Low payment for pulmonary rehab explained

 

A new review of 2015 Medicare data clearly points fingers at hospitals for the historically low payment rates for pulmonary rehabilitation.

To fully understand these data, everyone involved in the delivery of pulmonary rehabilitation services needs to know some of the specifics regarding Medicare’s rate setting process for hospital outpatient services. Those services are paid on the basis of a prospective payment methodology, similar to the DRG system for inpatient services. Under the outpatient system, APCs (ambulatory payment classifications) are computed with two key data sources, both provided by hospitals.

First, every claim submitted to Medicare for an outpatient service must include the hospital’s “charge” for the service. (IMPORTANT NOTE: It is very easy to use the terms cost, charge, payment, and reimbursement interchangeably, but when discussing this issue, it is critically important to make key distinctions). This “charge” is not what the hospital expects to get paid – it is information from the hospital’s “chargemaster” that identifies what, in theory, a self-pay patient might pay for a certain service. Therefore, every claim submitted to CMS for payment of code G0424 (pulmonary rehabilitation services) must include this “charge” data.

The second key component used by CMS for rate setting is the hospital cost report, submitted annually to CMS tied to the individual hospital’s fiscal year. This flow of data to CMS is ongoing because of differing fiscal years and is somewhat attributable to changes in Medicare proposed rates for the following year, published in July, compared with final rates, published in early November.

The other key historical fact that needs emphasis is what happened in 2010 when CMS began reimbursing for pulmonary rehab under new HCPCS code G0424. Clearly, there were no charge data to examine, so the Agency had to do a bit of guesswork, estimating what would be a reasonable payment. CMS turned to payment information tied to codes G0237 and G0238, codes that had been used by many institutions for the previous decade for billing pulmonary rehab. But one critical difference existed. The new code, G0424, was a 1-hour code, while G0237-38 were 15-minute codes. Over the next 2 years, even CMS cited the failure of hospitals to adjust their charges to reflect all the component services included in this new, bundled 1-hour code, compared with the unbundled 15-minute code.

The new review of CMS data bears out this problem. With approximately 1,350 institutions billing for hospital outpatient pulmonary rehab via code G0424, there is incredibly wide variance in charge data. The range is from a high of $1,981 to a low of $44, with 1,350 institutions in-between. The average charge was $247, but the difference between the lowest charge and the highest charge is approximately 44-fold.

For cost report data, the spread is from $1,265 to $4 (yes, $4, based on data provided to CMS). Approximately 750 hospitals, more than half, submit data to CMS reflecting costs associated with the delivery of pulmonary rehab, per hour, at $50 or less.

There are probably several reasons why hospitals behave this way. First, there is the historical phenomenon cited by CMS that it often takes years for hospitals to adjust charges appropriately when any new HCPCS code is adopted by CMS. And, in fact, CMS cited pulmonary rehab as a glaring example of that failure by hospitals. Second, there is the cost report data, and we believe it, too, falls victim to hospital neglect. We can understand that a service such as pulmonary rehab falls so far below the radar by chargemasters, hospital administrators and others associated with information submitted to CMS that little attention is paid to accuracy of charges or administrative costs culled from the hospital cost report. And then, there is the matter of community relations. The hospitals at the very high end of the spectrum in terms of charges ($1,100 and up) are unlikely to build good community relations if they let people know of those charges. Ironically, it is fair to presume that hospitals do pay very close attention to their charges and cost report data for very high-end hospital outpatient services, micro-examining that information to ensure desirable payment rates.

So, the critical challenge to the pulmonary community is to focus on those two very specific bits of data submitted by hospitals to CMS: what a hospital identifies as the “charge” for code G0424 and is then entered on every claim submitted to G0424; and second, information correlated to the administrative aspects of pulmonary rehab that hospitals submit to CMS annually in their cost report to CMS. Until those adjustments are made, pulmonary rehab will live with unacceptable payment rates.

 

A new review of 2015 Medicare data clearly points fingers at hospitals for the historically low payment rates for pulmonary rehabilitation.

To fully understand these data, everyone involved in the delivery of pulmonary rehabilitation services needs to know some of the specifics regarding Medicare’s rate setting process for hospital outpatient services. Those services are paid on the basis of a prospective payment methodology, similar to the DRG system for inpatient services. Under the outpatient system, APCs (ambulatory payment classifications) are computed with two key data sources, both provided by hospitals.

First, every claim submitted to Medicare for an outpatient service must include the hospital’s “charge” for the service. (IMPORTANT NOTE: It is very easy to use the terms cost, charge, payment, and reimbursement interchangeably, but when discussing this issue, it is critically important to make key distinctions). This “charge” is not what the hospital expects to get paid – it is information from the hospital’s “chargemaster” that identifies what, in theory, a self-pay patient might pay for a certain service. Therefore, every claim submitted to CMS for payment of code G0424 (pulmonary rehabilitation services) must include this “charge” data.

The second key component used by CMS for rate setting is the hospital cost report, submitted annually to CMS tied to the individual hospital’s fiscal year. This flow of data to CMS is ongoing because of differing fiscal years and is somewhat attributable to changes in Medicare proposed rates for the following year, published in July, compared with final rates, published in early November.

The other key historical fact that needs emphasis is what happened in 2010 when CMS began reimbursing for pulmonary rehab under new HCPCS code G0424. Clearly, there were no charge data to examine, so the Agency had to do a bit of guesswork, estimating what would be a reasonable payment. CMS turned to payment information tied to codes G0237 and G0238, codes that had been used by many institutions for the previous decade for billing pulmonary rehab. But one critical difference existed. The new code, G0424, was a 1-hour code, while G0237-38 were 15-minute codes. Over the next 2 years, even CMS cited the failure of hospitals to adjust their charges to reflect all the component services included in this new, bundled 1-hour code, compared with the unbundled 15-minute code.

