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Medicaid Hospital Reimbursement

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Hospital Reimbursement Modernization
The Department of Social Services is committed to modernization of the hospital reimbursement system. The first step of the process was to implement an inpatient system based on an All Patient Refined-Diagnosis Related Group (APR-DRG) payment methodology. The system was successfully launched on January 1, 2015 when DSS moved from an interim per diem rate system and case rate settlements to an APR-DRG system where hospital payments are established prospectively. Each inpatient claim is assigned an APR-DRG by utilizing claim data submitted such as diagnoses, procedures, member age, and gender. This method will aid DSS in its goals of moving toward a system that encourages access to care, reward efficiency, improves transparency, and improves equity by paying similarly across hospitals for similar care.

The second step was to implement an outpatient system based on an Ambulatory Payment Classification (APC) methodology. This system was implemented on July 1, 2016. This system is a change from the previous method based on Revenue Center Codes (RCC) using a combination of fixed fees and hospital-specific, code-specific cost to charge ratios to a system based on the complexity of services performed. The goals of this project are similar to the inpatient modernization goals. Evaluation of the new methodology will be ongoing as DSS is statutorily required to complete a fiscal analysis of the impact of the new methodology within six months of implementation.

Goals of Hospital Modernization:

  1. Greater administrative simplification for hospital providers and the Department by following the established Medicare reimbursement policies and procedures.
  2. Greater accuracy in matching reimbursement amounts to relative cost and complexity.
  3. Greater ability to partner with Medicare and other private sector payers in developing innovative payment strategies that reward improved quality as opposed to greater quantity of care.
  4. Greater transparency in the payment methodology.

Connecticut Statute 17b-239(a)(2) "Upon the conversion to a hospital payment methodology based on diagnosis-related groups, the Commissioner shall evaluate payments for all hospital services, including, but not limited to, a review of pediatric psychiatric inpatient units within hospitals."

The Department reviewed inpatient claims for dates of service from January 1, 2015 through March 31, 2015. The analysis broke down the claims by DRG assignment and included total paid, number of claims, and average paid per claim. DRG payment analysis for Q1 2015

Quick Links:

Inpatient Hospital APR-DRG Methodology Timeline
Outpatient Hospital APC Methodology Timeline
Hospital Payment Modernization (HPM) Issue Papers



Inpatient Hospital APR-DRG Methodology Timeline
Inpatient Hospital reimbursement moved to an APR-DRG methodology. Implementation occurred on January 1, 2015.

September 15, 2016
DSS and its consultants have completed the review of the statewide case mix index (CMI) for the first year of DRG reimbursement. DSS sent a letter and two issue papers by e-mail to each hospital's CFO and all hospital contacts. The Documentation and Coding Improvements issue paper provides background information and has not changed since it was revised on December 9, 2014. The Documentation and Coding Improvements (DCI) Reserve Refund issue paper is new. It describes the data analysis in detail and states that the statewide CMI has increased more than anticipated therefore a refund of the reserve is not warranted.

Letter from Deputy Commissioner Brennan

June 30, 2015
House Bill number 5597, Public Act #14-217, Section 194 requires that the Department complete a fiscal analysis of the impact of the diagnosis related group (DRG) reimbursement methodology within six months of implementation.

Fiscal Analysis DRG Reimbursement Methodology

December 8, 2014
DSS issued the rate letter and final DRG base rate calculation by e-mail to each hospital's CFO and all hospital contacts. All general acute care hospitals, including border and out-of-state, are now reimbursed using the All Patient Refined Diagnosis Related Groups (APR-DRG) methodology. A hospital can estimate its payment for a claim using the DRG payment calculator. The calculator contains detailed instructions regarding the data to be entered, including a link to 3M’s site that must be used to calculate the DRG assignment to be entered in the calculator.

DRG Payment Calculator

November 14, 2014
Mercer distributed the claim level detail files including outliers and payment calculator by secure e-mail to each hospital's designated contact person.

November 6, 2014
DSS met with hospital representatives including the Connecticut Hospital Association to discuss the hospital-specific APR-DRG base rate calculations sent to each hospital on November 5th.

November 5, 2014
Mercer distributed the draft DRG base rate calculations by e-mail to each hospital's designated contact person.

October 20, 2014
DSS met with hospital representatives including the Connecticut Hospital Association to provide an update on the modernization project.

October 20 Presentation
Precis of the CT Medicaid Program (as mentioned by Kate McEvoy)

October 2, 2014
DSS met with hospital representatives including the Connecticut Hospital Association to provide an update on the modernization project. There is no presentation for this meeting as the September 18 meeting summary was the basis for the discussion. Revenue Neutrality and Coding Improvements issue papers were revised as a result of this meeting.

October 2 Meeting Summary
Revenue Neutral Pro Forma Calculation (Example)

September 18, 2014
DSS met with hospital representatives including the Connecticut Hospital Association to provide an update on the modernization project.

September 18 Presentation
September 18 Meeting Summary
National APR-DRG Weights

September 3, 2014
DSS met with hospital representatives including the Connecticut Hospital Association to provide an update on the modernization project.

