Provider Notice issued 06/26/14

Hospital Rate Reform - Additional Guidance Effective with Inpatient Discharges and Outpatient Dates of Service Beginning July 1, 2014

On June 17, 2014, the Joint Committee on Administrative Rules approved the Department of Healthcare and Family Services’ administrative rule amendments to implement new inpatient and outpatient reimbursement systems.

The department’s most recent release regarding the planned implementation of the new systems was an April 14, 2014 Informational Notice titled, Hospital Rate Reform Effective with Inpatient Discharges and Outpatient Dates of Service Beginning July 1, 2014 (pdf). As a result of legislation passed in the recently-adjourned session, and continued implementation planning, the department needs providers to be aware of these additional planned actions:

Public Act 98-0651 Changes (still subject to federal approval):;

• Safety Net Hospitals - Safety Net hospitals (excluding pediatric hospitals) will receive an additional $57.50 per day add-on for general acute care inpatient services.

• Psychiatric Hospitals - Psychiatric hospitals that primarily treat children under age 20 but are not designated as children’s hospitals will receive an additional $48.25 per day add-on for psychiatric inpatient services.

• Transition Period – The transition period to the reimbursement systems will continue through June 30, 2018, instead of ending June 30, 2016. During this period, qualifying hospitals will receive monthly static payments via C-13 payment voucher to help preserve access to hospital services. Letters regarding these payments will be forthcoming to the affected hospitals.

Other Planned Changes:

• Expensive Drugs and Devices Listing – The outlier add-on for specified expensive drugs and devices provided in an outpatient setting will no longer be applicable for dates of service beginning July 1, 2014. Payment for these drugs and devices will be included as part of the Enhanced Ambulatory Patient Groups (EAPG) payment.

• National Drug Code (NDC) on Outpatient Claims – In previous policy releases, the department only required hospitals and ASTCs to identify on outpatient claims the NDCs for drugs on the Renal Dialysis Injectable Drug Listing and the Expensive Drugs and Devices Listing. Effective with outpatient dates of service on and after July 1, 2014, all HCPCS drug codes must be coded with the appropriate NDC(s) in order for the department to be able to claim the rebates from the drug manufacturers as part of the Medicaid Drug Rebate Program.

• UD Modifier to Denote 340B-Purchased Drugs on Outpatient Claims – Section 340B of the Public Health Service Act limits the cost of covered outpatient drugs to certain providers, including qualified hospitals. These providers purchase pharmaceuticals at significantly discounted prices. Previously, the department required hospitals to identify all 340B-purchased drugs published on the Renal Dialysis Injectable Drug Listing and Expensive Drugs and Devices Listing on outpatient claims by reporting modifier “UD” in FL 44 of the UB-04. Effective with outpatient dates of service on and after July 1, 2014, hospitals must identify all 340B-purchased drugs so that the department will not claim the rebates. Modifier “UD” must be the first modifier listed after the HCPCS drug code.

• Discharge Status Codes – The department will open Discharge Status Codes 69 and 81-95 to be consistent with UB-04 guidelines. These codes will be billable effective July 1, 2014, for discharges on and after October 1, 2013.

• Hospital- Acquired Conditions (HACs) – For discharges on and after July 1, 2014, the APR-DRG system will evaluate the Present on Admission coding on inpatient claims and price the claims accordingly. APR-DRG Grouper Version 30 is programmed to identify two HACs, Surgical Site Infection Following Cardiac Device Procedures, and Iatrogenic Pneumothorax with Venous Catheterization, that are not currently on the list established by the department. The department’s listing of Hospital-Acquired Conditions  will be revised to reflect the additional conditions.  

• APR-DRG Grouper Version 30 – In the April 14, 2014 Informational Notice (pdf), the department stated it would update to APR-DRG Grouper Version 32 effective January 1, 2015. Due to the federal delay of ICD-10 implementation, the department does not plan to update grouper versions until January 1, 2016.

• Series Claims – Dates of service on series claims cannot span July 1, 2014. Series claims must be split in order to price correctly. If a series claim contains more than 54 Revenue Code lines, the claim service dates must be split into two or more separate claims.

• Pricing Calculators - The department has posted inpatient and outpatient claims calculators on the Hospital Rate Reform webpage. These calculators contain the list of APR-DRGs / EAPGs and their relative weights and will display all rate components needed for each individual hospital to determine estimated claim payment for a given claim on the “Interactive Calculator” tab.

• Observation - Hospitals and ASTCs are required to code observation services with Revenue Code 0762 and an associated HCPCS Code as identified in the APL, and note the number of hours in observation in FL 46 – Service Units. Additionally, providers must code a second Revenue Code 0762 line and identify HCPCS code G0378 in order for observation services to process correctly. The minimum billable observation time will be one hour.

New Systems Claims Processing:

• Effective dates for payment under the new inpatient and outpatient systems remain inpatient dates of discharge and outpatient dates of service on and after July 1, 2014. There is a potential four-week period where claims meeting these date parameters will be accepted by the department and placed in hold status. Claims received with prior date parameters will continue to be paid under the legacy payment system. Hospitals already qualified by the department to be paid on an expedited schedule may contact the department to ensure there are no cash flow issues during this period.

Any questions regarding this notice or inquiries regarding expedited payment schedules may be directed to the Bureau of Hospital and Provider Services at 1-877-782-5565.

Theresa A. Eagleson, Administrator

Division of Medical Programs