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Medicare severity diagnosis-related group (MS-DRG)
Medicare severity diagnosis-related group (MS-DRG) is a classification system used by Medicare to categorize inpatient hospital stays based on diagnosis, severity, and resource utilization.
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What is Medicare Severity Diagnosis-Related Group (MS-DRG)?
The Medicare Severity Diagnosis-Related Group (MS-DRG) is a classification system used by the Centers for Medicare and Medicaid Services (CMS) to categorize and reimburse healthcare providers for inpatient hospital services. It is a method of grouping patients with similar clinical characteristics and resource utilization into a single payment category. The MS-DRG system is primarily used for Medicare reimbursement purposes, but it is also adopted by many other payers as a basis for payment determination.
The MS-DRG system was introduced in 2007 as an enhancement to the previous Diagnosis-Related Group (DRG) system. The primary objective of implementing the MS-DRG system was to improve the accuracy and fairness of Medicare payments to hospitals by accounting for the severity of a patient's condition and the resources required for their treatment.
How does the MS-DRG system work?
The MS-DRG system assigns a unique code to each patient's hospital stay based on their principal diagnosis, secondary diagnoses, procedures performed, age, sex, and discharge status. These codes are used to classify patients into one of the 761 MS-DRG categories. Each MS-DRG category has a corresponding payment weight, which represents the average resources required to treat patients within that category.
The payment weight assigned to each MS-DRG category is multiplied by a standardized payment rate to determine the reimbursement amount for a specific hospital stay. The payment rate is adjusted based on various factors, including the hospital's geographic location, teaching status, and the presence of disproportionate share and indirect medical education adjustments.
What is the difference between MS-DRG and DRG?
The main difference between MS-DRG and DRG lies in the level of specificity and accuracy in payment determination. While both systems group patients with similar clinical characteristics, the MS-DRG system further refines the classification by incorporating the severity of a patient's condition.
The DRG system, which was introduced in the early 1980s, primarily considers the principal diagnosis and surgical procedures performed to assign patients to a specific payment category. It does not account for the severity of the patient's condition or the resources required for their treatment. On the other hand, the MS-DRG system takes into account additional factors such as secondary diagnoses, age, sex, and discharge status to provide a more accurate payment determination.
How are MS-DRGs different from Ambulatory Payment Classifications (APCs)?
While both MS-DRGs and Ambulatory Payment Classifications (APCs) are classification systems used for payment determination, they differ in terms of the type of healthcare services they cover. MS-DRGs are used for inpatient hospital services, whereas APCs are used for outpatient services.
The MS-DRG system focuses on classifying patients based on their diagnoses, procedures, and resource utilization during an inpatient hospital stay. It is primarily used to determine reimbursement for services provided during the hospitalization period, including room and board, nursing care, and other ancillary services.
On the other hand, APCs are used to classify and reimburse outpatient services provided in hospital outpatient departments, ambulatory surgical centers, and other outpatient settings. APCs consider factors such as the type of service provided, the complexity of the procedure, and the resources required for the outpatient encounter.
Examples of MS-DRG classifications
To provide a better understanding of how the MS-DRG system works, here are a few examples of MS-DRG classifications:
1. MS-DRG 470: Major Joint Replacement or Reattachment of Lower Extremity without Major Complication or Comorbidity (MCC): This MS-DRG category includes patients who undergo major joint replacement surgeries, such as hip or knee replacements, without any significant complications or comorbidities. The payment weight assigned to this category reflects the average resources required for these procedures.
2. MS-DRG 291: Heart Failure and Shock with MCC: This MS-DRG category includes patients admitted with heart failure or shock and have significant complications or comorbidities. The payment weight assigned to this category is higher due to the increased resources required for the treatment of these complex cases.
3. MS-DRG 638: Diabetes with Hyperglycemia: This MS-DRG category includes patients with diabetes who are admitted due to hyperglycemia (high blood sugar levels). The payment weight assigned to this category reflects the average resources required for managing diabetes-related complications.
It is important to note that the examples provided above are just a few illustrations of the wide range of MS-DRG categories available. Each category represents a unique combination of clinical characteristics and resource utilization, allowing for a more accurate payment determination based on the severity of the patient's condition.
In conclusion, the Medicare Severity Diagnosis-Related Group (MS-DRG) system is a classification system used to categorize and reimburse healthcare providers for inpatient hospital services. It improves the accuracy and fairness of Medicare payments by considering the severity of a patient's condition and the resources required for their treatment. The MS-DRG system differs from the previous DRG system by incorporating additional factors for payment determination. It is important for healthcare professionals involved in revenue cycle management to understand the intricacies of the MS-DRG system to ensure accurate reimbursement for their services.
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Related terms.
Copayment is a fixed amount that a patient pays out-of-pocket for a specific healthcare service at the time of receiving care.
Clinical denial
Clinical denial is the rejection of a healthcare claim by an insurance payer due to a discrepancy between the clinical documentation and the billed services.
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Understanding MS-DRG and Its Effect on the Case Mix Index
A lot goes into understanding the type of care a hospital provides, the community it serves, and how well it delivers care. A holistic approach to health care determines that we look at each patient as an individual with unique needs. Those needs are quantified through a Diagnosis Related Group (DRG). The collection of DRGs each hospital sees makes up the hospital Case Mix Index.
What Is the Diagnosis Related Group?
Centers for Medicare & Medicaid Services (CMS) developed the Diagnosis Related Group system in collaboration with Yale University’s Schools of Management and Public Health to define the treatment that hospitals deliver. It classifies all possible human disease diagnoses into bodily systems and then subdivides those systems into groups.
DRGs serve as the basis for Medicare’s hospital reimbursement structure. The system calculates fees by considering the damaged body systems and groups and the quantity of hospital resources needed to treat the ailment, resulting in a fixed rate for patient services.
In 1987, CMS separated the DRG system into two parts: the All-Patient DRG (AP-DRG) system, which handles non-Medicare billing, and the Medicare Severity Diagnosis Related Group (MS-DRG) system, which runs Medicare billing. Because of the expanding number of Medicare beneficiaries, MS-DRG is used most extensively today.
MS-DRG Details
With the MS-DRG system, each patient discharged is assigned one of 767 DRGs, an expanded list that facilitates a potential increase in diagnosable services and provides better recognition of the severity of illness and expected hospital resource consumption than the traditional DRG system.
Each DRG code carries a significant amount of information that gets tied up into multiple levels, including:
- Anticipated patient care resources used by the hospital;
- How it relates to the estimated length of stay (LOS), the geometric mean;
- Reimbursement for the patient’s entire hospitalization;
- Relative weight for resources and costs and reimbursements versus other DRGs.
To illustrate the weight value, using a baseline of 1 for an average hospitalization, if the DRG increases to 1.5, it assumes the hospital will use 50 percent more resources. Conversely, a hospital stay with a weight of .5 would require half the resources.
The DRG system enables CMS to increase reimbursement to hospitals serving more severely ill patients; hospitals treating less severely ill patients receive lower reimbursement.
Principal and Secondary Diagnoses
Hospitals may choose from three new DRG designations in the MS-DRG system, including the Principal and Secondary Diagnoses.
The CMS Uniform Hospital Discharge Data Set defines the Principal Diagnosis as “that condition established after study to be chiefly responsible for occasioning the admission of the patient to the hospital for care.”
Secondary diagnoses are additional conditions that affect patient care in terms of requiring at least one of the following:
- Clinical evaluations
- Therapeutic treatment
- Diagnostic procedures
- Extended LOS
- Increased nursing care and monitoring
Secondary diagnoses may be DRGs with Complication or Comorbidity (CC), with a Major Complication or Comorbidity (MCC), or with no CCs or MCCs.
Comorbidities represent conditions patients bring with them on admissions that continue to require some type of treatment or monitoring while on inpatient status. Complications are conditions acquired during hospitalization, and MCCs reflect the highest level of severity.
What Is the Case Mix Index?
CMS utilizes the Case Mix Index to set hospital reimbursement rates for Medicare and Medicaid patients. This metric indicates the variety, severity, and complexity of patient ailments handled at a specific hospital or health care center.
The Case Mix Index (CMI) is the direct calculation that ties to the DRG. Initially, CMS designed the CMI to calculate hospital payments. Now, it is a standard indicator of hospital disease severity in the United States and internationally.
CMI is calculated based on the average relative DRG weight of hospital inpatient discharges and by summing the Medicare severity DRG weight for each discharge and dividing the total by the number of discharges. This calculation reflects the severity, clinical complexity, and resource needs of all the patients in the hospital relative to other hospitals and previous years. Using a baseline of 1, like DRGs, a higher case mix index indicates a more complex and resource-intensive patient load.
Many factors can impact this metric , however, including:
- Coding accuracy
- Documentation specificity
- High volumes of highly weighted DRGs (such as organ transplantations, cardiothoracic surgeries, or neurosurgeries)
- Annual updates to relative MS-DRG weights
- Penalties for hospital-acquired conditions
Case Mix Importance to a Hospital
By documenting the complications and comorbidities accompanying a diagnosis, the hospital ensures that it assigns the correct DRG to a patient, resulting in a more accurate (and improved) CMI, a key ROI value driver .
There are at least three reasons why this is important:
- Delivering appropriate documentation guidelines and collaborating with clinical documentation specialists can significantly improve CMI accuracy for medical and surgical patients;
- CMI reflects the value of bundled DRG payments and advises on expected LOS;
- The CMI also influences quality scoring of patient outcomes by capturing the case’s complexity and ensuring more accurate reimbursement rates.
Finally, not only does the CMI play a central role in hospital finances, but it is also an important indicator of hospital performance and clinical documentation.
For example, two hospitals with similar patient populations and surgical capability might report different case mix index results. A lower CMI could imply that one hospital is documenting its cases less successfully than another, even though the patients they care for and the services they provide are virtually the same.
With the central role CMI and DRGs play for hospitals, they must be correct and accurate; therefore, the documentation from which they come must be comprehensive and precise.
As part of our health care solutions, SCP Health offers extensive management and documentation support, ensuring your DRGs and, thus, CMI correctly represents the care you deliver.
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"Navigating the Healthcare Maze"
MS-DRG: What is a Medicare Severity-Diagnosis Related Group?
Medicare severity-diagnosis-related groups , abbreviated as MS-DRGs, are categories of inpatient hospital stays. The Medicare system uses them to determine reimbursements for hospitals, skilled nursing facilities, and hospices.
A hospital stay can range from one day to 100 days. The most expensive MS-DRGs have the longest average stays.
These expensive hospital services may include open-heart surgery or lung cancer surgeries. They could also include major joint replacements and organ transplants. The MS-DRG system provides a structure for classifying and collecting reimbursement for these services.
Here, we’ll discuss how Medicaid classifies these groups. We’ll also touch on what that means for you. To learn more about MS-DRGs, keep reading.
What Is MS-DRG?
MS-DRG means Medicare severity-diagnosis-related group. It’s a system of classifying patient hospital stays. Within the system, Medicare classifies groups to facilitate service payments.
The system originated from the collaboration of two groups. The first group included Yale University’s Schools of Management.
The second was the University’s Schools of Public Health. Together, the two groups created the classification system now used by many health care organizations.
The classification system separates potential diseases into diagnoses. These diagnoses align with more than 20 body systems. The system further divides those systems into 450 groups.
Using the system, Medicare assesses fees. It factors the body systems and groups affected by a potential illness.
An MS-DRG compares that effect with the hospital resources needed to treat the condition. In the end, the system results in a fixed rate for patient services. These services are called diagnosis-related groups (DRGs).
In 1987, Medicare split the DRG system into two parts. The first part was the all-patient DRG (AP-DRG) system. The system covers billing for non-Medicare patients.
The second part of the system is the MS-DRG. Now, the number of Medicare patients is growing. As a result, the MS-DRG is the most widely used DRG system.
The MS-DRG system calculates provider payments using wage variations. It also considers geographic location. In addition, it takes into account the percentage of Medicare patients that a care provider treats .
Getting Diagnoses Right
Since then, the MS-DRG has expanded. There are now about 750 DRG groups.
These groups facilitate an increase and diagnosable conditions. They also enable Medicare to offer better recognition of the severity of some illnesses. The system is an improvement over the original Centers for Medicare and Medicaid Services (CMS) DRG system.
For example, the original DRG for congestive heart failure is DRG 127. Now, however, care providers can choose from three new related DRGs. The DRGs vary depending on the diagnosis of physicians.
Originally, Medicare used a two-tiered system. The system enabled care providers to provide a secondary diagnosis.
Now, however, Medicare uses a three-tiered system. As a result, a secondary diagnosis could expand to two other structures.
These expanded structures include CC (complication/co-morbidity) or non-CC (no complication/comorbidity). This increased structure enables Medicare to increase reimbursements to care providers who serve more severely ill patients.
In some instances, a hospital must transfer a patient to another facility. In that case, the hospital will pay the transferring hospital a per diem rate. Meanwhile, the receiving facility will receive a full MS-DRG payment.
The MS-DRG Payment Classification System
The MS-DRG enables the Medicare system to determine hospital payments. This payment system falls under the inpatient prospective payment system (IPPS).
Let’s take a closer look at the MS-DRG payment system. Imagine that you’ve been admitted as an inpatient to a care facility.
The facility will assign a DRG on your discharge. They’ll base the DRG on the care provided during your stay.
The hospital will receive a fixed payment from Medicare for that DRG. They’ll receive this amount regardless of how much they spent treating you.
In some cases, a care provider may provide effective service, and it will cost less. Remember, Medicare will pay the same amount no matter what. In this case, the hospital makes a profit.
In other instances, however, the hospital might spend more money providing services for your DRG. In that case, they’ll lose money for providing those services.
Ultimately, the goal of the MS-DRG is for Medicare to ensure that reimbursements properly reflect a care provider’s caseload. For example, the MS-DRG formula takes into account the types of patients and the severity of their conditions.
These factors play a role in determining costs. Medicare can use this information to assess the resources that a care provider should have used to treat patients and provides reimbursements accordingly.
How to Categorize Hospitalization Costs
You may want to figure out how much your care provider gets paid for a given hospitalization. If so, you’ll need to know the DRG that was assigned to your care provider.
You’ll also need to know your care provider’s base payment rate. This rate is also called the “payment rate per case.”
You can get this information from hospital billing or accounting. Alternatively, you may need to call the case management department. Once you find the appropriate department, you can ask for the Medicare base payment rate.
Also, Medicare assigns a relative rate to each DRG. This rate is based on the average amount of resources required to provide patient care.
You can look up the relative weight for your DRG. You’ll need to download a CMS chart to do so. The general process might go as follows.
You can begin by navigating to the CMS website. There, you’ll look for No. 3 of “Tables.” Next, you’ll click “Download Table 5.” The information will download as an Excel spreadsheet. Now, you can open the file.
Here, you want to look for the column labeled “Weights.” This column will show the relative weight of your DRG.
Get Help Understanding MS-DRG
We understand that MS-DRG can be confusing. Submit your information below and we’ll get in touch with you as soon as possible.
MS-DRG Codes/MS-DRG Lists
Under the DRG system, the CMS pinpoints secondary diagnoses that result in considerably increased hospital resource consumption. The CMS will then categorize this list into two different levels of severity.
The first level of severity is major complications or comorbidities (MCCs). The second level, CCs, is the next level of severity.
In some cases, however, the CMS will exclude some MCCs and CCs because they’re too closely related to the principal diagnoses. These DRGs are on the CC exclusion list. This list identifies conditions that Medicare will not consider as a CC or MCC for principal diagnoses.
Elsewhere, some patient groups are extremely resource-intensive. The CMS will put them into a separate group called pre-MCD MS-DRG for this reason.
If a treatment doesn’t go into this group, however, then Medicare will classify a patient by whether or not they had an operating room (OR) procedure within a major diagnostic category (MDC). Sometimes, however, a non-OR procedure can also affect MS-DRG assignment.
Medicare also uses “proxies” for MS-DRGs. A proxy is another way to measure patient severity based on the presence or absence of CCs, non-CCs or CCs.
