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Pancreas transplant

$26,897.76

costs that often occur in large teaching hospitals. Changes in factors such as IME following the Balanced Budget Act (BBA) in 1997 may result in changes in DRG reimbursement for various services.

Hospitals also may be reimbursed for unusually high discharge expenses. A hospital may receive an outlier payment if the cost of a discharge, calculated through a hospital-specific, cost-to-charge ratio, exceeds a certain threshold amount. In fiscal year 2003 the threshold was $33,450 above the base payment for the DRG, so if a discharge reaches that threshold, Medicare will pick up about 80 percent of the overage.

The Medicare Payment Advisory Commission (MedPAC) re-calibrates and reclassifies the DRG on a periodic basis based partly on cost reports that all hospitals file annually. MedPAC is an independent federal body made up of 17 members that meet publicly to discuss policy issues and formulate recommendations to the U.S. Congress on improving Medicare policies. Changes are published every year in the Federal Register. For fiscal year 2003, there were 510 DRGs.

Medicare Physician Fee Schedule

The Medicare physician fee schedule determines reimbursement to physicians and surgeons for services rendered in the care of a transplant recipient under Medicare Part B (as opposed to Part A, which goes to the hospital). Published annually by the U.S. Department of Health and Human Services (HHS), the fee schedule identifies a prespecified reimbursement rate for each service it identifies. Services are described by Current Procedural Terminology (CPT) codes, a uniform coding system for healthcare procedures developed by the American Medical Association (AMA) that is used for submitting claims.

The fee schedule is a resource-based relative value system (RBRVS). Payment for each service in the schedule is based on three factors:

1. A nationally uniform relative value for the specific service. This relative value is based on calculations for each service based on components of work (RVUW), practice overhead (RVUpe) and professional liability (RVUL) and is referred to as a relative value unit, or RVU.

2. A geographically specific modifier that considers variation in different areas of the country. Each area of the country has its own geographic practice cost indices (GPCI) for each of the relative value factors of work, practice overhead, and professional liability.

3. A nationally uniform conversion factor that is updated annually. The conversion factor for 2003 is $36.7856. This rate is up slightly from 2002, $36.1992.

The fee schedule is calculated according to several variables: the procedure performed, the CPT code for the procedure, the RVU factor for the procedure, the GPCI modifiers for the geographic area, and the national conversion factor for the year.

For surgeons, most of the payment is based on the number of work RVUs because it reflects the physician's services. The annual fee schedule increase for physicians is based on the Medicare economic index. This index is limited by the sustainable growth rate (SGR), which HHS determines to estimate how much Medicare expenditures for physician services should grow each year.

The Medicare fee schedule also is modified with input from the Relative Value Update Committee (RUC), a body convened by the AMA. The RUC is comprised of 29 members. Twenty-three are appointed by major national medical specialty societies, including three rotating seats (two of which are reserved for an internal medicine subspecialty with the other open to any other specialty) whose membership rotates every two years. The RUC Chair, Practice Expense Advisory Committee Chair, Co-Chair of the Health Care Professionals Advisory Committee (an advisory committee representing non-MD/DO health professionals), and representatives of the AMA, American Osteopathic Association, and CPT Editorial Panel hold the remaining six seats.

The Advisory Committee to the RUC, which is made up of representatives from the medical specialty societies whose members provide the services being valued, develops relative value recommendations for new and revised codes. One physician representative is appointed from each of the 98 specialty societies seated in the AMA House of Delegates to serve on the committee, and members are responsible for presenting their societies' recommendations to the RUC. The Advisory Committee member for each specialty is supported by an internal specialty RVS committee that manages the process of gathering information about the new or revised code(s) by developing vignettes and selecting reference services for use in surveying physicians in their specialties about the work involved in the service; reviewing survey results; and developing relative value recommendations for presentation to the RUC.

One fundamental feature about the Medicare physician fee schedule is that any changes must be budget neutral—in other words, any increase in one budget area must be taken from elsewhere in the budget. Beginning in 1999, the Medicare system began making the practice expense component of the fee schedule resource based. Transplant surgeons fees were significantly reduced for 1999 to 2002 in the fee schedule amounts. Heart-lung transplants lost 31%, kidney transplants about 15%, and liver transplants about 9%. The RUC evaluates all CPT codes every five years and makes its recommendations to CMS, which in turn interprets these recommendations and makes final rules. These are published in the Federal Register and, after a period for public comment, are considered final and comprise the new fee schedule.

Organ Acquisition Cost Centers (OACC)

Medicare separates payment for organ acquisition costs from both the payment the hospital receives on a DRG basis and the physician fee schedule payment to physicians for services rendered in transplant recipient care.

Organ acquisition cost centers are an accounting category created outside the transplant DRG for each transplanted organ. OACCs were designed to compensate the hospital for reasonable expenses of organ acquisition as well as both living donor and recipient evaluation and selection, as well as maintenance and reevaluation of recipient candidates on waiting lists until transplantation occurs. For certified transplant centers, Medicare pays for organ acquisition costs on a reasonable cost basis, one of the very few areas of hospital payment that is still cost reimbursed. Reimbursement is based on full cost, allowing the hospital indirect costs on all components that reflect overhead, with the presumption that overhead is allocated fairly.

