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Key Takeaways from the Long-Awaited IPPS Final Rule

The lengthy document contains information about changes relevant to professionals in coding, HIM, and CDI.

Each summer we all wait with bated breath for the Centers for Medicare & Medicaid Services (CMS) to release the hospital Inpatient Prospective Payment System (IPPS) Final Rule. On Aug. 2, the wait was over, with the Final Rule coming in at 2,295 pages! This regulatory policy under Medicare Part A includes a variety of notable changes impacting the majority of acute-care hospitals. There was some impact of the COVID-19 pandemic to the expected changes, resulting in implementation delays of one year (and/or using 2019 data, rather than data from 2020).

Certainly, revenue cycle, compliance, cost report specialists, data analysts, and reimbursement leadership will find this Final Rule very relevant. For health information management (HIM), coding, and clinical documentation integrity (CDI) specialists, the IPPS Medicare Severity Diagnostic-Related Groups (MS-DRGs) changes are an area of great interest, and merit a close review.

Per the CMS fact sheet, “we are also finalizing our proposal to repeal the market-based MS-DRG relative weight methodology that was adopted effective for FY 2024, and to continue using the existing cost-based MS-DRG relative weight methodology to set Medicare payment rates for inpatient stays for FY 2024 and subsequent fiscal years.” (See the link to the fact sheet and final rule below.)

Using much of the language directly in the IPPS final rule, let’s take a look at some of the key implications for the aforementioned specialists:

MS-DRG Relative Weights (RWs): Each MS-DRG has a relative weight (figure) that is based on a cost methodology. That relative weight (i.e., 1.34) is used along with the hospital-specific base rate (i.e., $6,500) to calculate the MS-DRG payment (1.34 x 6,500 = $8,710 in reimbursement). Remember, there is one MS-DRG for each hospital inpatient encounter under Medicare Part A. For FY 2022, CMS had recommended a change to the methodology, but in the final rule, they stated they will not implement the market-based MS-DRG relative weight methodology for calculating the MS-DRG relative weights that was to be effective in FY 2024, but rather will continue with the cost-based structure.

MS-DRG Length of Stay (LOS): The arithmetic length of stay (ALOS) for each MS-DRG is used commonly by hospital utilization review staff and case management. In addition, the ALOS is an important data element when coding inpatient encounters and comparing it to the actual LOS. If the actual LOS is less than the ALOS by at least a day for a given MS-DRG, this could indicate a need to audit/review the CC/MCC and confirm that there is supporting documentation for all the ICD-10-CM/PCS codes assigned (see the February 2021 U.S. Department of Health and Human Services Office of Inspector General, or HHS-OIG, Report on MS-DRGs). It’s a best practice to audit some of the MS-DRG encounters a few times a year, looking closely at those for which the actual LOS is at least one day less than the ALOS.

Revisions/Reassignments to MS-DRGs: CMS has been studying and analyzing a new non-CC subgroup for several MS-DRGs, but with the pandemic impact on hospital inpatient stays, they will delay the application of the non-CC subgroup criteria to existing MS-DRGs, with a three-way severity level split until FY 2023 or later. For FY 2022, they will maintain the current structure of the 32 MS-DRGs that currently have a three-way severity level split. This is an area that we will need to keep a close eye on, and when we see the proposed rule regarding non-CC subgroups for FY 2023, we need to be sure to submit any comments to CMS.

It should be noted that procedure codes describing CAR T-cell, non-CAR T-cell and other immunotherapies will be assigned to pre-MDC MS-DRG 018, and the title is being modified to “Chimeric Antigen Receptor (CAR) T-cell and Other Immunotherapies” to better reflect the cases reporting the administration of other therapies.

CMS will reassign procedure codes 0JB60ZZ, 0JB70ZZ, and 0JB80ZZ, describing excision of subcutaneous tissue of chest, back, or abdomen, from MS-DRGs 140, 141, and 142 to MS-DRGs 143, 144, and 145 for FY 2022.

There will also be a reassignment of 31 procedure codes (shown in IPPS Table 6P.2b) that describe laser interstitial thermal therapy (LITT) of various body parts to the more clinically appropriate MDCs and MS-DRGs.

Other reassignments will occur with 26 procedure codes (nine procedure codes describing repair of pulmonary or thoracic structures, and 17 procedure codes describing procedures performed on the sternum or ribs); these are shown in IPPS Table 6P.2c. They will move from MS-DRGs 166, 167, and 168 to MS-DRGs 163, 164, and 165 in MDC 04 for FY 2022.

Within MDC 05, there was a large volume of discussion and data analysis regarding short-term external heart assist device procedures. CMS will reassign ICD-10-PCS codes 02HA0RJ, 02HA3RJ, and 02HA4RJ (intraoperative short-term external heart assist devices) from MS-DRG 215 to MS-DRGs 216, 217, 218, 219, 202, and 221 – still within MDC 05, without modification, effective Oct. 1, 2021.