The CMS also identifies codes that result in an increase in complexity. These codes could be considered a proxy for the presence of a CC or MCC secondary diagnosis.
When a care provider performs an OR procedure unrelated to the principal diagnoses, the CMS will assign an “unrelated-” or “procedure MS-DRG.” Finally, if a care provider does not perform an OR procedure, the CMS will classify care by the principal diagnosis.
How MS-DRGs Affect Your Care
In some cases, private insurers also use DRGs. However, they might use different calculations for their classification system.
In either case, DRGs get updated every year. At that time, the CMS will associate specified amounts with each procedure. In 2021, care providers used Medicare DRG version 38.1.
As with medical treatments, MS-DRGs are complex. However, your care provider’s billing department should have the ability to answer any questions that you may have regarding what you may need to pay out-of-pocket.
You may have a Medicare Advantage plan. These kinds of plans include out-of-pocket spending limits.
If you’re eligible for Medicare, you have the option of enrolling in a Medicare Advantage plan. This plan is also called Medicare Part C.
It covers all the benefits offered by Original Medicare . This kind of coverage is called Medicare Parts A and B.
However, Medicare Part C is private insurance. It can provide you with benefits that aren’t available under Original Medicare.
For example, all Medicare Advantage plans have a yearly out-of-pocket spending limit. However, Original Medicare doesn’t offer this benefit.
Still, you’ll need to find the best insurance for your needs. The question here is, “How do you find the right insurance provider? Fortunately, we’re here to help.
It’s Easy Getting Help Understanding Your Medicare Expenses
Now you know a bit more about the complex world of the MS-DRG system. If you’re like many people, you may need help making the right choices when it comes to your health insurance and other important medical decisions. Amazing Healthcare Consultants is here to help. Let us take some of the burden of navigating the health care maze off of your shoulders. We’ll provide you with expert advice, guidance, and support. At Amazing Healthcare Consultants, we want nothing more than for you to be able to focus on maintaining your health and not have to worry about anything else.
Please feel free to contact Amazing Healthcare Consultants today or connect with us online to schedule an informative consultation .
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- What’s Changed?
Acute Care Hospital Inpatient Prospective Payment System
Ambulatory surgical center payment system & coverage, dmepos fee schedule, home health prospective payment system & coverage, hospice payment system & coverage, hospital outpatient prospective payment system, inpatient psychiatric facility prospective payment system, inpatient rehabilitation facility prospective payment system, long-term care hospital prospective payment system, skilled nursing facility prospective payment system.
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Medicare Payment Systems
MLN6922507 December 2023
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What’s Changed?
- Updated the market basket increase for FY 2024
- Updated the number of Medicare Severity Diagnosis Related Groups (MS-DRGs) for FY 2024
- Added details about rural emergency hospitals and nonprovider sites
- New process for submitting MS-DRG classification change requests
- Updated with the CY 2024 payment rates
- Added coverage information for lymphedema compression treatment items
- Added information on a temporary gap period for the Competitive Bidding Program
- Updated with the 2024 multifactor productivity adjustment
- Added policy information about suppliers contacting patients before dispensing DMEPOS refills
- Updated with the CY 2024 case-mix budget neutrality factor
- Updated with the CY 2024 fixed dollar loss ratio
- Added marriage and family therapists and mental health counselors to hospice interdisciplinary team
- Starting May 1, 2024, physicians who certify hospice services must be enrolled in Medicare or be validly opted-out
- Updated with the 2024 drug packaging threshold
- Added information about allowing for direct supervision of diagnostic services to include the virtual presence of the physician or non-physician practitioner
- Added information about 2024 payment for 340B-acquired drugs
- Added new reporting modifier for all 340B-covered entity hospitals paid under the OPPS, effective January 1, 2025
- Added information about expanding the existing rate structure to include 2 partial hospitalization program ambulatory payment classifications for each provider type
- Added information about reassignment of HCPCS code G0330
Updated with the FY 2024 factor increase and labor related share of the federal per diem base rate
Updated with the FY 2024 market basket increase
- Updated with the FY 2024 market basket increase factor
- New process for submitting requested MS-DRG changes
- Updated with FY 2024 fixed-loss amount calculation methodology
Added language to use place of service code 21 if a patient is seen in a physician’s office but is an inpatient
Substantive content changes are in dark red.
This Medicare Payment Systems educational tool explains how each service type payment system works.
A Prospective Payment System (PPS) refers to several payment formulas when reimbursement depends on predetermined payment regardless of the intensity of services provided. Medicare bases payment on codes using the classification system for that service (such as diagnosis-related groups for hospital inpatient services and ambulatory payment classification for hospital outpatient claims).
This tool explains the inpatient hospitals, hospice, hospital outpatient, inpatient psychiatric facilities, inpatient rehabilitation facilities, long-term care hospitals, ambulatory surgical centers, durable medical equipment, prosthetics, orthotics, and supplies, home health, and skilled nursing facilities payment systems.
![ms drg assignment is not based on information that includes](https://www.cms.gov/images/IPPS.jpg)
Hospitals contract with Medicare to deliver acute inpatient hospital care and agree to accept pre-determined acute care hospital Inpatient Prospective Payment System (IPPS) rates as full payment.
The IPPS benefit covers Medicare patients for 90 days of care per episode of illness, with a 60-day lifetime reserve. An episode of care begins when the hospital admits the patient and ends after they’ve been out of the hospital or skilled nursing facility (SNF) for 60 consecutive days.
The COVID-19 public health emergency (PHE) ended at the end of the day on May 11, 2023. View Infectious diseases for a list of waivers and flexibilities that were in place during the PHE.
We make updates to IPPS payment rates , including updates to base rates, wage indexes, Medicare Severity Diagnosis Related Group (MS-DRG) definitions and weights, and the outlier fixed-loss amount. IPPS base rates are updated annually based on the applicable market basket index and estimates of charges in productivity.
For FY 2024, the increase in operating payment rates for general acute care hospitals that are paid under the IPPS, successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program, and are meaningful electronic health record (EHR) users is 3.1%. This reflects a projected FY 2024 IPPS hospital market basket update of 3.3%, reduced by the statutorily required 0.2 percentage point productivity adjustment.
Congress sets the operating rate update by considering the projected increase in the hospital market basket index, which measures the price increases of goods and services hospitals buy to provide patient care.
We pay acute care hospitals an IPPS payment per inpatient case or inpatient discharge.
The admitting hospital, or an entity wholly owned or operated by the admitting hospital, must bill all outpatient diagnostic services and admission-related outpatient non-diagnostic services during the 3 days before admitting the patient to the hospital on the inpatient claim.
Acute care hospitals can’t separately bill Medicare Part B for these services.
Section 1886(d)(1)(B) of the Social Security Act excludes certain hospitals and hospital units from the IPPS. These hospitals and units include:
- Cancer hospitals
- Children’s hospitals
- Extended neoplastic disease care hospitals
- U.S. Virgin Islands
- Northern Mariana Islands
- American Samoa
- Inpatient psychiatric facility (IPF) hospitals and units
- Inpatient rehabilitation facility (IRF) hospitals and units
- Long-term care hospitals (LTCHs)
- Religious nonmedical health care institutions (RNHCIs)
Medicare Severity Diagnosis Related Groups
We assign inpatient hospital discharges to MS-DRGs . We use MS-DRGs to better reflect patients’ severity of illness, complexity of service, and hospital resource consumption. An MS-DRG is defined by a group of similar clinical conditions (diagnoses) requiring similar resource use.
The patient’s principal diagnosis, secondary diagnoses, procedures performed, sex, age, and discharge status determine MS-DRG assignment. We consider up to 25 diagnosis and 25 procedure codes for MS-DRG assignment. We review MS-DRG definitions annually to ensure each group has clinically similar conditions that are expected to require similar amounts of inpatient resources.
If our review demonstrates subsets of clinically similar cases within an MS-DRG use significantly different resources, we may propose to reassign them to different MS-DRGs with similar resource use or create new MS-DRGs.
The 3 levels of severity in the MS-DRG system based on secondary diagnosis codes are:
- Major Complication or Comorbidity (MCC) — the highest severity level affecting hospital resource consumption
- Complication or Comorbidity (CC) — the next lowest severity level affecting hospital resource consumption
- Non-Complication or Comorbidity (Non-CC) — the lowest severity level; this level doesn’t significantly affect illness severity and resource use
MS-DRGs may be subdivided (or split) into 2 or 3 severity levels according to these CC subgroups. Some MS-DRGs aren’t subdivided into severity levels, which are known as base MS-DRGs. There are 766 MS-DRGs for FY 2024.
Base Payment Amounts
We set operating and capital IPPS base rates (known as the standardized payment amounts). Operating costs cover labor and supplies, while capital-related costs cover depreciation, interest, rent, and property-related insurance and taxes.
We annually adjust these payment rates for:
- The patient’s clinical condition and related treatment costs compared to average Medicare case costs (MS-DRG relative weight)
- Market conditions in the hospital’s location compared to national conditions (wage index)
Other IPPS Hospital Payments
- Acute care hospitals’ extremely high cost cases can qualify for outlier payments.
- We pay hospitals that train residents in approved graduate medical education (GME) programs separately for the direct cost of training residents (direct GME). We also increase IPPS hospitals’ operating and capital payment rates to reflect teaching hospitals’ higher indirect patient care costs compared to non-teaching hospitals (indirect medical education (IME)).
- For portions of cost reporting periods beginning on or after October 1, 2023, we may consider a rural emergency hospital (REH) to be a nonprovider site and a hospital may include full-time equivalent (FTE) residents training at an REH in its direct GME and IME FTE counts if it meets the nonprovider setting requirements at 42 CFR 412.105(f)(1)(ii)(E) and 413.78(g) .
- We increase hospitals’ operating and capital payment rates for treating a disproportionate share of low-income patients. These hospitals also get uncompensated care payments.
- We may also pay acute care hospitals to treat patients with certain newly approved, costly technologies that offer a substantial clinical improvement over existing treatments or that get certain FDA designations for breakthrough devices and antimicrobial products.
- Qualifying rural hospitals and critical access hospitals (CAHs) can get pass-through payments for certain certified registered nurse anesthetist (CRNA) services.
- We pay for the cost of nursing and allied health education activities on a reasonable cost basis subject to conditions and limitations at 42 CFR 413.85(d) .
- We pay reasonable and necessary costs for the hospital to get an organ as an adjustment to a hospital’s IPPS payment.
- Hospitals get an add-on payment for the costs of administering blood clotting factors to inpatients with hemophilia.
- We pay an add-on payment to hospitals participating in a National Institutes of Health (NIH)-sponsored islet cell transplantation clinical trial for patients with Type I diabetes.
- We reduce payment in some cases when a patient has a short length of stay (LOS) and transfers to another acute care hospital or, in certain circumstances, to a post-acute care setting.
- IPPS payments are adjusted under the Hospital Value-Based Purchasing (VBP) Program and the Hospital Readmissions Reduction Program (HRRP).
- The Hospital-Acquired Condition (HAC) Reduction Program reduces overall IPPS payments for reasonably preventable HACs.
How We Determine an IPPS Payment
- The hospital submits a claim to its Medicare Administrative Contractor (MAC) for each patient they treat. Based on the claim information, the MAC assigns the case to an MS-DRG.
- The base payment rate, or standardized dollar amount, includes the labor-related and non-labor-related share. We adjust the labor-related share by a wage index to reflect area labor cost differences. The labor share equals 67.6% if the hospital’s wage index is greater than 1.0. The law requires that the labor share equals 62% if the hospital’s wage index is less than or equal to 1.0. We adjust the non-labor-related share by a Cost-of-Living Adjustment (COLA) factor equal to 1.0 except for hospitals in Alaska or Hawaii. This adjustment accounts for the higher cost of living in Alaska and Hawaii.
- We multiply the wage-adjusted standardized amount by an MS-DRG weighting factor. The weight is specific to each MS-DRG, and each MS-DRG relative weight represents the average resources to treat cases in that MS-DRG compared to the average resources to treat cases in all MS-DRGs.
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Figure 1. Acute Care Hospital IPPS: Operating Base Payment Rate Adjusted for Geographic Factors
![ms drg assignment is not based on information that includes This is a snapshot for Acute Care Hospital IPPS: Capital Base Payment Rate. For an explanation of the chart, contact your Medicare Administrative Contractor (MAC) Customer Service. For contact information, visit https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Review-Contractor-Directory-Interactive-Map on the Centers for Medicare & Medicaid Services (CMS) website.](https://www.cms.gov/images/OP.jpg)
Figure 2. Acute Care Hospital IPPS: Capital Base Payment Rate
MS-DRG Relative Weights
We assign a weight to each MS-DRG that reflects the average case cost in that group compared to the average Medicare case cost and use the same MS-DRG weights for operating and capital payment rates.
We annually adjust the MS-DRG weights without affecting overall IPPS payments, based on standardized charges and all IPPS case costs in each MS-DRG. This adjustment includes a 10% cap on decreases in an MS-DRG relative weight from one FY to another. We standardize hospitals’ billed charges to improve comparability by adjusting:
- Charges to remove differences in hospital wage rates across labor markets
- For the size and intensity of the hospital’s resident training activities
- For the number of low-income hospital patients treated
Note: We reduce charges to costs using national average hospital cost ratios to charges for 19 different hospital departments.
Market Condition Adjustments
We adjust the operating and capital rates by an area wage index to reflect differences in local labor market prices. We measure differences in hospital wage rates among labor markets by comparing the average hourly wage (AHW) for hospital workers in each urban or statewide rural area to the national average.
We use the Office of Management and Budget’s Core-Based Statistical Area delineations, with some modifications, to define each labor market area, and annually revise the wage index based on IPPS hospital wage data.
If a hospital believes it competes for labor in a different area than its location, it may request geographic reclassification through the Medicare Geographic Classification Review Board (MGCRB).
For FY 2024, these policies apply to the wage index:
- We increase the wage index for hospitals with a wage index value below the 25th percentile across all hospitals as we did in FYs 2020 through 2023.
- For FY 2023 and subsequent years, we apply a permanent 5% cap on any decrease to a hospital’s wage index from its wage index in the previous year, regardless of what caused the decline.
- We apply the wage index to the whole capital base rate and raise it to a fractional power, narrowing the geographic variation in wage index values among labor market areas.
- We apply a COLA, reflecting higher supplies and other non-labor resources costs, to the base IPPS operating and capital rates of hospitals in Hawaii and Alaska. We apply the COLA to the non-labor-related portion of the operating base rate and to the whole capital base rate.
Bad debts are when a patient doesn’t pay their Medicare coinsurance and deductible . We may pay hospital Medicare bad debts at 65% of the allowable amount if they meet all requirements under 42 CFR 413.89 .
Providers can collect unpaid patient Medicare cost-sharing amounts, unless the:
- State Medicaid agency classifies the patient as categorically or medically needy
- Provider determines the patient is indigent for bad debt purposes
Providers must submit an acceptable cost report with a detailed bad debt listing corresponding to their claimed bad debt amounts.
Direct Graduate Medical Education
We make direct graduate medical education (DGME) payments to teaching hospitals or hospitals that train residents in approved medical allopathic, osteopathic, dental, or podiatry residency programs. These payments are for the approved residency training programs’ direct operating costs.
We pay these separately from the IPPS per discharge payment and generally base DGME payments on the:
- Hospital-specific costs per resident in a historical base year, updated for inflation
- Number of residents a hospital trains
- Hospital’s Medicare patient load (the proportion of Medicare inpatient days to total inpatient days)
Indirect Medical Education
Teaching hospitals or hospitals that train residents in approved medical allopathic, osteopathic, dental, or podiatry residency programs also get an IME adjustment, which reflects the higher indirect patient care costs of teaching hospitals compared to non-teaching hospitals. We calculate the IME adjustment factor using a hospital’s intern- and resident-to-bed ratio.
Medicare Disproportionate Share Hospitals
We make additional payments for inpatient operating and capital costs to hospitals that serve a disproportionate share of low-income patients .
