Medicare funding and Reibursement - Essay Example

31 March Medicare Funding and Reimbursement Medicare Funding and Reimbursement Operating payment to be paidto the hospital The operating payment to be paid to the hospital is calculated as follows:Operating Cost = (DRG Relative Weight × ((Labor Related Large Urban Standardized Amount × San Francisco CBSA Wage Index) + (Nonlabor Related National Large Urban Standardized Amount × Cost of Living Adjustment)) × 1 + IME + DSH)) Substituting values yields the following results:Operating Cost = (0.

6419 × (($3397.52 x 1.5419) + ($1,476.97 x 1)) × 1 + 0.0744 + 0.1413Operating cost = (0.6419 × ($5238.64 + $1,476)) × 1.2157 = $4,310.13 × 1.2157 = $5,239.82 Therefore, the operating payment to be paid to the hospital is $5,239.822. Capital Cost Payment to be Made to the HospitalThe capital cost payment to be paid to the hospital is calculated as follows:Capital Cost = ((DRG Relative Weight × Federal Capital Rate ×Large Urban Add-On × Geographic Cost Adjustment Factor × COLA) × (1 + IME + DSH)) Substituting values yields the following results:Capital cost = (0.

6419 × $427.03 × 1.03 × 1.3452 ×1) × (1 + 0.0243 + 0.0631) = $283.67 × 1.0874 = $308.46 Therefore, the capital cost payment to be paid to the hospital is $308.463. Outlier Payments to which the hospital is eligible The operating costs and capital costs will first have to be calculated as follows:Operating Costs = Billed Charges × Operating Cost to Charge RatioOperating costs = $125,000 × 0.38 = $47,500Capital Costs = Billed Charges × Capital Cost to Charge RatioCapital costs = $125,000 × 0.

04 = $5,000The Operating and Capital Threshold will then need to be determined and is calculated as follows:Step 1Operating CCR to Total CCR = Operating CCR/ (Operating CCR + Capital CCR)Operating CCR to Total CCR = 0.38/ (0.38 + 0.04) = 0.38/0.42 = 0.9048Step 2Capital CCR to Total CCR = Capital CCR/Operating CCR + Capital CCR)Capital CCR to Total CCR = 0.04/(0.38 + 0.04) = 0.04/0.42 = 0.0952Step 3Operating Outlier Threshold = ((Fixed Loss Threshold × ((Labor related portion × San Francisco CBSA Wage Index) + Nonlabor related portion)) × Operating CCR to Total) + Federal Payment with IME and DSHOperating Outlier Threshold = (($24,485 × ((0.697 × 1.5419) + 0.303)) × 0.9048) + $5,239.

83 = $35,761.53 Step 4Capital Outlier Threshold = (Fixed Loss Threshold × Geographic Adj. Factor × Large Urban Add-On × Capital CCR to Total CCR) + Federal Payment with IME and DSHCapital Outlier Threshold = $24,485 × 1.3452 × 1.03 × 0.0952 + $308.46 = $3538.15It must be noted that the fixed loss threshold for FY 2008, 2009, 2010 and 2011 were $22,185, $20,045, $23,140 and $23,075 respectively. The figures provided in the example have been used in the calculations.The Operating and Capital Outlier Payment Amount is therefore calculated using the following steps(i) Determine if Total Costs are Greater Than Combined Threshold = (if (operating costs + Capital costs) > (operating threshold + capital threshold)) .

If this is true then continue to (ii)Operating costs + capital costs = $47,500 + $5,000 = $52,500Operating threshold + capital threshold = $35,761.53 + $3538.15 = $39,299.68Implies Total costs > combined threshold so we move to (ii)(ii) Operating Outlier Payment = (Operating Costs – Operating Outlier Threshold) × Marginal Cost FactorOperating Outlier Payment = ($47,500 - $35,761.53) × 0.8 = $9,390.77(iii) Capital Outlier Payment = (Capital Costs – Capital Outlier Threshold) × Marginal Cost FactorCapital Outlier Payment = ($5,000 - $3,538.15) × 0.8 = $1,169.

