Sustaining a Financially Vibrant Healthcare Organization

June 5, 2013
MS Healthcare Executives
Summer Meeting
Sustaining a Financially Vibrant
Healthcare Organization
• Moderator – Gwen Combs
VP for Policy & General Counsel, Mississippi Hospital
• Panelists
Dr. Mark Williams, Chief Medical Officer
North Mississippi Medical Center
Chandler Ewing, CPA, FACHE, Chief Executive Officer
Select Specialty Hospital – Jackson
Kevin Gore, CPA, BKD National Health Care Group
Reimbursement Drives the Delivery System
In an economic impact study of
hospitals, funded and published by
the Mississippi Hospital Association
in 2011, we learned that statewide
our hospitals’ revenue streams break
down as follows:
• 43% Medicare
• 16% Medicaid
• 42% Private pay & uncompensated
Critical Care: The Economic Impact of
Hospitals on the State’s Economy
Reimbursement Drives the Delivery System
Reimbursement Drives the Delivery System
Changing how Medicare pays for
inpatient acute care services:
• Value-Based Purchasing
• Reduction in Readmissions
• No payment for Hospital Acquired
• EHR Meaningful Use and other
Information Technology
Value-Based Purchasing
Readmissions Reduction
Source: 2007 MEDPAC report
No Payments for HACs
By FFY 2015, hospitals will see reductions in payment, or no payment, for
treatment of hospital acquired conditions. The newly proposed IPPS
regulations from CMS indicate a 2% reduction in payment for those
hospitals in the highest quartile for HACs.
Reductions for Failure to Utilize EHR and IT
By FFY 2015,
hospitals that do not
meet IQR
requirements face a
2% reduction in
under newly
Reductions in Medicare DSH
Financial Impact of ACA Medicare
Reimbursement Reductions
The Middle Class Tax Relief and Job Creation Act of 2012 authorized
reduction to Medicare payments for reimbursable bad debts for all
provider settings to 65%.
Financial impact on Mississippi hospitals over 10 years is
The American Taxpayer Relief Act of 2012 authorized
coding adjustment cuts for inpatient claims and for
outpatient radiosurgery claims.
Financial impact on Mississippi hospitals over
10 years is
CMS imposed a
prospective coding
adjustment of 1.9% for FFY
2013. This coding
adjustment continues under
newly proposed regulations.
The financial impact on
Mississippi hospitals is
Financial Impact of Reductions
• Under the Affordable Care Act, effective June 12,
2012, providers will no longer be paid for Hospital
Acquired Conditions (HACs) or Provider
Preventable Conditions (PPCs).
• These are quarterly adjustments for Never Events
that can be isolated from claims, such as:
– Performance of wrong procedure on correct patient
– Performance of procedure on patient not scheduled
for surgery
– Performance of correct procedure on wrong body
• Under the Affordable Care Act, beginning in
FFY 2014 (October 2013), Medicaid
Disproportionate Share Hospital payments
are to be phased down.
• The federal DSH “pot” will be reduced each
year as follows:
$500 million
$600 million
$600 million
$1.8 billion
2018 $5 billion
2019 $5.6 billion
2020 $4.0 billion
• The application of the Medicaid DSH
reductions must take into account the
– The percentage of uninsured individuals in the
– Whether the State targets its DSH payments
to hospitals with high uncompensated care
– Whether the state is defined as a “low DSH
(if so, the state faces a lower reduction)
Other Medicaid Reimbursement Issues
• Effective October 1, 2012, the Division of Medicaid
implemented a new inpatient reimbursement
system, APR-DRG, which, unlike the previous
cost-based per diem, now pays for “stays” not
• The object of this reimbursement methodology
change is transparency in the care that Medicaid
pays for. (In other words, Medicaid wants to pay
for acuity of care rather than just having beds filled
with Medicaid patients no matter the acuity of
Other Medicaid Reimbursement Issues
• Effective September 1, 2012, the Division of
Medicaid implemented an APC outpatient
reimbursement methodology, replacing the
historical cost-to-charge ratio and Medicare
fee schedule methodology.
• The new outpatient methodology uses
Medicare rates, APC fees, and a state
reimbursement fee schedule when no
Medicare or APC rate exists.
Under the Affordable Care
Act, effective January 1,
2013, primary care
physician reimbursement
will be at 100% of
Medicare, the difference
being paid by the federal
government for 2 years.
Medicare & Medicaid
And don’t forget RACs, MACs, SMRCs,
ZPIX, pre-payment reviews, utilization
review, and prior authorization.
Reasons for Denial of Claims
Medical necessity
Incorrect MS-DRG or other coding error
Insufficient or no documentation in
the medical record
All other
85% of the medical necessity denials seem to
center around the 1 day stay, leading auditors to
conclude that the medically necessary care was
delivered in the wrong setting.
Do Commercial Insurance Payers
Follow or Lead?
• Is the Affordable Care Act a game changer in the
delivery of health care services and the payment
for them?
• For 59% of the revenue streams for our
hospitals, the answer is a resounding yes.
• However, is not the commercial piece of the
hospitals’ revenue stream using reimbursement
to drive change in the delivery of health care as
How do hospitals maintain
their financial viability in
the face of the revolution
and evolution of payment
for hospital care and
health care?
- Quality Initiatives
- Business Model
- Initiatives
- Financial Initiatives

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