Hospitals get 25% of the amount they previously got under the traditional Medicare disproportionate share hospital (DSH) statutory formula. The remainder, equal to 75% of what we otherwise would pay as Medicare DSH operating payments, goes toward an uncompensated care payment after reducing the amount for the uninsured individuals’ percentage change.
Each Medicare DSH-eligible hospital gets an uncompensated care payment based on its share of uncompensated care costs compared to all Medicare DSH-eligible hospitals. We annually update the factor estimates that determine each eligible hospital’s uncompensated care payments.
For most DSH-eligible hospitals, we calculate uncompensated care payments from the 2 most recent years of audited Worksheet S-10 data to determine each hospital’s share of uncompensated care payments.
For FY 2024 and subsequent years, we’ll use a 3-year average of the uncompensated care data from the 3 most recent FYs for which audited data is available.
Note: We no longer use low-income insured days as a proxy for uncompensated care to determine Worksheet S-10 Factor 3 for Indian Health Service (IHS), tribal hospitals, and hospitals in Puerto Rico. We’re establishing a new supplemental payment for these hospitals.
Sole Community Hospitals
A Medicare IPPS hospital is eligible for sole community hospital (SCH) classification if it meets 1 of the criteria in 42 CFR 412.92 .
We don’t consider a nearby hospital to be a “like hospital” if its total inpatient days attributable to units of the nearby hospital that provides a level of care characteristic of the level of care payable under the acute care hospital IPPS are less than or equal to 8% of similarly calculated total inpatient days of the hospital seeking SCH status.
We base SCH operating payments on the higher of their hospital-specific payment rate or the federal rate and base capital payments on the capital base rate (like all other IPPS hospitals).
SCHs may qualify for a payment adjustment if they experience a significant volume decrease .
For IPPS purposes, we treat certain hospitals formerly designated as essential access community hospitals (EACHs) as SCHs.
Medicare Dependent Hospitals
A Medicare IPPS hospital is eligible for Medicare dependent hospital (MDH) classification if it meets the criteria in 42 CFR 412.108 .
We base MDH operating payments on the higher of the federal rate payment or the federal rate payment plus 75% of the difference between the federal rate payment and its hospital-specific rate payment.
Section 4102 of the Consolidated Appropriations Act, 2023 , extended the MDH program through September 30, 2024.
Rural Referral Centers
The Rural Referral Center (RRC) Program supports high-volume rural hospitals. We generally classify a Medicare participating acute care hospital as an RRC if it’s in a rural area for IPPS payment purposes and meets the criteria in 42 CFR 412.96 .
Current RRCs or hospitals that previously had RRC status get certain advantages:
- Proximity for MGCRB Reclassification: A hospital currently or previously designated as an RRC doesn’t need to demonstrate proximity to the area it gets reclassified. A hospital can apply for reclassification to the closest urban or rural area.
- AHW Data Comparison for MGCRB Reclassification: We exempt hospitals currently or previously designated as the requirement that a hospital’s AHW must exceed, by a certain percentage, the AHW of the labor market area where the hospital is located.
- Medicare DSH Cap: We exempt hospitals designated as an RRC from the 12% cap on Medicare operating DSH payments applicable to other rural hospitals.
Low-Volume Hospitals
Section 4101 of the Consolidated Appropriations Act, 2023 , extended the temporary changes to the low-volume hospital payment adjustments through September 30, 2024.
For FYs 2019 through 2024, we make add-on payments to qualifying low-volume hospitals more than 15 road miles from the nearest subsection (d) hospital if it discharges less than 3,800 total patients during the FY based on its most recently submitted cost report:
- Qualifying low-volume hospitals get an additional adjustment of 25% for each Medicare patient discharge
- For low-volume hospitals with 500 or fewer total discharges, the low-volume hospital payment adjustment is 0.25
- For low-volume hospitals with more than 500 total discharges but less than 3,800 total discharges, we calculate the low-volume hospital payment adjustment as 0.25 – [0.25/3300] × (number of total discharges – 500) = (95/330) – (number of total discharges/13,200)
Outlier Payments
We make additional payments for extremely costly outlier cases to promote seriously ill patients’ access to high quality inpatient care. We identify these cases by comparing their estimated operating and capital costs to a fixed-loss threshold.
We annually set the fixed-loss threshold and adjust it to reflect local labor market costs.
We pay outliers by offsetting reductions in the operating and capital base rates (reducing the payment rates to all cases so outlier payments don’t increase or decrease estimated aggregate Medicare spending).
We set the national fixed-loss threshold at 5.1% of total FY payments. For FY 2024, we’ll use the same FY 2020 methodology to incorporate a projection of operating outlier payment reconciliations for the FY 2024 outlier threshold calculation.
Transfer Policy
We reduce MS-DRG payments when the patient’s LOS is at least 1 day less than the geometric mean MS-DRG LOS and 1 of these:
- The hospital transfers the patient to another IPPS-covered acute care hospital or, for certain MS-DRGs, a post-acute care setting
- The hospital transfers the patient to a hospital not participating in Medicare
- The hospital transfers the patient to a CAH
Our transfer policy includes these post-acute care settings:
- Home health care, when the patient gets clinically related care beginning within 3 days after a hospital stay
- Hospice care
- Psychiatric distinct part units located in an acute care hospital or CAHs
- Psychiatric facilities
- Rehabilitation distinct part units located in an acute care hospital or CAHs
- Rehabilitation facilities
New Technology Add-On Payments
We make an additional payment for new medical services and technologies that meet the criteria in 42 CFR 412.87(b) .
Certain new transformative devices and antimicrobial products may qualify under an alternative inpatient new technology add-on payment pathway discussed in 42 CFR 412.87(c) and (d) .
The Medicare Electronic Application Request Information System ™ (MEARIS™) allows users to submit new technology add-on payment applications, requests for ICD-10-PCS procedure codes, or MS-DRG classification change requests. Beginning with FY 2024 MS-DRG classification change requests, we’ll only accept requests submitted through MEARIS and we’ll no longer accept email requests.
Hospital Readmissions Reduction Program
The Hospital Readmissions Reduction Program (HRRP) encourages hospitals to improve communication and care coordination to better engage patients and caregivers in discharge plans and, in turn, reduce avoidable readmissions. The program supports the national goal of improving health care for Americans by linking payment to the quality of hospital care.
Find HRRP data in the provider data catalog . We also adopted MEDPAR data that aligns with the applicable period’s HRRP calculation.
Hospital Value-Based Purchasing Program
The Hospital Value-Based Purchasing (VBP) Program delivers upward, downward, or neutral adjustments to participating hospitals’ base operating MS-DRG payments, based on their quality measure performance. We fund value-based incentive payments by reducing hospitals’ base operating MS-DRG payment amounts. Hospitals may earn back more than, all, or less than the applicable reduced percentage each year. The Hospital VBP Program generally applies to all acute IPPS hospitals, with certain exceptions.
The applicable reduction to hospitals’ base operating MS-DRG payment amount is 2%. Each hospital gets a value-based incentive payment amount that matches their 2% reduction to the base operating MS-DRG payment amount. We’ll continue using the revised scoring and payment methodology adopted in FY 2022 and hospitals won’t get total performance scores (TPSs).
Hospital-Acquired Condition Reduction Program
A hospital-acquired condition (HAC) is a condition a patient gets during hospitalization (the condition wasn’t present on admission). The HAC Reduction Program is a value-based purchasing program that links Medicare payments to health care quality in the inpatient hospital setting.
We reduce overall Medicare IPPS payments (by 1%) for hospitals that rank in the worst-performing quartile of all hospitals on measures of HACs. Under the HAC, hospitals are ranked on their total of preventable conditions, like falls, surgical site infections, and catheter-associated urinary tract infections.
The Hospital Inpatient Quality Reporting Program makes quality of care information available so patients can make informed decisions about their health care options. It also encourages hospitals and providers to improve the quality of inpatient care they provide to patients by ensuring they’re aware of, and reporting on, best practices for their facilities and type of care.
Find current quality reporting measures on the Quality Net website.
Hospitals that don’t report quality data get a 1/4 reduction to the percentage increase in the market basket index. For hospitals that aren’t meaningful EHR users and don’t get an exemption, 3/4 of the percentage increase is further reduced by 100% for FY 2024.
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Ambulatory surgical centers (ASCs) provide outpatient surgical services to patients who don’t need hospitalization and will typically discharge less than 24 hours after admission. Medicare ASC patients shouldn’t need active medical monitoring at midnight on the procedure day.
Medicare-certified ASCs must enter into a legal agreement with us to get paid. ASCs can be:
- Independent (not part of a service provider or other facility)
- Is a separately identifiable and certified facility and is Medicare-enrolled with a supplier approval agreement distinct from the hospital’s Medicare provider agreement
- Is physically, administratively, and financially independent and distinct from other hospital operations
- Treats ASC costs as a non-reimbursable cost center on the hospital’s cost report
- Agrees to the same assignment, coverage, and payment rules as independent ASCs
- Has surveyed, has approved, and is compliant with ASC conditions for coverage (CfC)
A hospital-operated ASC isn’t like a provider-based outpatient surgery hospital department, which means the ASC isn’t provider-based to a hospital.
A provider-based outpatient hospital department, including an outpatient surgery department:
- May be on or off campus
- Is an integral part of the hospital, subject to hospital conditions of participation
- Isn’t separately Medicare-enrolled or Medicare-certified or subject to ASC coverage conditions
Each ASC must follow the CfC quality and safety regulations . Each condition has several standards. In general, ASCs must have:
- A governing body and management
- Medical staffing
- Processes to remain compliant with state licensure laws
- Safe surgical procedures
- Infection prevention and control to minimize infections and communicable diseases
- Pharmaceutical services
- Patient admission, assessment, and discharge
- Complete, comprehensive, and accurate medical records
- Emergency preparedness
- Quality assessment and performance improvement
- Patient rights
- Lab and radiology services
- Nursing services
- A safe and sanitary environment to protect patient health and safety
The ASC Payment System establishes payment rates for eligible ASC procedures and excludes procedures posing significant patient safety risks or requiring active medical monitoring at midnight on the procedure day.
ASCs get a single payment for the procedure Medicare covers, including for ASC facility services, which include:
- Nursing services, technical personnel-provided services, and other related services
- Facility surgical procedures
- Drugs and biologicals (when we make no separate Outpatient Prospective Payment System (OPPS) payment), surgical dressings, supplies, splints, casts, appliances, and equipment
- Diagnostic or therapeutic services or items
- Administrative, record keeping, and housekeeping items and services
- Blood, blood plasma, and platelets, except when the blood deductible applies
- Anesthesia administration and monitoring supplies and equipment
- Implantable prosthetic devices, including intraocular lenses and related accessories and supplies not on pass-through status
- OPPS-packaged radiology services
- The operating surgeon’s anesthetist supervision services
We pay separately for ASC ancillary services that are integral to a surgical procedure Medicare covers. Covered ancillary services, which can be done immediately before, during, or after the procedure, include:
- OPPS drugs and biologicals paid separately
- OPPS radiology services and diagnostic tests paid separately
- Brachytherapy sources
- Certain OPPS pass-through status implantable items
- Corneal tissue acquisition
- Surgical procedure, functional non-opioid pain management drug supply
42 CFR 416.164(c) includes ASC items and services we don’t cover.
We cover surgical procedures that meet 42 CFR 416.166(a)–(d) requirements.
Certified providers or suppliers may provide and bill other ASC services not considered ASC services. ASCs should submit claims on the Health Insurance Claim Form (CMS-1500) .
We charge the ASC patient their 20% coinsurance payment after they meet their yearly Part B deductible . We waive certain Medicare preventive service coinsurance and deductibles.
Under the ASC Payment System, we pay prospectively determined amounts for services the ASC provides to patients in connection with covered surgical procedures. HCPCS codes identify the surgical procedures and ancillary services Medicare covers.
We annually update the ASC Payment System using the OPPS APC relative payment weights to revise the ASC relative payment weights for covered surgical procedures since ASCs don’t submit cost reports. We then scale those ASC relative weights for the ASC Payment System to ensure budget neutrality. To calculate the ASC payment rates for most ASC-covered surgical procedures, we multiply the ASC conversion factor (CF) by the ASC relative payment weight.
We scale ASC-covered surgical procedures’ relative payment weights, covered ancillary radiology services, and certain diagnostic tests within the medicine range of CPT codes.
The weight scalar is the ratio of the current CY to the upcoming CY total payment weight. We apply it to the upcoming CY relative payment weights to maintain budget neutrality.
We annually adjust the CF for budget neutrality by removing the effects of changes in wage index values for the upcoming year compared to the current year and make a productivity adjustment. The productivity adjustment reduces the ASC Payment System annual update factor.
- We update the ASC CF using the Consumer Price Index for All Urban (CPI-U) Consumers for CY 2010 and subsequent CYs
- For CY 2024, the hospital market basket update is 3.3%, minus the productivity adjustment of 0.2 percentage point, resulting in a hospital market basket update factor of 3.1% for ASCs meeting the quality reporting requirements
- We apply a 1.1% productivity-adjusted hospital market basket update to the CY 2023 ASC CF for ASCs not meeting the quality reporting requirements
ASCs get the lesser of the actual charge or the ASC payment rate for each procedure or service.
We make a geographic payment adjustment using the pre-floor and pre-reclassified inpatient hospital wage index values, with a 50% labor-related factor for covered surgical procedures and ancillary services. We make an additional adjustment when the ASC provides multiple surgical procedures in the same encounter or when ASC personnel stop procedures before starting anesthesia.
Surgical Procedure or Ancillary Service | Payment Method |
---|---|
Procedures CMS classifies as office based and performed in a physician’s office at least 50% of the time | Paid at the lower of the ASC rate or the non-facility practice expense relative value unit amount of the relevant year’s Medicare Physician Fee Schedule (PFS) |
Device-intensive procedures (ASC-covered surgical procedures when the estimated device offset percentage is greater than 30% of the HCPCS code’s mean cost) | Paid with the procedure’s device-related portion (we pay an ASC and OPPS the same amount) and a non-device-related portion (calculated according to the standard rate setting method) |
Separately payable covered ancillary radiology services facility costs | Paid at the lower of the ASC rate or the technical component or non-facility PE RVU amount of the same year’s Medicare PFS (whichever applies) |
Separately payable OPPS drugs and biologicals (except non-opioid pain management drugs that function as a supply when used in a surgical procedure) | Paid the same amount as OPPS |
Non-opioid pain management drugs that function as surgical supplies, like Exparel and Omidria, when provided in the ASC setting | Average sales price plus 6% |
Brachytherapy sources | Paid the same as OPPS rates if a prospective OPPS rate is available (otherwise, we pay at contractor-priced rates); payment isn’t adjusted for geographic wage differences |
Low-volume device-intensive procedures | Paid at the ASC rate (including device-intensive adjustments) not to exceed the procedure’s OPPS payment rate |
Primary surgical procedure and packaged add-on code combinations that are eligible for complexity adjustments under the OPPS and performed in the ASC setting | Paid at the ASC rate through C codes that correspond to each unique code combination, calculated based on the OPPS complexity-adjusted rate |
ASC Payment explains final ASC payment policies, the ASC-covered procedures list (ASC CPL) and payment rates, and the ASC Payment System quarterly addenda updates. We evaluate the ASC CPL each year to determine whether we’ll add or remove procedures.
The ASC Quality Reporting (ASCQR) Program is a pay-for-reporting quality program for the ASC setting. It uses public reporting of quality of care measurement, quality improvement, and information transparency to promote better health outcomes for Medicare patients. Facilities can also view their data and compare their performance to other outpatient settings through the ASC Compare tool on the Quality Reporting Center website.
Eligible ASCs that don’t report their quality data in compliance with program requirements get a reduction of 2.0% from their annual fee schedule update in the next payment determination year.
Find more information about the ASCQR Program on the QualityNet website and in 42 CFR 416 Subpart H .
