Provider Notice issued 10/04/13

Additional Information Regarding Hospital Inpatient and Outpatient Reimbursement Systems

This notice serves as an update to the Hospital Inpatient and Outpatient Reimbursement Systems notice dated September 10, 2012.

Hospital Rate Reform

Through combined efforts of the Department of Healthcare and Family Services and the Technical Advisory Group (TAG), which includes various representatives of the hospital community including the Illinois Hospital Association, the department will be implementing a new hospital reimbursement system. This new rate methodology will affect the pricing of both the inpatient and outpatient hospital claims and incorporates the following:

• Moves $200 million of current static payments into the claims based reimbursement

• Shifts $155 million of inpatient funding to outpatient funding

• MPA and MHVA programs will continue

Inpatient Claims

Effective with admissions on or after July 1, 2014, inpatient claims will be processed and adjudicated through the 3M™ All Payer Refined Diagnosis Related Group (APR-DRG) payment system. The department will continue to process and adjudicate inpatient claims under the current CMS-DRG grouper version 12 for claims with admission dates through June 30, 2014.

Certain adjusters have been applied to claims to ensure access to care for critical services and to reimburse for costs incurred by the hospitals for specialty staff and equipment needed to care for these types of cases. Adjusters include the following:

• Pediatric Adjuster – Applied to a hospital claim for a neonatal, normal newborn, or OB service that is provided by a Perinatal Level III facility as determined by the Illinois Department of Public Health.

• Trauma Adjuster – Applied to a hospital claim for a trauma service that is provided by a Trauma level 1 or Trauma level 2 hospital as determined by the Illinois Department of Public Health.

• Transplant Adjuster– Applied to a claim for a transplant service so that aggregate new system payments are 50% of the total charges.

• Outlier Adjustment– Claim outlier payments calculated based on 80% of outlier costs exceeding outlier threshold for Severity of Illness (SOI) levels 1 and 2 claims and 95% for SOI 3 and 4.

Outpatient Claims

Effective with dates of service on or after July 1, 2014, outpatient claims will be processed and adjudicated through the Enhanced Ambulatory Procedure Grouping (EAPG) payment system. The department will continue to process and reimburse outpatient claims under the current Ambulatory Procedures Listing (APL) group assignments on claims with dates of service through June 30, 2014.

Please note the following regarding outpatient reimbursement under the new system:

• Outpatient Adjuster – Applied to outpatient claims to enhance reimbursement for services provided at safety net hospitals and other hospitals where Medicaid outpatient utilization levels exceed a threshold that is 1.5 standard deviations above the regional average.

• Hospital fee-for-service billing and payment methodology will not be changed and will not be incorporated into the new EAPG payment system.

• Renal Dialysis will continue under the current payment methodology.

Transition Period

A temporary, 2-year transition period will be implemented and is designed to help mitigate hospital impacts. A $200 million pool will be allocated to hospitals with a projected negative impact in the form of static payments. The 2-year time period will give hospitals adequate time to adjust to the new payment methodology. Once the 2-year transition period is complete, the $200 million will be moved into the claims' base rates and the department will evaluate any further need for continued static payments.

Shadow Pricing

The department is creating hospital specific claim level data files comparing the legacy pricing to the new pricing for hospitals review. These shadow pricing files will include a breakdown of the pricing structure including base rates, weights, outliers and other pertinent data necessary to analyze changes from the legacy system to the new system. These files will be made available in mid-October. To obtain your hospital's file, please e-mail HFS Hospitals with the name and email address of the contact person to receive the file, the hospital or hospital's name and address, and the hospital's Medicaid Provider ID. Each hospital's report will be sent to only one email address.

Theresa A. Eagleson, Administrator

Division of Medical Programs