Speaker 1: Hello, and welcome to this short educational video refresher on the mechanisms and timelines for Medicare physician and facility payments for common procedures performed in the EP lab. My name is Katie Joseph, and I'm a Regional Economic Manager with Medtronic. We continue to receive questions on the process and components of determining reimbursement for facilities and physicians. In this video, we will review these elements as well as the fundamentals of reimbursement. This video is organized into four segments. Section 1 is a brief review of reimbursement fundamentals. Section 2 will focus on the specific components of physician reimbursement. Section 3 will focus on the components and process for facility reimbursement. Finally, we will share additional resources available from Medtronic on these topics. The reimbursement process is made up of three separate components – coverage, coding, and payment. Coverage defines the products and services that are eligible for payment from the insurer to the health care providers. Insurer policies also establish specific criteria or additional requirements necessary for coverage. Coding identifies patient conditions, services, and supplies. Payment defines the processes and allowable amounts for given procedures and services. To further ensure our understanding of coverage, coding, and payment, it can be helpful to understand the role or roles various entities play in the process. For any device, the FDA must evaluate and ultimately approve or clear the device for commercial distribution. And while FDA approval or clearance is typically required before other components of coverage or payment are established, it is not the same as coverage. The AMA creates and maintains the procedural codes, called CPT codes, which stands for Current Procedural Terminology, and provides doctors and health care professionals a uniform language for coding medical services and procedures. The AMA also evaluates the value of these procedures and recommends the associated RVUs or Relative Value Units. We will talk in more detail about RVUs in the next section. There are a couple of ways that Medicare can establish coverage of a procedure or treatment, including a National Coverage Determination, or NCD. I'll explain CMS coverage a bit more in a few moments. CMS also evaluates medical necessity and assigns the associated payment. Various professional societies further delineate the process for identifying which patients will likely benefit from a given therapy or procedure and develop or modify clinical treatment guidelines. All of these organizations contribute to the overall coverage and reimbursement landscape, but the process is not always linear and can take considerable time to implement. A Medicare Administrative Contractor is a private insurance company that is contracted with Medicare to administer traditional Medicare programs, including processing claims based on Medicare rules and policies in a specific geographic area. In the absence of or in addition to a Medicare NCD, the MACs may establish a Local Coverage Determination, or LCD. To better understand the coverage landscape of the EP service line, let's look at some examples of Medicare coverage policies for a few common procedures done in the EP lab. The implantable loop recorder, sometimes referred to as an ILR or subcutaneous cardiac rhythm monitor, does not have its own unique NCD, but rather is included in a broad coverage policy for other EP diagnostic procedures, such as ambulatory monitors and Holter monitors. Leadless pacemakers are covered under a national coverage decision, but have a unique and additional coverage component, which is the CED, or coverage with evidence development. These claims-based studies, in which Medicare beneficiaries receiving leadless pacemakers with microdevices are automatically enrolled through standard billing practices, satisfy the basis for coverage and enable Medicare reimbursement. ICDs have a comprehensive NCD that includes detailed coverage requirements for various device implant indications as well as requiring a formal, shared decision-making process using an evidence-based tool. Medicare does not have any active national or local policies for cardiac catheter ablations. In the absence of formal coverage policy, the Social Security Act allows for coverage and payment of only those services that are considered to be medically reasonable and necessary. Procedure and diagnosis coding for cardiac catheter ablations do exist and are dependent on the condition being treated. Payment rates for cardiac ablation procedures are established and not differentiated by the energy source being used during the procedure. As we move beyond the concept of coverage and into coding and payment, it is important to understand the relationship between coding and payment systems. A combination of various diagnosis and procedure codes are utilized by both providers and facilities to support the medical necessity determination for the service rendered, such as what procedure was performed and for what clinical purpose. This also helps to determine appropriate reimbursement as these coding systems funnel into both physician and facility payment systems. The Medicare Physician Fee Schedule, or MPFS, establishes reimbursement for physicians, which we will discuss in more detail in the next section. Hospital inpatient reimbursement is established by the MS-DRG mechanism and hospital outpatient reimbursement utilizes the APC mechanism, and we will discuss both of these in more detail in the final section of this video. The common thread among all three of these payment systems is that the diagnosis and procedure codes are key components. Now that we have established some of the foundational components that go into coverage, coding, and payment, let's look more closely at physician reimbursement. Several components work together to establish physician payment via the MPFS. Three key factors are Relative Value Units, or RVUs, Geographic Practice Cost Index, or GPCIs, and the Monetary Conversion Factor, or CF. RVUs account for the relative costliness of inputs used to provide physician services. These inputs are categorized into Work, Practice Expense, or PE, and Malpractice Professional Liability Insurance, or MP. Work RVUs assess physician labor on several levels, accounting for technical skill, physical effort, mental effort, judgment, and time required to perform the service. GPCI reflects the price level for related inputs in the local market where the service is furnished. The Conversion Factor is the amount Medicare pays per RVU and is updated annually. As we discussed in the previous