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Medicare Part B (medical insurance) covers various DMEPOS items and services when a qualified provider prescribes them and documents medical necessity that meets Medicare coverage requirements.
Starting January 1, 2024, Medicare will pay for lymphedema compression treatment items for Medicare Part B patients.
We limit our DME coverage to medically necessary items used in a Medicare patient’s home, including an institution used as the patient’s home. A hospital or nursing home isn’t considered a patient’s home.
We pay for DMEPOS items and services through either:
- A fee schedule . We update the schedule in January and July (and in April and October, if needed). We base the payment on 80% of the supplier’s actual charge or the fee schedule amount, whichever is lower. The patient pays the remaining 20% coinsurance after they’ve paid their deductible.
- The Competitive Bidding Program (CBP) requires bidders compete to become contract suppliers that provide DMEPOS items throughout a competitive bidding area. Contract suppliers must accept assignment on all claims for bid items, and we pay them a single payment amount. On January 1, 2024, a temporary gap period in the DMEPOS CBP begins. During the temporary gap period, any Medicare-enrolled DMEPOS supplier may provide a DMEPOS item, including items that were formerly included in the CBP.
We pay for certain DMEPOS items and services on a fee schedule based on Sections 1834(a), (h), and (i) of the Social Security Act and 42 CFR 414.102 for parenteral and enteral nutrition (PEN), splints, casts, and intraocular lenses inserted at a physician’s office.
The DMEPOS and PEN fee schedule files contain certain HCPCS codes that are subject to fee schedule adjustments using payment information from the CBP. We determine the payments for these items under the CBP and adjust the fee schedule amounts for those same items using payment information from the program when they are provided outside the program (in non-competitive bidding areas).
The fee schedule adjustment methodologies and regulations at 42 CFR 414.210(g) consider the differences in the costs of providing the items in competitive bidding areas versus non-competitive bidding areas. The fee schedule files also include codes for items and services that aren’t subject to the program or fee schedule adjustments.
The DMEPOS Fee Schedule: CY 2024 Update has more information on DMEPOS fee schedule amounts and adjustments.
For more payment guidance:
- 42 CFR 410.38
- Medicare Benefit Policy Manual, Chapter 15
- Medicare Claims Processing Manual, Chapter 20
- National and Local Coverage Determinations
We’ve streamlined regulatory requirements to help simplify DMEPOS payment requirements and reduce provider and supplier burden through the Master List of Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Items Potentially Subject to Conditions of Payment . The Master List is a library of Fee-for-Service DMEPOS codes that are flagged as potential vulnerabilities.
Providers and suppliers don’t need to act unless an item on the Master List also appears on 1 or both of these lists:
- Required Prior Authorization List
- Required Face-to-Face Encounter and Written Order Prior to Delivery List
Some DMEPOS items that are frequently subject to unnecessary use require prior authorization as a condition of payment, and these items are on the Required Prior Authorization List . The prior authorization process ensures you meet all coverage, coding, and clinical documentation requirements before providing the item to the patient and submitting the claim.
Prior Authorization and Pre-Claim Review Initiatives has more information.
We sometimes update fee schedules in April, July, or October when we add new items (HCPCS codes), make necessary fee schedule corrections, or apply statute or regulation changes and outline the process in Section 60 of the Medicare Claims Processing Manual, Chapter 23 .
Section 1834(a)(14)(L) of the Social Security Act updates certain DMEPOS fee schedule amounts by the percentage increase in the Consumer Price Index for all Urban Consumers (CPI-U) (U.S. city average) for the 12-month period ending June 30 of the previous year.
We based this adjustment on the economy-wide productivity change equal to the 10-year moving average of changes in annual economy-wide private non-farm business multifactor productivity (MFP). The MFP adjustment is 0.4%, and the CPI-U percentage increase is 3.0%. We reduced the 3.0% increase in the CPI-U by the 0.4% increase in the MFP resulting in a net 2.6% increase update factor.
Effective January 1, 2024, we require documentation indicating the patient confirmed the need for the refill within the 30-day period before the end of the current supply. Delivery of DMEPOS items (that is, date of service) can’t be sooner than 10 calendar days before the expected end of the current supply.
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Medicare pays home health agencies (HHAs) a national, standardized 30-day period payment rate if a period of care meets a certain threshold of home health visits. We adjust this payment rate for case-mix and geographic differences in wages and pay a per-visit payment rate for the discipline providing care during 30-day periods of care that don’t meet the visit threshold. The Patient-Driven Groupings Model (PDGM) bases payments on 30-day periods and relies on clinical characteristics and other Medicare patient information to place home health care periods into meaningful payment categories.
We cover home health services if:
- Section 30 of the Medicare Benefit Policy Manual, Chapter 7
- 42 CFR 409.42
- Sections 1814(a)(2)(C) and 1835(a)(2)(A) of the Social Security Act
- The HHA providing the services has a valid Medicare Program agreement to participate
- The HHA submits a covered-services claim
- Services provided aren’t otherwise excluded from covered services
Patient Eligibility
Patients are eligible for Medicare home health services if they meet all these criteria:
- Are enrolled in Medicare Parts A and B
- Need reasonable and necessary skilled nursing (SN) care (on an intermittent basis), physical therapy (PT), or speech-language pathology (SLP) services, or they have a continuing need for occupational therapy (OT)
- Are under a physician’s or allowed practitioner’s care
- Get services under a home health plan of care a physician or allowed practitioner established and periodically reviews
- Are confined to home (homebound)
We consider an individual confined to home (homebound) if they meet these criteria:
Criterion 1
The patient must meet 1 of these requirements:
- Needs supportive devices like crutches, canes, wheelchairs, or walkers; uses special transportation; or requires another person’s help to leave their home because of illness or injury
- Has a condition where leaving their home isn’t medically advised
If the patient meets 1 of the requirements in Criterion 1, they must also meet both requirements in Criterion 2:
Criterion 2
- The individual can’t normally leave home
- Leaving home requires a considerable and taxing effort
We consider a person confined to home (homebound) if they don’t leave their home often or if they leave only for a short time for health care services, religious services, adult day care, or other unique or infrequent events (for example, funeral, graduation, barber, or hairdresser services).
- A person who’s blind or has dementia and needs help to leave home
- A patient who returns home after surgery and a physician or allowed practitioner has restricted them to specified and limited activities (like only getting out of bed for a specified length of time or walking stairs only once a day)
- A person with a mental health disorder who refuses to leave home or whose physician or allowed practitioner considers it unsafe to leave home unattended, even if the individual has no physical limitations
Occupational therapists can complete the initial and comprehensive patient assessment when the physician or allowed practitioner only orders a therapy service with another rehabilitation therapy service.
Skilled Therapy
We cover skilled therapy services (PT, SLP, and OT) to maintain the patient’s current condition or to prevent or slow further deterioration. Services must be:
- Performed safely and effectively by, or under the supervision of, a skilled therapist
- Consistent with the nature and severity of the illness or injury and the patient’s particular medical needs, including reasonable amount, frequency, and duration of services
- Specific, safe, and effective treatment for the patient’s condition
- Reassessed at least once every 30 days by a qualified therapist from each therapy discipline
- Documented in the clinical record to reflect the initial therapy assessment of the patient’s activities of daily living
Skilled Nursing
We cover SN care (other than only venipuncture for getting a blood sample) when the:
- Patient needs a registered nurse’s or licensed vocational nurse’s (when regulations allow) specialized judgment, knowledge, and skills
- Patient’s condition requires SN services to maintain their current condition or prevent or slow further deterioration
Intermittent Skilled Nursing Care
We define intermittent SN care as care that patients need less than 7 days each week or less than 8 hours each day for periods of 21 days or less (with extensions in exceptional circumstances requiring more limited and predictable care).
To meet intermittent SN care requirements, patients must need a medically predictable recurring SN service, which typically occurs when a patient needs an SN service at least once every 60 days. The exception to the intermittent requirement is daily SN services for diabetic patients unable to administer their insulin (when they don’t have an able and willing caregiver).
Home Health Aide
We cover home health aide services if a patient qualifies for the home health benefit. These services can include:
- Personal care
- Help with activities that support SN services
- Simple dressing changes
- Assistance with medications that are ordinarily self-administered and don’t require the skills of a licensed nurse
- Prosthetic or orthotic device personal care
To provide these services, a home health aide must meet all these criteria:
- Be certified with competency evaluation requirements
- Provide hands-on, personal care or services that help treat a patient’s illness or injury, or maintain a patient’s health
- Perform tasks allowed only under state law
Orders for home health aide services must show how often patients need these services. A registered nurse or other skilled professional must perform on-site supervision of the home health aide at least every 14 days if the patient gets SN, PT, OT, or SLP services. In rare instances outside the HHA’s control, we allow 1 virtual supervisory visit per 60-day episode of care, which HHAs must document in the patient’s medical record.
Medical Social Services
We cover medical social services when all these criteria are met:
- The patient is eligible for the home health benefit
- The plan of care explains why only a qualified medical social worker or social work assistant, under the supervision of a qualified medical social worker, can safely and effectively provide services the patient needs
- Services resolve social or emotional problems that complicate a patient’s medical condition or recovery rate
Services using telecommunications technology must be indicated on the plan of care and can include:
- Remote patient monitoring, defined as collecting physiologic data (for example, electrocardiogram, blood pressure, glucose monitoring) digitally stored or transmitted by the patient or caregivers, or both, and sent to the HHAs
- Teletypewriter (TTY)
- Real-time interaction between the patient and clinician via 2-way audio-video.
Services provided by telecommunications technology aren’t separately billable and can’t be counted as a visit for payment or eligibility requirements. Visits to a patient’s home solely to supply, connect, or train them on remote patient monitoring equipment, without providing another skilled service, aren’t separately billable.
Physicians or allowed practitioners can include the use of telecommunications technologies for the provision of home health services in the home health plan of care. Payment conditions include:
- The physician or allowed practitioner must include remote patient monitoring in the plan of care or other services via telecommunications system or audio-only technology
- HHAs can’t substitute telecommunications or audio-only technology for a home visit as part of the plan of care, patient eligibility, or payment
- Telecommunications or audio-only technologies must meet patient-specific needs identified in the comprehensive assessment
PDGM & Home Health Resource Groups
The PDGM case-mix methodology bases 30-day period payment rates on the patient’s clinical characteristics and resource needs. It assigns each 30-day period into 1 of 432 case-mix groups called home health resource groups.
We base case-mix payment on these groups, and each group’s case-mix weight reflects predicted mean group cost relative to the overall average across all groups.
We apply changes to the PDGM case-mix weights in a budget-neutral manner by multiplying the CY 2024 national standardized 30-day period payment rate by a case-mix budget neutrality factor. The final CY 2024 case-mix budget neutrality factor is 1.0124.
We base the national, standardized 30-day period payment for case-mix on the patient’s condition, care needs, and area wage differences.
Adjustments to the 30-Day Period Payment Rate
Case-mix adjustments.
We use a case-mix methodology that adjusts the 30-day payment rate based on characteristics of the patient and their corresponding resource needs.
We put the 30-day periods into different subgroups for each of these categories:
- Institutional (acute hospital, inpatient rehabilitation facility, skilled nursing facility, long-term care hospital, inpatient psychiatric facility)
- Early (first 30-day care period)
- Late (all subsequent 30-day care periods, unless there’s a gap of more than 60 days between the end of 1 care period and the start of another)
- Musculoskeletal Rehabilitation
- Neuro/Stroke Rehabilitation
- Wounds: Post-Op Wound Aftercare and Skin/Non-Surgical Wound Care
- Behavioral Health
- Complex Nursing Interventions
- MMTA — Surgical Aftercare
- MMTA — Cardiac/Circulatory
- MMTA — Endocrine
- MMTA — Gastrointestinal Tract/Genitourinary System
- MMTA — Infectious Disease/Neoplasms/Blood-forming Diseases
- MMTA — Respiratory
- MMTA — Other
Case-Mix Variable Information from OASIS Assessment
Labor adjustments.
The labor portion bases each 30-day period payment adjustment on wage levels and wage-related costs of providing patient home health care in different geographic areas.
We cap decreases to the home health wage index in a geographic area so the wage index isn’t less than 95% of the wage index in that area in the prior CY. We apply this 5% cap on negative wage index changes in a budget-neutral manner using wage index budget neutrality factors.
The FY 2024 Wage Index Home Page has more information.
Continuous 60-Day Recertifications
The Home Health Prospective Payment System (PPS) allows continuous 60-day patient recertification when the patient remains eligible.
Medicare conditions of participation require recertification assessment during the last 5 days of the previous certification period (for example, during the initial 60-day certification period, you must complete the recertification visit on days 56–60).
Notice of Admission
HHAs must submit a 1-time Notice of Admission (NOA) to establish the patient is under a home health plan of care that covers all 30-day periods until the patient discharges.
We may waive the consequences of not submitting a NOA on time if we determine the HHA encountered a circumstance that’s exceptional and qualifies for the waiver.
HHAs may submit the NOA under these conditions:
- The certifying physician’s or allowed practitioner’s written or verbal order meets the requirements in 42 CFR 409.43(d) and 42 CFR 484.60(b)
- The initial visit happened within the 60-day certification period and the patient was admitted to home health care
Plan of Care
The certifying physician or allowed practitioner must periodically review the plan of care, and it must include:
- The services required to meet the patient-specific needs identified in the comprehensive assessment.
- The responsible disciplines and the frequency and duration of all visits as well as those listed in 42 CFR 484.60(a) that establish the need for services.
- Remote patient monitoring or other services provided through a telecommunications system. The plan of care must also describe how using this technology is tied to the patient-specific needs identified in the comprehensive assessment and will help achieve the goals outlined in the plan of care. These services can’t substitute for a home visit the provider orders as part of the plan of care, and we won’t consider a home visit for patient eligibility or payment.
If the signed plan of care isn’t available at the time of NOA submission, the HHA must base the submission on 1 of these:
- Is recorded in the plan of care
- Has a patient-condition description and services the HHA provides
- Has a responsible registered nurse’s or qualified therapist’s signed and dated attestation for providing or supervising ordered services in the plan of care defined in 42 CFR 484.115
- Is copied into the plan of care, which is immediately submitted to the physician or allowed practitioner
- A referral with a required detailed services order signed and dated by the physician or allowed practitioner
- A physician or allowed practitioner, who meets the certification and recertification requirements in 42 CFR 424.22 , must sign and date the plan of care or any changes in the plan of care before submitting the claim for each 30-day period
- If any services are based on a physician’s or allowed practitioner’s oral orders, the registered nurse or qualified therapist (defined in 42 CFR 484.115 ) responsible for providing or supervising the ordered services must document, sign, and date the receipt
- Patient wants a transfer
- There’s a change in condition
- The patient discharged with goals met or there’s no expectation they’ll need home health care and the patient returns to home health care within 60 days
- The plan of care is terminated if the patient doesn’t get at least 1 covered SN, PT, SLP, or OT visit in a 60-day period unless the physician or allowed practitioner documents that the interval without this care is appropriate to treating the patient’s illness or injury
Low Utilization Payment Adjustment
We make Low Utilization Payment Adjustment (LUPA) payments for 30-day periods with a low number of visits below the 432 case-mix group’s threshold per-visit rather than paying the case-mix adjusted 30-day payment amount. We updated the 2024 LUPA thresholds using CY 2022 data.
Submit appropriate claims and supporting documentation for us to apply the LUPA threshold. Documentation must show the patient’s condition and care needs or the case-mix assignment.
Note: We may adjust a home health claim based on other claims a provider may or may not bill. Those claims could affect the Common Working File and PPS code already billed or paid.
Partial Episode Payments
We adjust payments if a patient transfers from 1 HHA to another or discharges and readmits to the same agency within 30 days of the original 30-day period start date. We prorate case-mix adjusted payments for 30-day periods of that type based on the length of the 30-day period ending in a transfer or discharge and readmission, resulting in partial-period payment.
We recognize discharge and return to the same HHA during the 30-day episode period only when a patient reaches treatment goals in the original home health plan of care.