Dealing with both live donor and cadaver organs, organ acquisition costs cover costs related to acquiring the organ and evaluating the recipient prior to transplant. Medical directors must establish separate cost centers for each of the different types of organs that Medicare reimburses. One major exception to the general rule of pretransplant costs is costs related to professional fees for physician services rendered to live donors during the admission for surgery. Otherwise, examples of appropriate charges against OACCs include:

• Donor and recipient evaluation,

• Costs associated with procurement of organs such as general routine and special care services for the donor, and

• Operating room and other inpatient ancillary services applicable to the donor.

Acquisition costs are divided into direct and indirect costs. Direct costs are those related to the organ acquisition itself, while indirect costs are transplant center overhead costs, or basic facility costs that all hospitals need to operate. From a cost reporting standpoint, direct and indirect costs are accumulated in the OACC on Worksheet A. Direct organ acquisition costs cover a wide scope of services and other transplant center costs including:

• Salaries of the staff involved in organ acquisition (procurement coordinators, administrative and support staff, clerical staff, medical directors, social workers or financial coordinators who may be working with potential transplant recipients, etc.);

• Outpatient services related to pretransplant workup such as evaluation services, tissue typing, and other laboratory services that occur on an ongoing basis;

• United Network for Organ Sharing (UNOS) registration fees;

• Purchase of the cadaver organ; and

• Transportation and preservation services.

For living donation, organ acquisition costs also include outpatient pretransplant workup for the donor; costs relating to the operating room such as anesthesia and other types of ancillary services related to the surgical procedure; and postoperative services to the live donor for any complications from the donation.

Some physician services can be included as direct organ acquisition costs, but they must be kept entirely separate from other types of physician professional services that can be billed under Medicare Part B. Donor and recipient pretransplant evaluation services, physician services that may relate to tissue typing and related laboratory services, and professional surgeon fees for cadaver organ procurement excisions (kidney excision fee is currently limited to $1250 per donor, although extra-renal excision fees which have no RVU allotment are reimbursed on a market value (carrier-based) basis) are all covered as direct organ acquisition costs. However, physician fees associated with the operative transplant and post-transplant services are not considered acquisition costs because they are paid under the physician fee schedule as part of the global surgery fee. In contrast to cadaver organ procurement, live donor organ procurement for a Medicare transplant recipient is paid directly to the physician under Part B, rather than through the OACC. Live donor organ procurement is paid at 100 percent of the physician fee schedule (deductibles and coinsurance do not apply). Postoperative physician services for a live donor and physician services that are related to other medical conditions when a patient may have been admitted for another medical reason besides organ donation also get paid directly under Part B.

When physician services are paid as direct organ acquisition services, transplant centers can pay physicians for their services and report those costs as organ acquisition costs as long as they provide appropriate documentation outlining the services and how much they cost. Accounting records should identify the recipient of the services and the services performed, and they should confirm the recipient's status as a potential organ donor or transplant recipient. If physician compensation includes other services, the transplant center and physician need some type of documentation that can be audited to identify how much of the compensation is attributable to organ acquisition services. Unless a provider is able to identify how much relates to organ acquisition services, it will not be able to directly assign those costs to the OACC.

Indirect costs of organ acquisition include various transplant center overhead costs such as:

• Fringe benefits based on the respective salaries of those whose services have been included in the OACC;

• Space costs such as depreciation expense, plant operation cost, utility cost, maintenance and repairs, and general costs that are necessary to operate a hospital;

• Equipment depreciation expense and social services costs that were not solely related to organ acquisition;

• General administrative costs (referred to as administrative and general costs on the Medicare cost report);

• Some portion of the salary of the hospital's CEO, CFO, and other various administrative personnel; and

• Other costs needed to run the hospital such as telephones, data processing, and insurance.

A portion of these costs gets brought over to the OACC. The percentage Medicare pays of the indirect organ acquisition costs is determined by apportionment, the process of identifying Medicare's share of the hospital's overall costs. Apportionment is based on a ratio of Medicare usable organs to total usable organs. The numerator of the ratio is the number of Medicare recipient organs that are actually transplanted. That includes the number of organs that were obtained or excised at the certified transplant center and sold to organ procurement organizations (OPOs). Medicare allows organs that are sold to OPOs to be included in the numerator because centers that excise organs and sell them to an OPO usually do not know who is the final recipient of the organ. The denominator is the total number of organs transplanted plus the number of organs that were excised at the transplant center and sold to OPOs.

To calculate the actual amount Medicare will pay for organ acquisition costs, total organ acquisition costs are multiplied by the apportionment ratio, and the amount of revenue the transplant center obtained when it sold organs to an OPO is subtracted. Any revenues the transplant center may have received from payors primary to Medicare also must be subtracted. For example, a transplant recipient for whom Medicare is a secondary payor is counted as a Medicare organ in computing the Medicare percentage, but on the tail end of the process, the revenues that the primary payor paid to the transplant center for organ acquisition are subtracted. The process of determining total organ acquisition costs and determining the Medicare share of organ acquisition costs is done differently for each type of organ, with the total amount of direct and indirect organ acquisition costs accumulated in cost report Worksheet D-6.

The average kidney (organ) acquisition cost is calculated by dividing the total full cost of all costs incurred by the hospital in the 'acquisition process' for that organ (kidney) divided by the number of kidneys transplanted. The average cost per organ is not inversely proportional to the number of total usable organs because cost is driven more by the average waiting time for the organ and length of the waiting list. Since periodic laboratory testing services (e.g., panel reactive antibody level testing) and the interval medical evaluations make up a large component of organ acquisitions costs, costs are higher the longer the potential transplant recipients are on the waiting list.

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