section, physician payment for procedures begins with the diagnosis codes and CPT codes to establish what procedure or service was provided and for what medical or clinical reason. The billing claim is submitted to the payer, in our case we are focused on Medicare, where the claim is analyzed and adjudicated. At this point, the RVUs are associated with the procedure and as you can see here, the Work RVUs are the higher percentage of the total payment. The total number of RVUs assigned are then multiplied by both the Conversion Factor and the Geographic Cost Index to determine the specific physician payment for that procedure in that geography. CMS has an established timeline for evaluating and proposing updates to physician and hospital reimbursement. A proposed rule is released and is followed by a comment period and a final rule that may include changes reflected in the comment period. The MPFS is based on a calendar year and updates physician payment yearly. The Conversion Factor is updated based on budget neutrality and statutory updates. The proposed rule is released in July, followed by a comment period. The final rule is typically released in early November and rate changes are implemented in January of the next calendar year. Codes and services may be identified as potentially misvalued by CMS, the AMA, RUC, or the public. To be identified, there must be evidence showing change in the code or service, such as change in physician work time, build with another code 75% or more, change in site of service, high volume growth, etc. Once a code or service is identified, it goes through a payment update process. The AMA, RUC will revalue by surveying their members and determining a recommendation. The AMA, RUC sends the recommended valuation to CMS. In the proposed MPFS rule, CMS proposes to accept or reject the AMA, RUC's recommendation and states the rationale why. The public may comment on MPFS rule, including CMS proposed payment rate or a code. In the final MPFS rule, CMS finalized the payment rate and it goes into effect January 1st. Finally, let's review how facilities, inpatient and outpatient hospitals, and ASCs establish reimbursement which utilize unique payment mechanisms that are significantly different than that of physician payments. Earlier, we reviewed that hospital inpatient payments utilize the MS-DRG system and hospital outpatient payments utilize the APC system. Let's take a closer look at the components of each. The payment system for acute hospital inpatient services is referred to as the Inpatient Prospective Payment System or IPPS. Under the IPPS, each case is categorized into a diagnosis-related group or DRG. Each DRG has a payment weight assigned to it based on the average resources used to treat Medicare patients in that DRG. The base payment rate is divided into labor-related and non-labor share. The labor-related share is adjusted by the wage index applicable to the area where the hospital is located. This base payment rate is multiplied by the DRG relative weight. If the hospital treats a high percentage of low-income patients, it receives a percentage add-on payment applied to the DRG-adjusted base payment rate. This add-on is known as the Disproportionate Share Hospital Adjustment or DISH. Also, if the hospital is an approved teaching hospital, it receives a percentage add-on payment for each case paid through IPPS. This add-on, known as the Indirect Medical Education or IME Adjustment, varies depending on the ratio of residents to beds. Finally, for particular cases that are unusually costly, known as outlier cases, the IPPS payment is increased. This additional payment is designed to protect the hospital from large financial losses due to unusually expensive cases. As with MPFS, the IPPS has an established timeline for rulemaking and updates. The IPPS is based on a fiscal year that runs from October 1st to September 30th. The IPPS proposed rule is released in mid-April and final rule in mid-July and any changes in rates implemented in October. IPPS base rates are updated annually primarily based on the applicable market basket index and estimates of changes in productivity. Inpatient payments are updated for each fiscal year using Medicare claims data and cost reports from two years prior. It takes a minimum of two years for the costs of a new technology to be reflected in inpatient payment. The Hospital Outpatient Prospective Payment System, or OPPS, classifies all hospital outpatient services into ambulatory payment classifications, or APCs. The OPPS sets payments for individual services using a set of relative weights, a conversion factor, and an adjustment for geographic differences in input prices. Hospitals also can receive additional payments in the form of outlier adjustments for extraordinarily high-cost services and pass-through payments for some new technologies. The unit of payment under the OPPS is the individual service as identified by Healthcare Common Procedure Coding System, or HCPCS code. In recent years, the agency has revised payment policy to increase the amount of packaging of costs within the APCs. This includes the advent of comprehensive APCs that package together an expanded number of related items and services contained on the same claim into a single payment for a comprehensive primary service under the OPPS. ASC payments are determined by a formula that includes an ASC-specific conversion factor, ASC relative payment weight that is based on the OPPS relative payment weight, and other local factors. Medicare maintains a list of procedures that are approved in the ASC setting. Any procedure not on the ASC-approved procedure list will not be reimbursed by Medicare. The OPPS is based on a calendar year that runs from January 1st to December 31st. OPPS base rates are updated annually, primarily based on the applicable market basket index and estimates of changes in productivity. Outpatient payments are updated for each calendar year using Medicare claims data and cost reports from two years prior. It takes a minimum of two years for the cost of a new technology to be reflected in outpatient payments. Thank you for your time. We hope you found this information helpful as you navigate the Medicare reimbursement landscape. Medtronic has numerous resources to support various aspects of healthcare economics. If you would like more information on this topic, please reach out to your local Medtronic field sales team to connect you with a regional economic manager, or send an email to our reimbursement customer support team. You can also visit our website at medtronic.com slash CRHF reimbursement for a comprehensive library of economic topics.