Terminate the original home health plan of care if you anticipate the patient won’t need home health services for the rest of the 30-day period.
We adjust partial episode payments by proportionally adjusting the original 30-day episode payment to reflect the number of days the patient was under HHA care before an intervening event. We calculate partial payment adjustments using a span of days (the first billable service date through and including the last billable service date) under the original plan of care as a proportion of the 30-day period. We then multiply the proportion by the original case-mix and wage index to produce the 30-day payment.
Partial payment adjustments don’t apply for transfers among HHAs of common ownership. We consider those situations as services provided under arrangement on behalf of the originating HHA by the receiving HHA with ownership interest until the end of the 30-day period.
We allow outlier payments when a 30-day period has unusually large, costly patient home health care needs. We add these outlier payments to the regular 30-day case-mix and wage-adjusted period payments when estimated costs exceed a threshold amount for each home health resource group.
You can calculate the amount of the outlier payment using steps 1–6 in Section 10.8 of the Medicare Benefit Policy Manual, Chapter 7 .
Note: In CY 2024, the fixed dollar loss ratio is 0.27 to ensure aggregate outlier payments don’t exceed 2.5% of total aggregate payments.
Consolidated Billing Requirements
We include all HHA patient services and supplies in the Home Health PPS 30-day period payment rate under a home health plan of care except:
- Certain covered injectable osteoporosis drugs when patients meet specific criteria
- DME, including home infusion drugs and related services
- Negative pressure wound therapy (NPWT) using a disposable device
Provide all other covered home health services directly or under arrangement (an outside supplier provides services under arrangement and looks to the HHA for payment). Bill the HHA for covered home health services.
Home Health Services & Medical Supplies Subject to Consolidated Billing Requirements
We subject these home health services to the consolidated billing Home Health PPS requirements. These services and supplies must meet consolidated billing requirements and get billed with the 30-day period payment:
- Certain covered injectable osteoporosis drugs (get more billing instructions in Section 90.1 of the Medicare Claims Processing Manual, Chapter 10 )
- NPWT using disposable device (get more billing instructions in Section 90.3 of the Medicare Claims Processing Manual, Chapter 10 )
Allowed physicians and practitioners, including clinical nurse specialists, physician assistants, and nurse practitioners, can certify and recertify eligibility, order home health services, and review the plan of care. Certifying physicians or allowed practitioners must authorize physicians or non-physician practitioners to care for the patients in their absence, but they don’t have to be in the same group practice as the certifying physician or allowed practitioner.
- Section 30.5.1 of the Medicare Benefit Policy Manual, Chapter 7 explains certifying patient eligibility for Medicare home health services
- Section 30.5.1.1 of the Medicare Benefit Policy Manual, Chapter 7 discusses the home health face-to-face encounter
- Section 30.5.4 of the Medicare Benefit Policy Manual, Chapter 7 outlines billing for certification and recertification
The Home Health Quality Reporting Program (HH QRP) is a pay-for-reporting quality program for the home health setting. It uses public reporting of quality of care measurement, quality improvement, and information transparency to promote better health outcomes for Medicare patients.
HHAs must submit admission and discharge OASIS assessments for at least 90% of patients with care episodes occurring during the reporting period. Report data using OASIS and the Home Health Care CAHPS Survey (HHCAHPS). HHAs use additional measures on each claim.
For HHAs that submit the required quality data for CY 2024, the home health payment update is a 4.0% increase. HHAs that don’t report quality data get a 2.0% annual market basket update reduction.
HHAs qualify for the full home health update factor by submitting required quality data for specific quality of care measures. The Home Health Quality Reporting Program has more information on these measures.
HHAs may qualify for an HH QRP reconsideration and extension or exemption .
The iQIES , which includes survey and certification functions, replaces and consolidates the QIES, CASPER, and ASPEN legacy systems.
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Medicare patients who elect hospice must meet these requirements:
- Be eligible for Part A
- Be certified as terminally ill with medical prognosis of 6 months or less to live if the illness runs its normal course
- Use a Medicare-approved hospice program
- Sign a hospice election statement
- Waive all coverage rights for terminal illness and related conditions, unless the hospice arranges or delivers it
We pay covered benefits unrelated to a terminal prognosis.
The Medicare hospice benefit includes these services to reduce pain or disease severity and manage terminal illness:
- Hospice-employed physician, nurse practitioner (NP), or services from other physicians
- Nursing care
- Medical equipment
- Medical supplies
- Drugs for pain and symptom management
- Hospice aide and homemaker services
- Physical therapy
- Occupational therapy
- Speech-language pathology services
- Medical social services
- Dietary counseling
- Spiritual counseling
- In the absence of an NP, registered nurse, social worker, or counselor, marriage and family therapists or mental health counselors may provide this service
- Short-term inpatient pain control, symptom management, and respite care
- Other Medicare hospice services specified in the patient’s plan of care (POC) that you offer or arrange as reasonable and necessary, and that we may pay for
When a patient elects hospice care, we don’t pay for:
- Hospice care from another hospice other than the hospice the patient designates (unless provided under arrangement by the designated hospice)
- Hospice care from a designated provider
- Hospice care from another hospice arranged by a designated provider
- Hospice care from the patient’s attending physician if the physician isn’t an employee of the designated hospice or the hospice pays for those services
- Room and board, unless the hospice arranges short-term inpatient care
- Emergency room, hospital, or other inpatient facility; outpatient services; or ambulance transportation, unless the hospice arranges these services, or they’re services unrelated to the patient’s terminal prognosis
Billing Hospice Attending Physician Services at Certain Facilities
A Rural Health Clinic (RHC) or Federally Qualified Health Center (FQHC) can bill and get paid under the RHC All-Inclusive Rate (AIR) or FQHC Prospective Payment System (PPS), respectively. This applies when a designated attending physician is an employee of, or has a contract with, those facilities that provide attending physician services during a patient’s hospice election.
To get the RHC AIR or FQHC PPS payment, the RHC or FQHC must report the GV modifier (attending physician not employed or paid under arrangement by the patient’s hospice provider) when a physician, NP, or physician assistant (PA) employed by, or contracted with, an RHC or FQHC provides hospice services to a patient electing hospice.
42 CFR 418.52 requires you to provide the patient or representative with verbal and written notice of their rights and responsibilities during their initial assessment.
42 CFR 418.54 requires you to identify patient, family, and caregiver needs, including physical, emotional, psychosocial, and spiritual care.
42 CFR 418.56(c) requires the POC state all necessary palliation, terminal illness, and related conditions, items, and services, including:
- Pain and symptom management
- Details about patient and family scope and frequency of service needs
- Measurable POC-expected outcomes
- Patient treatment and drug needs
- Patient medical supplies and appliance needs
- Patient or representative documented understanding, involvement, and plan agreement
You must develop and maintain a communication and integration system among all providers delivering terminally ill patient care to help minimize fragmented care and improve quality of life. Clearly identify related and unrelated conditions and those responsible for delivering services for those conditions. Share this information with non-hospice providers delivering services unrelated to the terminal illness.
Hospice Aide Training & Evaluation
Hospice aides deliver a significant portion of direct care. A past employer may train an aide (for example, a hospice, home health agency, or nursing home) and get certified before their current employment. You must evaluate new aides’ competence, ensuring they provide appropriate care.
We’ll allow you to observe and assess an aide’s skill competencies with a patient or a pseudo-patient simulation . If the hospice verifies an area of concern during the onsite visit, it must conduct, and the hospice aide must complete, a competency evaluation of the deficient skill and all related skills.
The hospice’s medical director, or the hospice interdisciplinary group physician designee, and the patient’s attending physician (if they have an attending physician) must certify the patient is terminally ill no later than 2 calendar days after starting hospice care for their initial 90-day coverage period.
When a patient chooses hospice care, they identify an attending physician who will primarily decide treatment and deliver their medical care. Attending physicians can be a doctor of medicine (MD), a doctor of osteopathy (DO), an NP, or a PA. Only an MD or a DO can certify or recertify the patient is terminally ill. If a patient’s attending physician is an NP or a PA, the hospice medical director or the hospice interdisciplinary group physician member certifies the patient as terminally ill.
The initial election period certification lasts 90 days. After the initial period, the patient gets another 90-day period and unlimited 60-day election periods, which an MD or a DO must certify or recertify each election period.
You must document certification in the patient’s clinical record before submitting a claim to your Medicare Administrative Contractor (MAC) , and it must have all these items:
- A statement certifying the patient is terminally ill with 6 months or less to live if the terminal illness runs its normal course
- Specific clinical findings and documentation supporting life expectancy of 6 months or less
- A certified physician’s brief narrative explaining clinical findings supporting life expectancy of 6 months or less
- Physician signature, certification signature date, and benefit period dates
- The third benefit period recertification
- Each recertification afterwards to decide continued hospice benefits eligibility
When you newly admit a patient in their third or later benefit period, exceptional circumstances may prevent a face-to-face encounter before the benefit period starts.
The hospice physician or NP must document they had a face-to-face patient encounter. The attestation must:
- Include the face-to-face visit date
- State the certifying physician got clinical face-to-face findings to determine continued hospice care eligibility
Hospice Certifying Enrollment
Starting May 1, 2024 , under Section 6405 of the Affordable Care Act , these 2 categories of physicians must be enrolled in Medicare or must opt out of Medicare to get paid for hospice services:
- Hospice medical director or the physician member of the hospice interdisciplinary group who certifies the patient’s terminal condition
- Patient-designated attending physician (if they have one) who certifies their terminal condition
This gives unenrolled and non-opted-out physicians time to enroll in or opt out of the Medicare Program and allows us to screen the physician to make sure they’re licensed to certify the terminal condition.
Under 42 CFR 418.22(c) , either of the 2 categories of physicians listed above must certify the patient’s terminal condition. For subsequent coverage periods, only the hospice physician may certify the patient’s terminal condition.
Important Concepts
- Certification Timing: The hospice physician and attending physician only need to be enrolled or opted-out at the time they make the certification or recertification. They don’t need to remain enrolled or opted-out during the patient’s entire certification and benefit period, and if they become unenrolled and non-opted-out, the hospice doesn’t need to get a new certification to replace the one the previously enrolled or opted-out physician signed.
- Current Enrollment or Opt-Out: If the physician is currently enrolled or opted-out, they don’t need to do anything. They already meet the enrollment or opt-out requirements.
- Program Applicability: Our new enrollment or opt-out requirement applies only to Medicare Parts A and B. It doesn’t apply to Medicare Advantage, Medicaid, or any other public or private health care program.
- Enrollment Vehicle: You can enroll using PECOS , the Medicare Enrollment Application: Physicians and Non-Physician Practitioners (CMS-855I) , or the Medicare Enrollment Application: Enrollment for Eligible Ordering/Certifying Physicians and Other Eligible Professionals (CMS-855O) enrollment applications. The Medicare Enrollment for Providers & Suppliers has more information about the provider enrollment process.
- Enrollment or Opt-Out Status Verification: Hospices can verify a physician’s enrollment or opt-out status using the CMS ordering and referring data file (ORDF), which lists all Medicare-enrolled and opted-out physicians. The ORDF has a separate column for hospice enrolled or opted-out physicians.
- Our new requirement doesn’t prohibit the patient’s desired attending physician from treating the patient in the hospice and then billing for these services under Part B; in that case, the physician must be enrolled through the CMS-855I.
- Written and Oral Certifications: The new requirement applies to all certifications under 42 CFR 418.22(c) , whether written or oral. 42 CFR 418.22(a)(3)(i) has information about oral certifications.
- No Other Change in Who Can Certify: Except for the new enrollment or opt-out requirement, nothing is changing under 42 CFR 418.22 about who may certify the patient’s terminal illness.
- Hospice Specialty: It’s not necessary for the physician to have designated “hospice” as their specialty on the Medicare Enrollment Application: Institutional Providers (CMS-855A) to certify hospice care. If the physician is enrolled or opted-out, they meet the new requirement regardless of their specialty listed on the CMS-855A enrollment application.
- For subsequent benefit periods, the hospice certifying physician should be listed in the claim form’s Attending Physician field. Leave the Other field blank.
- Verification of Fields: Starting May 1, 2024, we’ll only verify the enrollment or opt-out status of the physician listed in the claim’s Attending Physician field. We’ll begin verifying the enrollment or opt-out status of physicians listed in the Other Physician field later in 2024.
Hospice care is available for 2, 90-day periods and an unlimited number of 60-day periods. Patients meeting eligibility requirements must file an election statement , which must:
- Identify the hospice and attending physician providing care. The patient or representative must acknowledge they chose the attending physician, if applicable.
- Show the patient or representative understands hospice is for palliative care rather than curative care.
- You must inform the patient it’s exceptional and unusual that their services aren’t related to terminal illness.
- You should supply virtually all needed care.
- Show the effective election date; this means the first day of hospice care or a later date, but no earlier than the election date statement.
- Provide individual hospice cost-sharing information.
- If you find conditions, items, services, and drugs unrelated to the patient’s terminal illness and related conditions the hospice won’t cover, notify the patient (or representative) of their right to get an election statement addendum .
- Provide Beneficiary and Family Centered Care Quality Improvement Organization (BFCC-QIO) information, including the right to immediate advocacy and BFCC-QIO contact information .
- Include the patient’s or representative’s signature.
Notice of Election
You must file a Notice of Election (NOE) with your MAC within 5 calendar days after the hospice election date. You may submit the NOE through electronic data interchange. If you file the NOE after the 5-day period, you’re liable for services between the hospice election date and the NOE filing date.
Note: We allow exceptions when it’s beyond the hospice’s control to file the NOE within 5 calendar days.
When you admit patients, you must inform them in writing that their care is subject to QIO review and discuss potential review results.
Revoking Hospice Election
If a patient wants to change attending physicians, they must file a signed statement with the hospice indicating the change.
A patient or representative may revoke hospice election at any time. Revoking a hospice election is the patient’s or representative’s choice made without undue influence from the hospice provider. To revoke the election, the patient must file a written document with the hospice that includes:
- A signed statement saying they revoke hospice care for the remainder of that election period
- The revocation effective date
The patient gives up their remaining days in that election period, and their previously waived Medicare coverage restarts.
If a Medicare Advantage (MA) enrollee revokes their hospice election, they can continue services through their MA Plan or Medicare Fee-for-Service (FFS) providers (subject to the FFS deductible ) until the beginning of the next month when they get services only through their MA Plan.
Unless submitting a final claim, you must file a MAC Notice of Termination/Revocation (NOTR) within 5 calendar days after a patient or representative revokes a hospice election, or the patient discharges.
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Hospice Patient Discharge
You may only discharge a hospice patient if:
- The patient moves out of the hospice service area or transfers to another hospice
- You find the patient is no longer terminally ill
- You discharge for cause
Discharging a patient only to avoid exceeding the cap limit violates these regulations and may cause undue distress and potential harm to terminally ill patients who must find care outside the hospice benefit.
Change of Designated Hospice
A patient can change their hospice election designation once each election period with a transfer, which isn’t considered a revocation. To change the designated hospice, the patient must file a signed statement with the hospice where they got care and the newly designated hospice. The statement must include the:
- Previous hospice provider name
- New hospice provider name
- Effective date of change
We require home health agencies, skilled nursing facilities, hospices, and comprehensive outpatient rehabilitation facilities to provide a Notice of Medicare Non-Coverage (NOMNC) to patients ending their Medicare-covered services. The NOMNC tells patients how to request a BFCC-QIO determination and lets them request an expedited determination. A patient gets a Detailed Explanation of Non-Coverage (DENC), which explains specific reasons for ending covered services, only if they ask for an expedited determination.