The new review of CMS data bears out this problem. With approximately 1,350 institutions billing for hospital outpatient pulmonary rehab via code G0424, there is incredibly wide variance in charge data. The range is from a high of $1,981 to a low of $44, with 1,350 institutions in-between. The average charge was $247, but the difference between the lowest charge and the highest charge is approximately 44-fold.

For cost report data, the spread is from $1,265 to $4 (yes, $4, based on data provided to CMS). Approximately 750 hospitals, more than half, submit data to CMS reflecting costs associated with the delivery of pulmonary rehab, per hour, at $50 or less.

There are probably several reasons why hospitals behave this way. First, there is the historical phenomenon cited by CMS that it often takes years for hospitals to adjust charges appropriately when any new HCPCS code is adopted by CMS. And, in fact, CMS cited pulmonary rehab as a glaring example of that failure by hospitals. Second, there is the cost report data, and we believe it, too, falls victim to hospital neglect. We can understand that a service such as pulmonary rehab falls so far below the radar by chargemasters, hospital administrators and others associated with information submitted to CMS that little attention is paid to accuracy of charges or administrative costs culled from the hospital cost report. And then, there is the matter of community relations. The hospitals at the very high end of the spectrum in terms of charges ($1,100 and up) are unlikely to build good community relations if they let people know of those charges. Ironically, it is fair to presume that hospitals do pay very close attention to their charges and cost report data for very high-end hospital outpatient services, micro-examining that information to ensure desirable payment rates.

So, the critical challenge to the pulmonary community is to focus on those two very specific bits of data submitted by hospitals to CMS: what a hospital identifies as the “charge” for code G0424 and is then entered on every claim submitted to G0424; and second, information correlated to the administrative aspects of pulmonary rehab that hospitals submit to CMS annually in their cost report to CMS. Until those adjustments are made, pulmonary rehab will live with unacceptable payment rates.

 

A new review of 2015 Medicare data clearly points fingers at hospitals for the historically low payment rates for pulmonary rehabilitation.

To fully understand these data, everyone involved in the delivery of pulmonary rehabilitation services needs to know some of the specifics regarding Medicare’s rate setting process for hospital outpatient services. Those services are paid on the basis of a prospective payment methodology, similar to the DRG system for inpatient services. Under the outpatient system, APCs (ambulatory payment classifications) are computed with two key data sources, both provided by hospitals.

First, every claim submitted to Medicare for an outpatient service must include the hospital’s “charge” for the service. (IMPORTANT NOTE: It is very easy to use the terms cost, charge, payment, and reimbursement interchangeably, but when discussing this issue, it is critically important to make key distinctions). This “charge” is not what the hospital expects to get paid – it is information from the hospital’s “chargemaster” that identifies what, in theory, a self-pay patient might pay for a certain service. Therefore, every claim submitted to CMS for payment of code G0424 (pulmonary rehabilitation services) must include this “charge” data.

The second key component used by CMS for rate setting is the hospital cost report, submitted annually to CMS tied to the individual hospital’s fiscal year. This flow of data to CMS is ongoing because of differing fiscal years and is somewhat attributable to changes in Medicare proposed rates for the following year, published in July, compared with final rates, published in early November.

The other key historical fact that needs emphasis is what happened in 2010 when CMS began reimbursing for pulmonary rehab under new HCPCS code G0424. Clearly, there were no charge data to examine, so the Agency had to do a bit of guesswork, estimating what would be a reasonable payment. CMS turned to payment information tied to codes G0237 and G0238, codes that had been used by many institutions for the previous decade for billing pulmonary rehab. But one critical difference existed. The new code, G0424, was a 1-hour code, while G0237-38 were 15-minute codes. Over the next 2 years, even CMS cited the failure of hospitals to adjust their charges to reflect all the component services included in this new, bundled 1-hour code, compared with the unbundled 15-minute code.

The new review of CMS data bears out this problem. With approximately 1,350 institutions billing for hospital outpatient pulmonary rehab via code G0424, there is incredibly wide variance in charge data. The range is from a high of $1,981 to a low of $44, with 1,350 institutions in-between. The average charge was $247, but the difference between the lowest charge and the highest charge is approximately 44-fold.

For cost report data, the spread is from $1,265 to $4 (yes, $4, based on data provided to CMS). Approximately 750 hospitals, more than half, submit data to CMS reflecting costs associated with the delivery of pulmonary rehab, per hour, at $50 or less.

There are probably several reasons why hospitals behave this way. First, there is the historical phenomenon cited by CMS that it often takes years for hospitals to adjust charges appropriately when any new HCPCS code is adopted by CMS. And, in fact, CMS cited pulmonary rehab as a glaring example of that failure by hospitals. Second, there is the cost report data, and we believe it, too, falls victim to hospital neglect. We can understand that a service such as pulmonary rehab falls so far below the radar by chargemasters, hospital administrators and others associated with information submitted to CMS that little attention is paid to accuracy of charges or administrative costs culled from the hospital cost report. And then, there is the matter of community relations. The hospitals at the very high end of the spectrum in terms of charges ($1,100 and up) are unlikely to build good community relations if they let people know of those charges. Ironically, it is fair to presume that hospitals do pay very close attention to their charges and cost report data for very high-end hospital outpatient services, micro-examining that information to ensure desirable payment rates.

So, the critical challenge to the pulmonary community is to focus on those two very specific bits of data submitted by hospitals to CMS: what a hospital identifies as the “charge” for code G0424 and is then entered on every claim submitted to G0424; and second, information correlated to the administrative aspects of pulmonary rehab that hospitals submit to CMS annually in their cost report to CMS. Until those adjustments are made, pulmonary rehab will live with unacceptable payment rates.