A modification to the GROUPER logic will occur for FY 2022 to allow cases reporting diagnosis code I21.A1 (Myocardial infarction type 2) as a secondary diagnosis to group to MS-DRGs 222 and 223 when reported with qualifying procedures, effective Oct. 1, 2021.

Another MS-DRG reassignment will occur with ICD-10-CM diagnosis code B33.24 (Viral cardiomyopathy) from MDC 18 in MS-DRGs 865 and 866 (Viral Illness with and without MCC, respectively) to MDC 05 in MS-DRGs 314, 315, and 316 (Other Circulatory System Diagnoses with MCC, with CC, and without CC/MCC, respectively), without modification, effective Oct. 1, 2021.

There will a revision made to the surgical hierarchy, reassigning ICD-10-CM diagnosis code B33.24 from MDC 18 in MS-DRGs 865 and 866 (Viral Illness with and without MCC, respectively) to MDC 05 in MS-DRGs 314, 315, and 316 (Other Circulatory System Diagnoses with MCC, with CC, and without CC/MCC, respectively), without modification, effective Oct. 1, 2021.

In addition, CMS will revise the assignment of cases with a procedure code describing coronary bypass and a procedure code describing open ablation to MS-DRGs 233 and 234, and they are changing the titles of these MS-DRGs to “Coronary Bypass with Cardiac Catheterization or Open Ablation with and without MCC, respectively.” (See the IPPS Final Rule for more specifics on this change.)

Comments were submitted regarding procedure code combination for removal and replacement of knee joints that were missing from the logic. CMS conducted data analysis, along with a discussion of the grouper logic, and will be adding the three procedure code combinations (see the IPPS Final Rule) describing removal and replacement of the right knee joint that were inadvertently omitted from the logic to MS-DRGs 461, 462, 466, 467, and 468 in MDC 08 and MS-DRGs 628, 629, and 630 in MDC 10. They are also adding the 11 additional code combinations listed that were provided by the commenter to the logic for MS-DRGs 628, 629, and 630 in MDC 10 for FY 2022.

Keep in mind that when MS-DRGs are moved around from one year to the next, the hospital case mix can change, so it’s important for HIM and CDI staff to understand this. It’s also a good practice to inform the financial leadership of these changes, and utilize MS-DRG frequency (include RW) reports to demonstrate this impact, if any.

CC Exclusion Rule/List: CMS will include a diagnosis for congestive heart failure, ICD-10-CM codes I11.0 and I13.2.

Extension of the New COVID-19 Treatments Add-on Payment (NCTAP): Currently, as drugs and biological products become available and are authorized for emergency use or full approval by the Food and Drug Administration (FDA) for the treatment of COVID-19 in the inpatient setting, there is an increase in the IPPS payment amounts to mitigate any potential financial disincentives for hospitals to provide new COVID-19 treatments during the public health emergency (PHE). The Final Rule states that the NCTAP should remain available for cases involving eligible treatments for the remainder of the fiscal year in which the PHE ends (for example, until Sept. 30, 2022). Documenting and coding COVID-19 treatments accurately is vital to revenue integrity.

With all these changes, CMS did finalize a 2.7-percent payment increase to hospitals that are successful with their participation in the Hospital Inpatient Quality Reporting program and are meaningful electronic health record (EHR) users. They also included disproportionate share hospital and Medicare uncompensated care payments; the agency estimates that IPPS hospital payments will increase by $2.3 billion.

Some interesting statistics that CMS shared in the Final Rule appear below; I think that for any given hospital, it might be worth running a few data reports to compare your metrics to these CMS percentages (what do your MS-DRG stats indicate for FY 2020?):

  • The number of inpatient admissions for MS-DRG 470 (Major Hip and Knee Joint Replacement or Reattachment of Lower Extremity without MCC) dropped by 40 percent in FY 2020.
  • The number of inpatient admissions for MS-DRG 177 (Respiratory Infections and Inflammations with MCC) increased by 133 percent.
  • In FY 2019, CMS calculated a case-mix value of 1.813, and for FY 2020, the agency calculated a case-mix value of 1.883, an increase in total case-mix of 3.9 percent.

Wow, that’s a lot of information, and I didn’t cover it all in this article. It’s going to be critical that hospitals run some data reports of their own MS-DRG statistics, and specifically on many of the reassigned MS-DRGs, to determine the impact, if any. For HIM and CDI professionals, ensure that they receive education on the FY 2022 IPPS rule, in addition to the ICD-10-CM/PCS code changes, to assist them with the Oct. 1, 2021, implementation date.

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Gloryanne Bryant, RHIA, CDIP, CCS, CCDS

Gloryanne is an HIM coding professional and leader with more than 40 years of experience. She has an RHIA, CDIP, CCS, and a CCDS. For the past six years she has been a regular speaker and contributing author for ICD10monitor and Talk Ten Tuesdays. She has conducted numerous educational programs on ICD-10-CM/PCS and CPT coding and continues to do so. Ms. Bryant continues to advocate for compliant clinical documentation and data quality. She is passionate about helping healthcare have accurate and reliable coded data.

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