Hospice Level of Care Payment
Even if you don’t provide a service on a given day, we pay for hospice care each day a patient is under hospice election. Payments cover service costs in the patient’s POC, including services directly from, or arranged by, the hospice. We base payments on 4 levels of care to meet the patient’s and family’s needs:
- Higher payment rate for days 1–60
- Lower payment rate for days 61 and beyond
- Continuous home care (to manage a short-term symptom crisis in the home, involving 8 or more hours of care per day, mostly nursing)
- Inpatient respite care (facility care for up to 5 days to provide an informal caregiver a break)
- General inpatient care (provided in a facility on a short-term basis to manage symptoms that can’t be managed in another setting)
We also pay a service intensity add-on with the routine home care rate during the patient’s last 7 days of life, if their care meets these criteria:
- The day is a routine level-of-health care
- The day happens during the patient’s last 7 days of life, and the patient is discharged as deceased
- A registered nurse or social worker provides direct patient care that day
The service intensity add-on payment is the continuous home care hourly payment rate multiplied by the amount of direct patient care a registered nurse or social worker provides during the 7-day period for a minimum of 15 minutes and up to 4 total hours per day.
We update hospice payment rates annually by the hospital market basket. The market basket index is reduced by a productivity adjustment. Each level of care’s base rate has a labor share and a non-labor share. We adjust the base payment rate labor share of the hospice wage index and annually update the base rates shown on the hospital market basket update.
For FY 2024, the final hospice payment update is 3.1% (3.3% inpatient hospital market basket percentage increase minus the 0.2 percentage point productivity adjustment). The final FY 2024 hospice cap is $33,494.01.
Level of Care | Revised Labor Share | Non-Labor Share |
---|---|---|
Routine Home Care | 66% | 34% |
Continuous Home Care | 75.2% | 24.8% |
Inpatient Respite Care | 61% | 39% |
General Inpatient Care | 63.5% | 36.5% |
Two caps limit the amount and cost of care that an individual hospice can provide in a single year:
- One cap limits the number of inpatient care days that hospices may provide to 20% of its total patient care days.
- The other cap is an absolute dollar limit on the average annual payment per patient a hospice can get. We limit this amount to the FY cap amount multiplied by the number of patients served.
Renew certifications every 3 years starting April 6, 2015–September 30, 2025. Division CC, Section 404 of the Consolidated Appropriations Act, 2021 , extended the accounting years affected by the adjustment to the hospice cap calculation until 2032. For accounting years ending after September 30, 2016, and before October 1, 2032, we updated the hospice cap amount by the hospice payment update percentage rather than using the CPI-U.
For FY 2023 and subsequent years, we’ll apply a permanent 5% cap on any decrease to a geographic area’s wage index from its wage index in the previous year, regardless of what caused the decline, so a geographic area’s wage index wouldn’t be less than 95% of its previous FY’s wage index. If we base a geographic area’s previous FY wage index on the 5% cap, then the following year’s wage index wouldn’t be less than 95% of the geographic area’s capped wage index in the previous FY.
Prescription Drugs or Biologicals
When a patient isn’t a hospice inpatient and getting routine or continuous home care, you may bill a coinsurance amount for each palliative drug or biological prescription. Coinsurance for each prescription is about 5% of its cost to the hospice. You establish the drug copayment schedule. The coinsurance for each prescription can’t be more than $5. We don’t cover the patient’s prescription coinsurance when they get general inpatient or respite care.
Inpatient Respite Care
You may bill patients a coinsurance amount each respite care day equal to 5% of the Medicare respite care day payment. A patient’s respite care coinsurance during a hospice coinsurance period can’t be more than the inpatient hospital deductible for the year the hospice coinsurance period began.
MA Plans must cover all services Medicare FFS covers, except hospice care. MA enrollees get Medicare FFS hospice benefits and may choose treatment unrelated to their terminal prognosis, including care from their attending physician, from providers outside the MA Plan. When MA enrollees get services unrelated to their terminal prognosis from Medicare FFS providers (not through their MA Plan), they’re subject to the 20% coinsurance .
For MA Plan patients, check with the MA Plan for information on eligibility, coverage, and payment. Each plan can have different patient out-of-pocket costs and specific rules for getting and billing for services. You must follow the plan’s terms and conditions for payment.
MA enrollees needing treatment unrelated to their terminal prognosis may also choose services through their MA Plan at the plan cost-sharing level. Benefit costs and coverage may vary by plan. At enrollment and annually thereafter, MA Plans must inform enrollees about Medicare hospice option availability and approved hospices in the MA Plan’s service area, including:
- Those the MA organization owns, controls, or has a financial interest in
- If it’s common practice to refer patients to hospice programs outside the plan’s service area
Value-Based Insurance Design Model Hospice Benefit
When an enrollee in an MA Plan elects hospice, FFS Medicare begins covering most of their services, while the MA Plan continues covering certain services. Under the Value-Based Design Model Hospice Benefit Component , participating MA organizations retain responsibility for all FFS Medicare services, including hospice care.
The Hospice Quality Reporting Program (HQRP) makes quality of care information available so patients can make informed decisions about their health care options. It also encourages hospitals and providers to improve the quality of inpatient care they provide to patients by ensuring they’re aware of, and reporting on, best practices for their facilities and type of care.
Find current quality reporting measures on the Current Measures webpage. Find more information on the Public Reporting: Key Dates for Providers webpage.
To meet the hospital quality reporting requirements, hospices must submit all quality measures. Eligible hospices that don’t participate in the HQRP in a FY or don’t meet all reporting requirements get a 4.0% annual market basket update reduction (up from 2.0% before FY 2024).
Hospices may qualify for a quality reporting program extension or exemption .
Hospice Outcomes & Patient Evaluation
The Hospice Outcomes & Patient Evaluation (HOPE) tool can help you understand care needs throughout the patient’s dying process and contribute to the patient’s POC. It assesses patient interactions in real-time, as opposed to the Hospice Item Set retrospective chart review.
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CMS started the Hospital Outpatient Prospective Payment System (OPPS) under Section 1833(t) of the Social Security Act to pay for:
- Medicare Part B hospital outpatient items and services
- Part B inpatient hospital services when Medicare can’t pay under Part A because a patient exhausted Part A benefits or isn’t entitled to them
- Community mental health center (CMHC) partial hospitalization services and certain inpatient hospital services
- Home health agency hepatitis B shots and their administration, splints, casts, and antigens for patients not under a home health plan of care or for treating hospice patients’ non-terminal illnesses or related conditions
- Comprehensive outpatient rehabilitation facility hepatitis B shots and their administration
- The initial preventive physical exam within the first 12 months of Part B coverage
- Preventive services with a U.S. Preventive Services Task Force-recommended grade A or B; there’s no patient coinsurance or deductible
The Balanced Budget Refinement Act of 1999 mandates these OPPS provisions:
- Budget-neutral payments based on Part B amounts payable in 1999 and patient coinsurance under the system before the OPPS.
- Budget-neutral outlier adjustments based on services billed individually.
- 5.8% operating costs reduction and 10% capital costs reduction through the first OPPS start date.
- Annual payment weights, relative payment rates, wage adjustments, outlier payments, other adjustments, and ambulatory payment classification (APC) group updates.
- Annual provider advisory panel consultation to review and update APC groups.
- Transitional pass-through payments for new and current medical devices, drugs, and biologicals for at least 2 years but not more than 3 years.
- OPPS payment for implantable devices, including DME, prosthetic devices, and diagnostic testing. We apply a device offset cap for APC claims that require implantable devices and have significant device offsets (greater than 30%), based on the credit amount listed in the FD value code (Credit Received from the Manufacturer for a Replaced Medical Device).
- Transitional corridor payments (also known as transitional outpatient payments) to limit providers’ OPPS cancer hospital losses. We pay CMHCs and most hospitals added payments for 3.5 years and permanently for non-PPS cancer hospitals.
- Patient copayment limits for individual OPPS services paid to the inpatient deductible each year.
These Medicare, Medicaid, and State Children’s Health Insurance Program Benefits Improvement and Protection Act of 2000 OPPS revisions also apply:
- Patient hospital outpatient department services copayment reductions
- Permanent transitional children’s hospitals’ outpatient payments
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 establishes these OPPS drug payment policies:
- Transitional drugs’ and biologicals’ pass-through payments covered under a competitive acquisition contract equals the drug’s or biological’s average price for all competitive acquisition areas that year. If hospital drug acquisition cost data isn’t available, we pay them based on 1 of several methods under Sections 1842(o) , 1847A , or 1847B of the Social Security Act.
- Adjust APC weights for specific, covered outpatient drugs to account for overhead and related expenses, like hospitals’ pharmacy services and handling costs.
- For CY 2024, we set the OPPS drug packaging threshold at $140.
- We exclude separately paid drugs and biologicals priced at 95% of average wholesale price outlier payments.
The Bipartisan Budget Act of 2015 makes this OPPS revision:
- Dedicated emergency department
- PBD on campus or within 250 yards of the hospital or a remote hospital location
The OPPS applies to designated hospital outpatient services in all hospital classes, except:
- Hospitals providing only inpatient Part B services
- Critical access hospitals (CAHs)
- Indian Health Service (IHS) and Tribal hospitals, including IHS Tribal CAHs
- Hospitals in American Samoa, Guam, Commonwealth of the Northern Mariana Islands, and U.S. Virgin Islands
- Maryland hospitals paid under the Total Cost of Care Model
We exclude payment for certain OPPS services , like outpatient therapy and screening and diagnostic mammography.
CMS created the inpatient only (IPO) list with the OPPS. Although a policy to eliminate this list was finalized in the CY 2021 OPPS and ASC final rule , we stopped that elimination and added a small number of procedures back to the list.
For CY 2024, we didn’t remove any services from the IPO list.
To ensure a standard minimum supervision level for each hospital outpatient service incident to a physician’s service, hospital and CAH outpatient therapeutic services physician supervision level is considered general supervision.
In CY 2023, we revised 42 CFR 410.28(e) to allow certain non-physician practitioners, like nurse practitioners, physician assistants, clinical nurse specialists, certified nurse midwives, and certified registered nurse anesthetists, to supervise diagnostic testing as authorized under their scope of practice and applicable state law.
Under 42 CFR 410.28(e)(2)(iii) , we allow for the direct supervision of diagnostic services to include the virtual presence of the physician or non-physician practitioner through audio/video real-time communications technology (excluding audio-only) through December 31, 2024.
340B-Acquired Drugs
Section 340B allows participating hospitals and other providers to purchase certain covered outpatient drugs from manufacturers at discounted prices.
For CY 2024, we pay for separately payable drugs and biologicals acquired through the 340B program at the same rate as drugs not acquired through the 340B program, which is generally the statutory default rate of the average sales price (ASP) plus 6%. We’ll reduce future non-drug item and service payments by adjusting the OPPS conversion factor by –0.5% starting in CY 2026.
We exempt sole community hospitals (SCHs), children’s hospitals, and PPS-exempt cancer hospitals from the 340B payment policy. These hospitals continue to report informational modifier TB for 340B-acquired drugs, and we continue to pay the average sales prices plus 6%.
We require all 340B-covered entity hospitals paid under the OPPS to report the TB modifier for 340B-acquired drugs and biologicals, effective January 1, 2025, even if the hospital previously reported the JG modifier for them. The JG modifier is effective through December 31, 2024. Hospitals that currently report the JG modifier can continue to use it in CY 2024 or can use the TB modifier.
OPPS APCs are the unit of payment in most cases. We assign individual services (HCPCS codes) to APC groups based on similar clinical characteristics and similar costs.
- The OPPS assigns a payment status indicator to every HCPCS code, which identifies if the service payment falls under the OPPS, and if so, whether it’s paid separately or packaged. The status indicator may provide information about how the code payment falls under the OPPS or under another payment system or fee schedule.
- The APC payment rate and calculated copayment apply to each APC service.
- Hospitals may get multiple APC payments for patient services on a single day. We discount multiple surgical procedures on the same day.
We sometimes assign new services to New Technology APCs based only on resource-similarity use because we don’t have the cost data to assign to a clinical APC. We set a New Technology APC payment rate at the midpoint of the applicable New Technology APC’s cost range. 42 CFR 419.31 describes the APC system and payment weights.
We pay for some services separately, including, but not limited to:
- Many surgical, diagnostic, and non-surgical therapeutic procedures
- Blood and blood products
- Most clinic and emergency department visits
- Some drugs, biologicals, and radiopharmaceuticals
- Corneal tissue acquisition costs
- Certain preventive services, including vaccine administration
We pay for partial hospitalization on a per diem basis. The payment represents the expected daily facility care costs in hospital outpatient departments and CMHCs. We’re expanding the existing rate structure to include 2 partial hospitalization program APCs for each provider type—1 for days with 3 services per day and 1 for days with 4 or more services per day.
Packaged Costs
Packaging is a critical OPPS feature or grouping of associated, integral, ancillary, supportive, dependent, and adjunctive services into a primary procedure or service payment. Packaging encourages better hospital resource use as we don’t make separate packaged service payments.
42 CFR 419.2(b) lists some types of packaged items and services. 42 CFR 419.2(c) lists costs not included in the hospital OPPS.
We typically group our policy package items and services payment under the OPPS. It also packages other items and services payment not typically grouped under the OPPS.
A single comprehensive APC payment doesn’t include services we can’t cover under outpatient department services, services we can’t pay for under OPPS statute, and services that require separate payment under OPPS statute.
We determine separately payable medical and surgical rates by multiplying the service’s clinical APC’s prospectively established scaled relative weight by a conversion factor (CF) to get a national unadjusted APC payment rate. The relative APC weight measures the resource service needs based on the APC geometric mean services cost.
The CF translates the scaled relative weights into dollar payment rates. The Hospital Outpatient Regulations and Notices webpage has the national unadjusted payment rates and copayments for each HCPCS code in each rulemaking page’s addendums section.
To account for geographic input price differences, we further adjust the labor portion of the national unadjusted payment rate (60%) by the hospital wage index for the area where we make payment. We don’t adjust the remaining 40%.
For CY 2024, we use the Inpatient Prospective Payment System (IPPS) post-reclassified wage index for urban and rural areas to determine the wage adjustments for both the OPPS payment rate and the copayment standardized amount. We limit all copayment amounts to 40% of the maximum APC payment rate.
Hospitals may get these payments added to standard OPPS payments:
- Pass-through payments for delivering specific drugs, biologicals, and device services that meet pass-through status criteria (generally, these items are too new to produce payment rate setting data).
- Individual services outlier payments that cost hospitals much more than the services’ APC group rates. CMHCs get a separate, capped hospital outlier threshold.
- Transitional outpatient payments for certain cancer hospitals and children’s hospitals.
- Certain cancer hospitals adjustment.
- Rural adjustment (currently a 7.1% increased payment) for most SCH services, including rural area essential access community hospitals (EACHs).
- Changes in hospital and medical practices
- Changes in technology
- Adding new services and removing obsolete services
- New cost data
- Hospital Outpatient Payment Panel recommendations
- Other relevant information
For CY 2024, we increased the OPPS payment rates by a 3.1% outpatient department fee schedule factor based on the hospital inpatient market basket of 3.3% for inpatient services paid under the hospital IPPS, reduced by a 0.2 percentage point productivity adjustment.
We create other items and service category payment rates through alternative methods, like:
- Separately payable drugs and biologicals
- Separately acquired 340B Program payable drugs and biologicals
- Therapeutic radiopharmaceuticals
- Services assigned to New Technology APCs
We update OPPS payment files quarterly to account for mid-year changes, like:
- New pass-through drugs or devices
- New services and procedures to clinical and New Technology APCs
- Removing inpatient only list procedures
- New HCPCS codes added during the year
- Updated payment rates for separately payable drugs and biologicals based on the most recently available average sales price data
We pay for items and services based on annual scaled relative weights and generally don’t update them quarterly. The Medicare Claims Processing Manual, Chapter 4 has more APC payment adjustment information.
We’re exempting rural SCHs from the site-specific Medicare PFS-equivalent payment for the clinic visit service when an off-campus PBD provides the service.
