition Chapter 25: Coding and Reimbursement

2. Coding and Reimbursement • Review the chapter’s learning objectives and key terms • Concepts in this chapter connect coding to reimbursement • Recognize the importance of learning about: • Hospital inpatient prospective payment system • Medicare coding reviews • Recovery audit contractors • Coding for medical necessity

3. Hospital Inpatient Prospective Payment System (IPPS) • Method of payment by Medicare for inpatient acute care hospital services • Payment based on diagnosis-related groups (DRGS) • Revised in 2008 to be severity adjusted DRGs called Medicare Severity Diagnosis-Related Groups (MS-DRGs)

4. Hospital Inpatient Prospective Payment System (IPPS) • Three levels of severity • MS-DRG with major complication/comorbidity (MCC) • MS-DRG with complication/comorbidity (CC) • MS-DRG with no complication or comorbidity (non-CC)

5. Hospital Inpatient Prospective Payment System (IPPS) • System designed to categorize patients who are medically related with respect to diagnoses and treatments and who are statistically similar in their length of stay • Each DRG has a preset reimbursement amount that hospital receives whenever the MS-DRG is assigned for an inpatient discharge

6. Hospital Inpatient Prospective Payment System (IPPS) • Patient’s principal diagnosis and up to 24 additional diagnoses that include diagnoses that are recognized as major or other complications or comorbidity will determine a medical MS-DRG • If the patient had surgery or a significant procedure, it will cause a surgical MS-DRG to be assigned

7. Hospital Inpatient Prospective Payment System (IPPS) • MS-DRG Payment • Basic payment calculation • Each MS-DRG has a relative weight • Relative weight represents the average resources required to care for cases in that particular DRG • Each hospital has individual payment rate • Based on regional or national adjusted standardized amount that considers the type of hospital and wage index

8. Hospital Inpatient Prospective Payment System (IPPS) • MS-DRG Payment • Hospital payment is determined by the formula: • MS-DRG weight multiplied by hospital base rate • A percentage add-on payment is made if the hospital treats a high percentage of low-income patients known as the disproportionate share hospital adjustment • Teaching hospitals with residents receive direct graduate medical education payment that represents the direct costs of operating a residency program, known as indirect medical education adjustment

9. Hospital Inpatient Prospective Payment System (IPPS) • Some categories of hospitals are paid the higher of a hospital-specific rate based on their costs in a base year • These hospitals are afforded this special payment protection in order to maintain access to services by Medicare beneficiaries • Sole Community Hospitals (SCHs) • Medicare-dependent Small Rural Hospitals (MDHs)

10. Hospital Inpatient Prospective Payment System (IPPS) • MS-DRG assignment is based on • Diagnoses (principal and secondary) • Surgical procedures (principal and secondary) • Discharge disposition or status • Presence of major or other complications and comorbidities (MCC or CC) as secondary diagnoses

11. Medicare Coding Reviews • The Centers for Medicare and Medicaid (CMS) reviews acute inpatient prospective payment (IPPS) and long term care hospitals (LTCHs) hospital records for payment purposes • CMS contracts with FIs and MACs to conduct medical and coding reviews to prevent improper payment of inpatient hospital claims

12. Medicare Coding Reviews • Quality Improvement Organizations (QIOs) focus their work on the following: • Reviewing beneficiary complaints • Using evidence-based performance improvement tools • Working with hospitals and nursing homes to prevent complications • Increasing preventive services • Helping reduce readmissions

13. Medicare Coding Reviews • Medicare Administrative Contractors (MACs) • As of October 2012, there were 15 MACs processing Part A and Part B Medicare claims for a particular jurisdiction • Perform medical review of claims to ensure it is a covered, correctly coded, reasonable and necessary service • Provides feedback based on their review findings

14. Medicare Coding Reviews • Comprehensive Error Rate Testing (CERT) contractor reviews are done to • Measure payment error rates for acute IPPS hospitals and LTCH claims in accordance with coverage, coding and medical necessity guidelines • Reviews are done on a post-payment basis • Hospitals provide copies of the selected records to the CERT contractor

15. Recovery Audit Contractors (RACs) • Concern that Medicare Trust Fund may not be adequately protected against improper payments • Medicare sponsored a three year demonstration project started in 2005 • Reviewed medical records in three states to • Detect improper Medicare payment, including both underpayments and overpayments • Correct improper Medicare payments

16. Recovery Audit Contractors (RACs) (continued) • RAC program expanded to all states in 2010 • Four regional RAC organizations • Claims are selected based on focused areas of review for both inpatient and outpatient records • Each hospital is notified when claims are requested through “additional documentation requests” for copies of medical records

17. Recovery Audit Contractors (RACs) (continued) • The RACs perform reviews of medical records to: • Detect improper Medicare payments, including both underpayments and overpayments • Correct improper Medicare payments

18. Coding for Medical Necessity • Factors that define medical necessity of a diagnostic test, procedure or treatment • Service provides a reasonable beneficial effect • Service proven to be effective in the diagnosis, treatment, cure, or relief of a condition • Procedures are only reimbursed when they are performed for a specific diagnosis or specified frequency

19. Coding for Medical Necessity (continued) • Accurate ICD-10-CM coding is essential to establish the medical necessity of a service • Medicare’s policies exist to define Medicare coverage of an outpatient service • National coverage determinations (NCDs) • Local coverage decisions (LCDs)

20. Coding for Medical Necessity (continued) • Local Coverage Decisions (LCDs) • Written by fiscal intermediary and carrier based on national coverage policy • Within each NCD and LCD, only certain diagnosis codes will justify that a service is reasonable and necessary and allow payment

21. Coding for Medical Necessity (continued) • The need to know if a patient’s condition meets the medical necessity requirements of a particular service is essential prior to issuing an advance beneficiary notice (ABN) • ABN is a statement signed by the patient when notified by the provider prior to the service being performed that Medicare may not reimburse based on the reason for the test. By signing, the patient indicates that he will be responsible for the charges • Medical necessity processing has brought the coding function closer to the point of care

22. Exercises • Complete the review exercises for Chapter 25 concerning the connection of coding and reimbursement.