Preparing for the inpatient rehabilitation PPS - propsective payment system case study, MetroHealth Center for Rehabilitation, Cleveland, Ohio

Healthcare Financial Management, Dec, 2001 by Joseph A. Rielinger

To assess the financial impact of the inpatient rehabilitation prospective payment system (PPS) on its future revenues, the MetroHealth Center for Rehabilitation (MHCR), Cleveland, Ohio, undertook a three-phase process using data from calendar year 2000 to estimate its potential profit or loss for each case-mix group (CMG) identified in the final rule. This process entailed developing a database to facilitate the combination and comparison of patient-charge and clinical data by CMG, using the combined data to estimate costs by cost center, and using payment information included in the final rule to estimate revenues by CMG. Following the assessment, the MHCR decided to expand the database to assist clinicians in making informed decisions in their patient-assessment and care-delivery processes that would account for cost and revenue considerations under the PPS.

On August 6, 2001, the Centers for Medicare and Medicaid Services (CMS--formerly HCFA) published the final rule outlining the new prospective payment system (PPS) for inpatient rehabilitation services. (a) Previously, rehabilitation hospitals and units were excluded from the DRG-based PPS established for acute care hospitals by the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 because the resources required to provide postacute rehabilitation services tended to vary dramatically among patients with the same diagnosis. Instead, TEFRA established a payment system for rehabilitation hospitals based on reasonable costs up to a ceiling payment (the TEFRA limit), which was determined for each hospital on the basis of various cost, demographic, and geographic factors.

The inpatient rehabilitation PPS promises to bring significant change to this sector of the healthcare industry. Therefore, inpatient rehabilitation facilities should prepare immediately for implementation of the new PPS.

The MetroHealth Center for Rehabilitation (MHCR), a member of the Cleveland, Ohio-based MetroHealth System, undertook an initiative whose primary long-term goals were to facilitate comparison of the financial impact of the new system with the existing cost-based payment structure, identify opportunities for cost savings, and clarify the financial implications of clinical decision making under the PPS. The initiative involved integrating clinical information from the organization's patient-assessment system with financial data from its billing and cost-accounting systems.

PPS Provisions

The Balanced Budget Act (BBA) of 1997 authorized the inpatient rehabilitation PPS. Under the BBA (with amendments under the Balanced Budget Refinement Act of 1999), CMS was to phase in the PPS over a two-year transition period starting with cost-reporting periods on or after October 1, 2001, and its budget effect was to be fixed, initially at 98 percent and then at 100 percent of the amount spent under the old cost-based payment system. The start date was changed twice, first to April 1, 2001, and then to January 1, 2002. In addition, CMS was charged with establishing:

* The payment unit (later determined by CMS to be per discharge);

* Case-mix groups (CMGs), the inpatient rehabilitation equivalent of DRGs, to be determined by factors such as a patient's level of impairment, age, comorbidities, and functional capabilities;

* Weights for each CMG;

* The method to be used for classification of patients into CMGs;

* The payment rate;

* Policies regarding outliers;

* Area wage adjustments; and

* Transfer payment policies.

The final rule for the inpatient rehabilitation PPS establishes 100 CMGs under which inpatient rehabilitation facilities may receive Medicare coverage. Of these CMGs, 95 are divided among 21 rehabilitation impairment categories (RICs--eg, stroke, brain injury, spinal cord injury), and the remaining five are placed in a special category for short-stay/expired patients. (b)

The 95 CMGs included in the RIGs are defined using clinical scores based on a slightly modified version of the Functional Independence Measure (FIM) system, a widely used rehabilitation assessment tool developed by Uniform Data Systems, Buffalo, New York. Each of these GMGs is defined by a motor score expressed as a range (with possible scores ranging from 12 to 84). Also, where appropriate, GMGs are defined by cognitive scores (with possible scores ranging from five to 35), and by age criteria.

Because most rehabilitation providers already are familiar with the FIM system, its inclusion in the inpatient rehabilitation PPS should help minimize the amount of additional training needed for facilities to ensure patients are properly assessed and categorized into the appropriate CMGs. In addition, FIM data on past discharges can provide a good basis for modeling the PPS's financial effect.

Under the final rule, each CMG is divided into four "tiers," based on the presence or absence of certain comorbidities, as defined by IGD-9 codes. Payments for each CMG will vary depending on the tier to which a patient is classified.