![ms drg assignment is not based on information that includes This is a complex flow chart intended to help you understand OPPS Payment Rates. For an explanation of the chart, contact your Medicare Administrative Contractor (MAC) Customer Service. For contact information, visit https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Review-Contractor-Directory-Interactive-Map on the Centers for Medicare & Medicaid Services (CMS) website.](https://www.cms.gov/images/opps.jpg)
Figure 3. Calculating OPPS Payments
We increased the penalty for some hospitals that don’t comply with the CY 2020 Hospital Price Transparency final rule . We set a minimum civil monetary penalty, $300 per day, for smaller hospitals with a bed count of less than 30 and a $10 per bed per day penalty for hospitals with a bed count greater than 30, not to exceed a maximum of $5,500 daily.
The Hospital Outpatient Quality Reporting (OQR) Program is a hospital outpatient department pay-for-reporting quality program. Hospitals that don’t report quality data get a 2.0% annual payment update reduction.
Hospitals qualify for the full OPPS update factor by submitting required quality data for specific quality of care measures. The Hospital Outpatient Overview webpage has more information.
We offer an alternative pathway for transformative devices with an FDA Breakthrough Device designation to qualify for device pass-through payment status when the substantial clinical improvement criterion wouldn’t apply to these devices. This alternative pathway applies to devices with pass-through payment status on or after January 1, 2020, and devices must still meet the other pass-through status criteria.
The Pass-Through Payment Status and New Technology Ambulatory Payment Classification (APC) webpage has more information on the requirements for device pass-through payment applications.
HCPCS code G0330 describes dental rehabilitation services that need monitored anesthesia and an operating room. Use this code to bill covered services provided to patients with special health needs who require general anesthesia in an operating room for dental care. We’re reassigning HCPCS code G0330 from the Dental Procedures APC (APC 5871) to Level 4 ENT Procedures (APC 5164) for CY 2024.
Use the existing unlisted CPT code 41899, which isn’t assigned to an existing dental code, to bill for covered, non-surgical dental services or surgical dental services you don’t perform under monitored anesthesia in an operating room.
CPT only copyright 2023 American Medical Association. All rights reserved.
You must request prior authorization for these outpatient department services:
- Blepharoplasty
- Botulinum toxin injections
- Cervical fusion with disc removal
- Facet joint interventions
- Panniculectomy
- Rhinoplasty
- Vein ablation
- Implanted spinal neurostimulators
Medical necessity documentation requirements remain the same.
![ms drg assignment is not based on information that includes](https://www.cms.gov/images/Psych.jpg)
Medicare pays for covered psychiatric services in inpatient psychiatric facilities (IPFs) under a prospective payment system (PPS). IPFs include inpatient psychiatric hospitals and Medicare-certified distinct part (DP) psychiatric units in acute care hospitals and critical access hospitals (CAHs).
We cover patients’ psychiatric conditions for 90 benefit days per benefit period, with a 60-day lifetime reserve. We pay for a total of 190 days of inpatient psychiatric hospital services during a patient’s lifetime. This 190-day lifetime limit applies to psychiatric services in freestanding psychiatric hospitals, but not inpatient psychiatric services in general hospitals, Medicare-certified DP psychiatric units in acute care hospitals, and CAHs.
When an eligible Medicare patient gets covered psychiatric services during an IPF stay, the facility may charge the patient only the appropriate deductible and coinsurance amounts.
Medicare Part A pays for services in an inpatient psychiatric facility only if a physician certifies and recertifies the need. Certification begins with an inpatient admission order. The certification statement helps us pay only for appropriate services.
Medicare Part A pays for IPF services if a physician certifies :
- The patient needs inpatient psychiatric services that could reasonably expect to improve their condition or for diagnostic study; inpatient psychiatric services require active treatment documented in the patient’s hospital records
- A qualified, licensed physician orders the patient’s admission and has admitting privileges at the hospital, permitted by state law
- The admitting practitioner is knowledgeable about the patient’s hospital course, medical plan of care, and current condition
- The decision (order) isn’t delegated to another person on the hospital’s medical staff that isn’t state-authorized to admit patients or has no patient-admitting privileges
- Recertification must happen by the 12th hospitalization day
- All other required recertifications must happen at least every 30 days; the utilization review committee can create different review intervals on a case-by-case basis (for example, every third day)
Recertification must include:
- The documented inpatient treatment since the last certification or recertification was, and continues to be, required
- Reasonable expectations to improve the patient’s condition or for diagnostic study
- Proof the patient still needs daily active treatment directly from, or under supervision of, IPF personnel
- Hospital records showing intensive treatment services, and admission or related services are needed for diagnostic study, or equivalent services
The physician responsible for the case, or another physician with case knowledge authorized by the responsible physician or the hospital’s medical staff, must sign certifications and recertifications.
Under the IPF PPS, inpatient psychiatric facilities get a predetermined federal per diem base rate for inpatient hospital services.
- The federal per diem base rate covers all IPF patient costs, including inpatient operating and capital-related costs (routine and ancillary services). It doesn’t include pass-through costs, like bad debts and graduate medical education.
- We calculate the IPF PPS per diem payment after adjusting the IPF PPS per diem base rate for facility and patient characteristics.
The IPF must provide all necessary Medicare-covered services directly or under arrangement. The IPF PPS payment is payment in full (subject to applicable deductible and coinsurance ) for Medicare-covered inpatient operating and capital-related costs associated with providing Medicare-covered services in an IPF, but not the costs of providing approved medical education program hospital services in an IPF.
Inpatient hospital services described in 42 CFR 409.10(b) don’t include physician services that meet the requirements of 42 CFR 415.102(a) or services provided by:
- Physician assistants
- Nurse practitioners
- Clinical nurse specialists
- Certified nurse-midwives
- Qualified psychologists
- Certified registered nurse anesthetists
We pay for these covered professional services separately under Medicare Part B.
Facility Characteristics
- We adjust the federal per diem base rate for geographic differences by adjusting the labor portion (LP) of the base rate with an appropriate IPF wage index
- IPFs in rural locations get a 17% payment adjustment
- IPFs with a qualifying emergency department (ED) get a 31% payment adjustment for the first day’s stay
- IPFs without a qualifying ED get a 19% payment adjustment for the first day’s stay
- IPFs that train interns and residents get paid a facility-level adjustment to the federal per diem rate
- We adjust the federal per diem base rate non-labor portion (NLP) for a Cost of Living Adjustment (COLA) factor for IPFs in Alaska and Hawaii
Patient Characteristics
Patient-level adjustments include:
- Principal psychiatric diagnosis, which determines Medicare Severity Diagnosis Related Group (MS-DRG)
- Selected comorbidities
- Variable per diem adjustment
Additional IPF Payments
- IPFs get an additional payment for each electroconvulsive therapy (ECT) treatment provided to a patient.
- IPF-eligible outlier cases (cases with extraordinarily high costs) when estimated total case cost exceeds the fixed dollar loss threshold amount multiplied by the IPF’s applicable facility-level adjustments, plus the federal per diem payment amount for the case. We pay 80% of the difference between the total cost and the adjusted threshold amount for the first 9 days, and 60% of the difference for all days after 9.
- For a patient who’s discharged and readmitted to the same IPF, interrupted stays are continuous for the purposes of applying the variable per diem adjustment and determining if the case qualifies for an outlier payment.
Note: FY 2024 Final IPF PPS Rates and Adjustment Factors Addendum A has the federal per diem base rate and other payment-related updates noted above.
Calculating IPF Prospective Payment
Step 1. Adjust the applicable federal per diem base rate for geographic differences in wages and COLA (Alaska and Hawaii only). The applicable federal per diem base rate is either the full federal per diem base rate or the reduced federal IPF per diem base rate for IPFs that don’t report quality data.
![ms drg assignment is not based on information that includes This is a complex flow chart intended to help you understand Inpatient Psychiatric Facility Prospective Payment. For an explanation of the chart, contact your Medicare Administrative Contractor (MAC) Customer Service. For contact information, visit https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Review-Contractor-Directory-Interactive-Map on the Centers for Medicare & Medicaid Services (CMS) website.](https://www.cms.gov/images/step1.jpg)
Step 2. Calculate the total facility and patient-level adjustment factors, except the variable per diem and ED adjustments.
![ms drg assignment is not based on information that includes This is a complex flow chart intended to help you understand Inpatient Psychiatric Facility Prospective Payment. For an explanation of the chart, contact your Medicare Administrative Contractor (MAC) Customer Service. For contact information, visit https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Review-Contractor-Directory-Interactive-Map on the Centers for Medicare & Medicaid Services (CMS) website.](https://www.cms.gov/images/step2.jpg)
Note: We didn’t make any FY 2024 changes to MS-DRG, comorbidity, age, teaching, and rural adjustment factors.
Step 3. Multiply Step 2’s Adjustment Factor by Step 1’s Wage and COLA-adjusted base rate to get a partially adjusted federal per diem base rate, without variable per diem and ED adjustments.
![ms drg assignment is not based on information that includes This is a complex flow chart intended to help you understand Inpatient Psychiatric Facility Prospective Payment. For an explanation of the chart, contact your Medicare Administrative Contractor (MAC) Customer Service. For contact information, visit https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Review-Contractor-Directory-Interactive-Map on the Centers for Medicare & Medicaid Services (CMS) website.](https://www.cms.gov/images/step3.jpg)
Step 4. Multiply the partially adjusted federal per diem base rate for each day of the stay by its applicable variable per diem adjustment factor. For Day 1, the factor is 1.31 if IPF has qualifying ED or 1.19 if IPF has no qualifying ED.
![ms drg assignment is not based on information that includes This is a complex flow chart intended to help you understand Inpatient Psychiatric Facility Prospective Payment. For an explanation of the chart, contact your Medicare Administrative Contractor (MAC) Customer Service. For contact information, visit https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Review-Contractor-Directory-Interactive-Map on the Centers for Medicare & Medicaid Services (CMS) website.](https://www.cms.gov/images/step5.jpg)
Step 5. Add the IPF PPS payments for each day of the stay to get the total IPF PPS payment amount.
Calculating ECT Treatment Payment
Multiply ECT treatment units provided during the stay by the appropriate wage and COLA-adjusted ECT per treatment amount to get the total ECT payment. The appropriate ECT per treatment amount is the full ECT per treatment amount or the reduced ECT per treatment amount for IPFs that don’t report quality data.
![ms drg assignment is not based on information that includes This is a complex flow chart intended to help you understand Inpatient Psychiatric Facility Prospective Payment. For an explanation of the chart, contact your Medicare Administrative Contractor (MAC) Customer Service. For contact information, visit https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Review-Contractor-Directory-Interactive-Map on the Centers for Medicare & Medicaid Services (CMS) website.](https://www.cms.gov/images/step6.jpg)
When submitting claims, reasonably and consistently record the items and services patients got during an IPF stay. Even though IPFs get a per diem payment, you must completely and accurately report claims charges. This information helps us accurately calculate outlier payments and periodically refine the IPF PPS .
The FY 2024 IPF factor increase is 3.3%, which is a 3.5% market basket update reduced by a 0.2 percentage point productivity adjustment.
IPF PPS Regulations and Notices has more information.
Cost Report Data
Cost report data from Medicare freestanding and hospital-based IPFs helps calculate the major market basket stand-alone IPF cost weights:
- We calculate average freestanding IPF LOS from data reported on Worksheet S–3, Part I, Line 14
- We calculate average hospital-based IPF LOS from data reported on Worksheet S–3, Part I, Line 16
The Provider Reimbursement Manual - Part 2, Chapter 40 explains these worksheets.
Market Basket Updates
- The FY 2024 labor related share (LRS) is 78.7%
- FY 2024 IPF labor market areas are delineated based on the core based statistical area established by the Office of Management and Budget
- We apply a permanent 5% cap on any decrease to a provider’s wage index from its wage index in the previous year, and we’ll apply this cap in a budget-neutral manner
- New IPFs that haven’t submitted their first Medicare cost report
- IPFs whose overall operating or capital CCR exceeds 3 standard deviations above corresponding national urban or rural average (the ceiling)
- Other IPFs that give the Medicare Administrative Contractor (MAC) inaccurate or incomplete data to calculate a CCR
The Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program makes quality of care information available so patients can make informed decisions about their health care options. It also encourages hospitals and providers to improve the quality of inpatient care they provide to patients by ensuring they’re aware of, and reporting on, best practices for their facilities and type of care. Find current quality reporting measures on the Quality Net website.
To meet the IPFQR Program requirements, IPFs must submit all quality measures. Eligible IPFs that don’t participate in the IPFQR Program in an FY or don’t meet all reporting requirements get a 2.0% annual market basket update reduction.
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Medicare pays inpatient rehabilitation hospitals and inpatient rehabilitation units, known as inpatient rehabilitation facilities (IRFs), on a per-discharge prospective payment system (PPS).
We use information from the IRF-Patient Assessment Instrument (IRF-PAI) to classify Medicare patients into clinical, demographic, and payment groups that reflect their expected resource needs. We also use information from the IRF-PAI to monitor quality of care.
IRFs must complete the appropriate IRF-PAI sections when admitting and discharging each Medicare Fee-for-Service and Medicare Advantage patient.
Under the IRF PPS, IRFs get a predetermined payment for goods and services they provide during each patient’s IRF stay. Federal rates reflect all IRF patient care costs, including routine, ancillary, and capital costs. Federal rates don’t include operating-approved educational activities costs described in 42 CFR 413.75(a)(1) and 42 CFR 413.85(c) , bad debts, or hemophilia blood product costs.
To determine the federal payment amount for each IRF patient, we group patients by clinical condition and expected resource use:
- Rehabilitation impairment categories according to the primary IRF admitting condition.
- An unweighted motor score determines a patient’s CMG placement. The 18 items scored have an equal weight of 1.
- Within each CMG, we categorize cases into 1 of 4 tiers based on the patient’s comorbidities (conditions secondary to the principal admitting diagnosis). We make 1 tier payment for the case based on the patient’s highest-paying tier comorbidity.
We adjust for interrupted stays, short stays less than 3 days, short-stay transfers (transfers to another institutional setting with an IRF length of stay less than the average CMG length of stay), deaths, and high-cost outlier cases.
We apply a permanent 5% cap on any decrease to a provider’s wage index from its wage index in the previous year, and we’ll apply this cap in a budget-neutral manner.
We adjust the hospital wage index to reflect geographic wage rate differences.
We apply an adjustment to the base rate for IRFs that treat a higher proportion of low-income patients.
IRFs with residency training programs get higher payment rates based on the number of interns and residents trained compared to their average daily census. We cap this adjustment.
We annually update rates to reflect:
- Inflation costs for IRF goods and services using a market basket index calculated for free-standing and hospital-based IRFs
- Changes in local wage rates
The FY 2024 IRF market basket increase factor is 3.4%, which is a 3.6% market basket update reduced by a 0.2 percentage point productivity adjustment.
Compliance Threshold
A facility must meet IRF classification requirements to get IRF PPS payment. At least 60% of the facility’s total inpatient population must need intensive IRF treatment for 1 or more of 13 medical conditions . We include comorbidities in the compliance threshold if they meet certain criteria.
Medicare Administrative Contractor Compliance Percentage
An IRF’s compliance percentage is the percentage of the total inpatient population requiring intensive IRF treatment for 1 or more of 13 medical conditions. Medicare Administrative Contractors (MACs) use compliance review period data to calculate the compliance percentage.
Each compliance review period, except for new IRFs, is 1 continuous 12-month period, beginning 4 months before starting a cost reporting period and ending 4 months before the next cost reporting period.
MACs calculate the compliance percentage using:
- If at least 60% of the IRF’s inpatient population requires IRF treatment for 1 or more of the 13 medical conditions, then the IRF meets the 60% rule.
- If the IRF doesn’t meet the 60% rule requirements based on the first part of the process, MACs must review IRF Arthritis Verification Report cases to ensure they meet regulatory requirements in the IRF’s presumptive methodology compliance percentage, explained in Section 140.1.3 of the Medicare Claims Processing Manual, Chapter 3 .
- If at least 50% of your inpatient population is Medicare Fee-for-Service or Medicare Advantage patients, then your MAC may use the presumptive methodology to determine if you meet the 60% compliance threshold. However, your MAC can review a random medical records sample if it believes that’s a more accurate way of calculating your compliance percentage. Your MAC must conduct a manual medical review if the IRF doesn’t meet the 60% compliance threshold using the presumptive methodology.