September 3 Presentation
September 3 Meeting Summary

Follow-up from the September 3 Meeting
Behavioral Health (BH) per diem rates will be paid for claims that are assigned a DRG of 740-776. There are three per diem rate tiers: $975, $1,050, and $1,125. Rates will be the same for child and adult to eliminate the current rate disparities. Each hospital is assigned to a tier that approximates historical revenue levels for BH days. For hospitals with a BH distinct part unit (DPU), tier assignment also takes into consideration BH costs as reported in the FY2012 Medicare cost report. If a hospital's change in revenue is negative and its percentage of cost is less than 100%, the hospital is bumped up one tier unless it is already assigned to the highest tier. Hospitals without a BH DPU are assigned to tier one, rate of $975. Behavioral Health (BH) File

Rehabilitation (Rehab) per diem rates will be paid for claims that are assigned to DRG 860. All rehab claims will be paid at a per diem rate of $1,370. This is based on 80% of the weighted average cost for the seven hospitals with a rehab DPU on their FY 2012 Medicare cost reports. There were only 138 rehab claims in the 2012 data. Rehabilitation (Rehab) File

July 28, 2014
DSS met with hospital representatives including the Connecticut Hospital Association to provide an update on the modernization project.

July 28 Presentation

March 31, 2014
DSS met with hospital representatives including the Connecticut Hospital Association to provide an update on the modernization project.

March 31 Presentation



Outpatient Hospital APC Methodology Timeline
Outpatient hospital reimbursement moved from a system of reimbursement based on Revenue Center Codes (RCC) to a prospective payment system based on the complexity of services performed. Implementation occurred on July 1, 2016.

January 9, 2017
Senate Bill number 502, Public Act #16-3, Section 87 requires that the Department complete a fiscal analysis report of the impact of the ambulatory payment classification (APC) reimbursement methodology within six months of implementation. Issuance of the report was delayed slightly, pending notification of the final listing of members of the Appropriations and Human Services committees to whom the report was to be sent.

Fiscal Analysis APC Reimbursement Methodology

June 28, 2016
DSS issued Out-of-State Hospital APC Rate Letters.

June 24, 2016
DSS issued the In-State rate letter by email to each hospital's CFO and all hospital contacts.

CMAP Addendum B
Estimated fiscal impact calculations

May 26, 2016
DSS met with hospital representatives including the Connecticut Hospital Association to provide clarification on the outpatient modernization project that will be implemented for dates of service on or after July 1, 2016.

May 26 Presentation

February 25, 2016
A web-conference was held to provide an update on the APC project. Each hospital was sent its summary fiscal impact model as well as the supporting claim level APC detail on February 24th. These documents were discussed during the web-conference and hospitals were asked to submit written comments to the Department.

February 25 Presentation
CT APC Claim Payment Workflow Chart

November 19, 2015
A web-conference was held to provide an update on the APC project.

November 19 Presentation
CT APC Claim Payment Workflow Chart
CT Medical Assistance Program information including CT Addendum B and Policy Bulletins

July 9, 2015
DSS met with hospital representative including the Connecticut Hospital Association to provide an update on the outpatient modernization project.

July 9 Presentation
CT APC Claim Payment Workflow Chart

April 22, 2015
As follow up to the April 9th web-conference, an email was sent to all hospitals and the Connecticut Hospital Association (CHA). To summarize: During the web conference, the Connecticut Hospital Association (CHA) suggested that they could identify potential issues and opportunities surrounding the transition to APC payments for Medicaid outpatient hospital services. To clarify, all outpatient hospitals including psychiatric and chronic disease hospitals will be subject to APCs and therefore should be included in the discussions. We would very much appreciate this effort and invite all outpatient hospitals and CHA to provide input as we finalize the design work for the APC payment methodology.

As noted during the web conference, time is of the essence as we are on schedule for a 1/1/16 implementation date for the APC grouper. In order for us to have sufficient time to incorporate your input into this process, please provide written comments by May 8th. Comments may be sent to Christopher LaVigne, Director of the Office of Reimbursement & Certificate of Need.

It will be very helpful if each issue or recommendation includes a brief description of the issue, possible options to consider, and a recommended approach and rationale. We will incorporate this input with the decision log and issue papers already envisioned by the consulting team. To the extent that you are able to coordinate your efforts and organize the topics into a single summary document, that will further expedite our work. However, we would encourage all participating hospitals to provide specific concerns as well.

April 9, 2015
A web-conference was held to provide an overview of the Ambulatory Payment Classification (APC) project regarding outpatient hospital payment modernization.

April 9 Presentation



Hospital Payment Modernization (HPM) Issue Papers

FAQ - Transition to Ambulatory Payment Classification (APC) - June 17, 2016
Issue Paper - 3M National Weights - Revision Date: August 12, 2014
Issue Paper - APC Policy Changes - Revision Date: August 19, 2016
Issue Paper - APC Policy Exclusions - Revision Date: August 18, 2016
Issue Paper - APC System Updates - Revision Date: July 7, 2016
Issue Paper - Basis for Fiscal Modeling - Revision Date: November 19, 2015
Issue Paper - Behavioral Health Services - Revision Date: April 7, 2016
Issue Paper - CMAP Addendum B - Revision Date: June 30, 2016
Issue Paper - Coding Improvements - Revision Date: December 9, 2014
Issue Paper - DCI Reserve Refund - Revision Date: September 8, 2016
Issue Paper - Edits and Billing Issues - Revision Date: December 16, 2015
Issue Paper - Indirect Medical Education (IME) Adjustment Factor - Revision Date: August 19, 2014
Issue Paper - Outlier Policy and Approach - Revision Date: December 11, 2014
Issue Paper - Outpatient Outliers - Revision Date: July 7, 2016
Issue Paper - PCMH - Revision Date: November 6, 2015
Issue Paper - Pharmacy Revenue Center Code 636 - Revision Date: June 16, 2016
Issue Paper - Professional Services - Revision Date: April 7, 2016
Issue Paper - Revenue Neutrality - Revision Date: November 3, 2014
Issue Paper - Transfer Payment Policy and Approach - Revision Date: August 19, 2014