48The Cost Outlier payments that the hospital will be eligible for is: Operating Outlier Payment + Capital Outlier Payment = $9,390.77 + $1,169.48 = $10,560.254. Total Payment to the Hospital Operating Payment + Capital Payment + Outlier Payment = $5,259.83 + $308.46 + $10,560.25 = $16,128.545. Skilled Nursing Facility PaymentThe payment for the skilled nursing facility (SNF) is calculated as follows:SNF base rate = 70% adjusted by area wages (hospital wage index) + 30% non-labor related portion (base adjusted for geographical factors x RUG weight).

The nursing rate of $151 as per (Medpac 2008) will be used in the calculation. After 20 days Mrs. Anderson will have to pay $128 per day in 2008 (CMS 2007). Number of days spent in SNF: 30Number of days allowed: 21Difference (days to be paid for) 9 Payment to be made by Mrs. Anderson: $128 x 10 = $1,280Medicare Pays: (20 x $151.74) + 10 x ($151 - $128) = $3034.80 + $230 = $3264.80 Total payment for SNF is $1,280 + $3,264.80 = $4,544.8 Part BCalculation of Physician reimbursement for all three types of physician and the out of pocket payments that Mrs.

Anderson will be responsible for:The table below shows the ratesCategoriesRVUGeographic Cost IndexProductConversion FactorWork27.451.09229.98Practice Expense43.051.74375.04Malpractice10.320.5435.60Total110.6264.43The payment rate is calculated by multiplying the total product value by the conversion factor. That is:110.62 × 64.43 = $7,127.25.Participating Physician ReimbursementIn terms of Participating Physician who accept assignment on each and every case the Physician bills Medicare and the patient 100% of the Medicare approved fee which is $125,000 in this case.

Medicare will pay 80% which is equivalent to $100,000 and the patient will pay 20% which equals $25,000.Non-participation Physician Who Accepts Assignment on a Case by Case BasisIn terms of a Non-participating Physician who accepts assignment on a case by case basis Medicare and the patient will be billed for 95% of the Medicare approved fee of $125,000. 95% is represented by $118,750. Medicare will pay 80% of $118,750 which is equal to $95,000 and the patient will pay 20% which is equal to $23,750.

Non-Participating Physicians Who Does Not Accept AssignmentWith respect to Non-participating Physicians who do not accept assignment the patient is billed for 115% of the Medicare approved fee of $125,000. This 115% is equal to $143,750. The patient makes the entire payment and Medicare reimburses 80% of the approved fee for non-participating physicians. Therefore, Medicare would pay 80% of $118,750 which is equal to $95,000 and the patient will bear the difference between what was paid to the Non-participating Physician which is $143,750 minus $95,000, which is equal to $48,750.

ReferencesMedpac. (2008). Skilled Nursing Facility Payment System. Retrieved: http://www.medpac.gov/documents/MedPAC_Payment_Basics_08_SNF.pdf. Last accessed 31 Mar 2011Centers for Medicare & Medicaid Services. (2007). Medicare Coverage of Skilled Nursing Facility Care. http://www.medicare.gov/publications/pubs/pdf/10153.pdfCenters for Medicare & Medicaid Services. (2010). Fact Sheet: Acute Care Hospital Inpatient Prospective Payment System. Retrieved: http://www.cms.gov/MLNProducts/downloads/AcutePaymtSysfctsht.pdf. Last accessed 31 Mar 2011AppendixTable of Operating Values Used in CalculationDRG 072 Relative Weight0.

6419Labor-related$3397.52Nonlabor-related$1,476.97San Francisco CBSA Wage Index1.5419Cost of Living Adjustment (COLA)1IME Operating Adjustment Factor0.0744DSH Operating Adjustment Factor0.1413Labor Related Portion0.697Nonlabor Related Portion0.303Operating Cost to Charge Ratio0.38Table above was used to calculate operating payments and costsTable of Capital Values Used In Calculation DRG 072 Relative Weight0.6419Federal Capital Rate$427.03Large Urban Add on1.03San Francisco CBSA GAF1.3452Cost of Living Adjustment1IME Operating Adjustment Factor0.

0243DSH Operating Adjustment Factor0.0631Capital Cost to Charge Ratio0.04Table above was used to calculate capital payments and costsOther FactorsBill Covered Charges$125,000Fixed Loss Outlier Threshold$24,485Marginal Cost Factor0.8Table above was used to calculate operating and capital costs used in calculating outlier payments