- A MAC-calculated, random medical record sample always replaces the presumptive compliance percentage review.
- Medical Records Review: MACs analyze a random medical records sample representing IRF inpatients during the compliance review period.
MACs must use the random sample medical record method to calculate the compliance percentage when:
- The facility’s presumptive compliance percentage is less than the required 60% compliance threshold
- The facility’s Medicare population (Medicare Fee-for-Service + Medicare Advantage patients) is less than half its total patient population
MACs must send results to the appropriate CMS Survey & Operations Group (CMS Location). The CMS Location determines an IRF’s classification before the next cost reporting period starts and is effective for the entire cost reporting period.
If the CMS Location doesn’t classify a Medicare provider as an IRF, they aren’t eligible for payment under the IRF PPS. We may pay them under the Inpatient Prospective Payment System.
Documentation Requirements
MACs must consider these items in a patient’s IRF medical record when determining if an IRF admission was reasonable and necessary:
- Preadmission screening .
- Individual overall plan of care completed within 4 days of IRF admission.
- Physician visit notes.
- Patient’s in-house medical record IRF-PAI forms (electronic or paper format). IRF-PAI admission and discharge assessments together after patient-discharge. A corresponding IRF-PAI must match the IRF claim for us to pay the claim.
Reasonable & Necessary Criteria
For Medicare to pay an IRF claim, the patient’s IRF stay must be reasonable and necessary according to the requirements at 42 CFR 412.622(a)(3)(4)(5) and Section 110 of the Medicare Benefit Policy Manual, Chapter 1 .
Note: We removed the physician post-admission evaluation verifying the patient’s preadmission screening requirement, but you still need to complete a history and physical under the conditions of participation .
Licensed or certified clinicians must complete a preadmission patient screening within the 48 hours before IRF admission and get this information:
- Prior function level
- Expected improvement level and time expected to reach it
- Clinical complications risk
- Conditions causing rehabilitation
- Required treatments (for example, physical therapy, occupational therapy, speech-language pathology, prosthetics, or orthotics)
- Anticipated discharge destination
- A preadmission screening that includes all the required elements, but is conducted more than 48 hours immediately before the IRF admission, is acceptable if an IRF conducts an update in person or by phone to document the patient’s medical and functional status in the patient’s medical record at the IRF within the 48 hours immediately before the IRF admission.
Interdisciplinary team meetings should be held at least once each week throughout the IRF stay. A rehabilitation physician may lead the weekly interdisciplinary team meetings by video or phone, with no more documentation.
Team meetings should involve a registered nurse with rehabilitation training or experience, a social worker or case manager, and a licensed or certified therapist from each treating therapy discipline.
The team conference should include participant names and professional titles. You don’t need signatures from interdisciplinary team meeting participants other than the rehabilitation physician’s agreement in the form of a signature.
The patient must:
- Need active and ongoing therapeutic intervention from multiple therapy disciplines (physical therapy, occupational therapy, speech-language pathology, or prosthetics or orthotics therapy), 1 of which must be physical or occupational therapy.
- Generally, need and get at least 3 hours of therapy per day at least 5 days per week and show measurable improvement in functional capacity or adapting to impairments. The facility staff must deliver the first session within 36 hours from midnight the day of admission. In certain well-documented cases, this intensive rehabilitation therapy program might instead be at least 15 hours per week within a 7 consecutive calendar day period, beginning with the IRF admission date.
- Be stable enough to benefit from intensive IRF services at admission. Patients who are unable to actively participate in, and benefit from, the intensive rehabilitation therapy services because they’re still completing their treatment course in the referring hospital should stay in the referring hospital until they can participate.
- Have the rehabilitation physician document an individualized plan of care by day 4.
- Have at least 3 face-to-face meetings with the rehabilitation physician to assess the patient’s medical and functional status within the first week of admission. Starting the week after admission, a non-physician practitioner with specialized training and experience may conduct 1 of the 3 required face-to-face visits per week.
Starting May 12, 2023, rehabilitation physicians or non-physician practitioners must visit IRF patients face-to-face at least 3 times per week, even after the first week.
Note: Only patients admitted before May 11, 2023, were allowed to have telehealth face-to-face visits.
IRF Rules and Related Files has more information.
The Inpatient Rehabilitation Facility Quality Reporting Program (IRF QRP) makes quality of care information available so patients can make informed decisions about their health care options. It also encourages hospitals and providers to improve the quality of inpatient care they provide to patients by ensuring they’re aware of, and reporting on, best practices for their facilities and type of care.
Find current quality reporting measures on the IRF QRP Measures Information webpage. Find more information in the CMS FAQs .
To meet the IRF QRP requirements, IRFs must submit all quality measures. Eligible IRFs that don’t participate in the IRF QRP in an FY or don’t meet all reporting requirements get a 2.0% annual increase factor reduction.
IRFs may qualify for a QRP reconsideration and exception and extension .
We’re expanding the IRF quality data reporting requirements, which currently apply to all IRF patients with Medicare Part A Fee-for-Service and Medicare Advantage Plans, so IRFs begin collecting data on all IRF patients, regardless of payer. This policy will ensure all IRF patients are getting the same quality of care and all provider metrics reflect performance across the IRF patient network. This reporting requirement will start with the FY 2026 IRF QRP. Providers start collecting the IRF-PAI assessment on all patients getting IRF care, regardless of payer, beginning October 1, 2024.
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Long-term care hospitals (LTCHs) generally treat medically complex patients who need longer hospital stays than they could get at short-term acute care hospitals. LTCHs must meet the same Medicare certification requirements as short-term acute care hospitals. For Medicare payment classification purposes, LTCHs must average an inpatient length of stay (LOS) greater than 25 days.
We update the LTCH payment rates annually based on the market basket index. Per federal regulations, we then reduce the rates through a productivity adjustment.
The FY 2024 LTCH Prospective Payment System (PPS) market basket increase factor is 3.3%, which is a 3.5% market basket update reduced by a 0.2 percentage point productivity adjustment.
Medicare Severity Long-Term Care Diagnosis Related Group Patient Classifications
We pay LTCHs under the LTCH PPS. Under this payment system, we set base payment rates prospectively for inpatient stays based on the patient’s diagnosis, the services or treatment provided, and severity of illness. A hospital gets a single payment for each case depending on the payment classification assigned at discharge. The classification systems are:
- Inpatient Prospective Payment System (IPPS): Medicare Severity Diagnosis Related Groups (MS-DRGs)
- LTCH PPS: Medicare Severity Long-Term Care Diagnosis Related Groups (MS-LTC-DRGs)
We group each patient stay using:
- 1 principal diagnosis
- Up to 24 secondary diagnoses
- Up to 25 surgical procedure codes
- Patient discharge status
We annually update each MS-LTC-DRG based on the latest LTCH discharge data and its predetermined average length of stay (ALOS). We pay LTCHs for each discharge based on the MS-LTC-DRG if it meets exclusion requirements from the site neutral payment rate. We pay for cases assigned to an MS-LTC-DRG based on the federal payment rate, including payment and policy adjustments.
Note: Beginning with FY 2024 MS-DRG classification change requests, we’ll accept requests submitted only through the Medicare Electronic Application Request Information System ™ (MEARIS™) and we’ll no longer accept email requests.
When a patient doesn’t meet specific criteria, we pay LTCH discharges at a site neutral payment rate, which is generally the lower of the:
- IPPS equivalent to the per diem amount (calculated under the short-stay outlier (SSO) policy, including the applicable high-cost outlier (HCO) payment)
- Estimated case costs calculated by multiplying allowable charges by the LTCH’s cost-to-charge ratio (CCR)
We exclude site neutral discharges from the payment rate and pay based on the standard federal payment rate if the:
- Provider directly admits the patient from the IPPS hospital and the patient had at least 3 days in an intensive care or coronary care unit but no psychiatric or rehabilitation MS-LTC-DRG LTCH care
- Provider directly admits the patient from the IPPS hospital and the patient got at least 96 hours of LTCH respiratory ventilation services but no psychiatric or rehabilitation MS-LTC-DRG LTCH care
SSO, HCO, fixed-loss amounts, and interrupted stay payment policy adjustments all apply to site neutral and standard federal payment rate discharges except where noted.
Short-Stay Outlier
The SSO policy helps prevent inappropriately paying for cases without a full episode of care. SSO payment adjustments apply only to the standard federal payment rate discharges and may happen when a patient:
- Experiences an acute condition that needs urgent treatment or more intensive rehabilitation and discharges to another facility
- Doesn’t need an LTCH care level and discharges to another facility
- Discharges to home
- Dies within the first several days of LTCH admission
- Exhausts LTCH benefits during the stay
We apply an adjustment when the LOS ranges from 1 day through 5/6 of the ALOS for the MS-LTC-DRG where we group that case. We subject the MS-LTC-DRG payment to the SSO adjustment.
We don’t apply an adjustment when the LOS is more than 5/6 of the ALOS for the MS-LTC-DRG where we group that case. In this situation, the LTCH gets the full MS-LTC-DRG payment.
Note: When calculating the SSO adjustment, we cap the SSO threshold (5/6 of the ALOS for the MS-LTC-DRG) at 25 days. We never subject stays of 25 days or more to the SSO policy.
This policy doesn’t apply to site neutral discharges.
We blend the MS-LTC-DRG per diem amount with what we would pay under the IPPS, calculated as a per diem and capped at the full IPPS comparable amount.
SSO Payments When Patient Benefits Exhaust During an LTCH Stay
We base LTCH payments on the patient’s covered benefit days until the LOS triggers a full MS-LTC-DRG payment. This means a patient’s remaining benefit days and length of hospital stay affects LTCH payments and may result in an SSO payment adjustment.
If | Then | Example |
---|---|---|
The patient uses regular episode benefit days during an LOS below the SSO MS-LTC-DRG threshold |
If | Then | Example |
---|---|---|
The patient uses all episode benefit days during an LOS exceeding the SSO MS-LTC-DRG threshold |
Note: We allow 90 covered episode benefit days of care under the inpatient hospital benefit. Each patient has 60 lifetime reserve days, which the patient may use to cover non-covered episode days of care exceeding 90 days.
High-Cost Outlier
The HCO policy adjusts the applicable LTCH PPS payment rate (site neutral rate or standard federal rate) for LTCH stays with costs exceeding typical cases of similar case-mix cost. To qualify for an HCO payment, an LTCH’s estimated treatment costs must exceed the outlier threshold. We calculate the applicable outlier threshold as the case’s applicable LTCH PPS payment plus the applicable fixed-loss amount.
The HCO payment equals 80% of the difference between the estimated case cost and the outlier threshold.
For SSO cases, we calculate the outlier threshold by adding the applicable fixed-loss amount to the adjusted SSO MS-LTC-DRG payment. If the estimated SSO case cost exceeds the outlier threshold, it qualifies for an HCO payment.
We set 2 fixed-loss amounts:
- Site neutral payment rate
- Standard federal rate
The HCO adjustment:
- Improves LTCH PPS hospital- and patient-resource cost accuracy
- Cuts LTCH financial losses from treating patients needing more costly care
- Limits LTCH loss to fixed-loss amount and cost percentages above the marginal cost factor
- Cuts incentives to under-serve high-cost patients
Medicare Administrative Contractors (MACs) use PRICER software to determine if there’s enough medically necessary benefit days in the outlier period. If a patient has enough benefit days, the MAC processes the claim as usual and the LTCH takes no other action. If a patient’s benefit days exhaust, the MAC returns the claim to the LTCH for correction, indicating the correct HCO threshold amount.
HCO Payments When Patient Benefits Exhaust During an LTCH Stay
We make HCO payments for:
- Days the patient has Medicare coverage (regular, coinsurance , or lifetime reserve days) for part of the stay beyond the HCO threshold
- Medically necessary covered cost days when the patient has a benefit day available
If | Then | Example |
---|---|---|
The LTCH gets HCO payment with SSO adjusted payment for covered medically necessary benefit days |
If | Then | Example |
---|---|---|
The LTCH gets HCO payment with the full LTCH PPS payment for covered medically necessary benefit days |
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Full applicable LTCH PPS payment means the standard federal rate (including SSO adjustment) or the site neutral payment rate, based on the LTCH case. Applicable HCO threshold means the HCO threshold determined from the standard federal rate fixed-loss amount or site neutral fixed-loss amount based on the LTCH case.
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If | Then | Example |
---|---|---|
If the patient’s benefits exhaust during the LTCH stay, determine the:
- Day when the case cost reaches the applicable HCO threshold (use charges per day and CCR)
- Number of benefit days the patient has left
To calculate the HCO, use the costs for the days after the patient’s case cost reaches the HCO threshold of available benefit days. If the patient remains under care after benefits exhaust, they pay the costs of those remaining days.
Under Medigap or Medicaid, changes to HCO payments under the LTCH PPS outlier reconciliation policy won’t retroactively affect a patient’s lifetime reserve days or coverage status, benefits, and payments.
HCO Fixed-Loss Amounts
The fixed-loss amount for standard federal payment rate cases is the amount allowing yearly projected total HCO payments to equal 7.975% of the total LTCH PPS standard federal payment rate payments estimated for that year (full MS-LTC-DRG payments or adjusted SSO amount + HCO payments).
In FY 2024, we’re including estimated uncompensated care payments in the outlier fixed-loss cost threshold calculation. Specifically, we’re using the estimated per-discharge uncompensated care payments to hospitals eligible for the uncompensated care payment for all cases in the outlier fixed-loss cost threshold calculation.
The applicable HCO threshold for site neutral payment rate cases is the sum of the case’s site neutral payment rate and the IPPS fixed-loss amount. For FY 2024, we set the site neutral case fixed-loss amount to the same as the IPPS fixed-loss amount.
We estimate each case’s cost using provider specific file CCRs:
- Use the applicable statewide average CCR when the LTCHs’ provider specific file CCRs aren’t available
- MACs estimate a case’s cost by multiplying the Medicare-covered charges by the LTCH’s overall CCR, based on the most recently settled or tentatively settled cost report
These CCR revisions or determinations may also apply:
- We may ask MACs to use an alternate CCR showing recent substantial increases or decreases in a hospital’s charges
- LTCHs may ask their MAC to use a higher or lower CCR based on substantial evidence when their CMS Regional Office approves it
- MACs annually assign the statewide average CCR to LTCHs with CCRs above the maximum ceiling
- MACs use an LTCH’s actual CCR rather than the statewide average LTCH CCR with CCRs below the minimum floor
- MACs may use the statewide average CCR when the LTCH CCR isn’t determined (for example, before a new LTCH submits its first Medicare cost report or when data isn’t available to calculate the CCR because it’s missing or incorrect)
LTCH PPS outlier policy allows for reconciling HCO payments at cost report settlement and looks for differences between the estimated and actual CCR.
Interrupted Stay
An interrupted stay happens when an LTCH discharges a patient to an acute care hospital, inpatient rehabilitation facility (IRF), skilled nursing facility (SNF), swing bed, or home, and the patient readmits to the same LTCH for more medical treatment within a specified period. For example, an LTCH patient discharges for treatment and services unavailable in the LTCH.
There are 2 types of interrupted stays:
- 3 days or less
- Greater than 3 days
Interruption day count begins the day of discharge (first day the patient is away from the LTCH at midnight).
3-Day or Less Interruption Example
- If an LTCH discharges a patient on September 2, the 3-day or less interrupted stay policy determines payment if the LTCH readmits the patient to the same LTCH on September 2, 3, or 4
- Outpatient or inpatient care during interruption is part of a single LTCH care episode and bundled into the LTCH payment
- If a patient gets tests or procedures during a 3-day interruption and the LTCH pays the provider under arrangements, the total patient day count includes all interrupted days
- If the patient doesn’t get care during the 3-day interruption, the LTCH can’t use days away in the total LOS
- If the patient gets care during an interruption that the LTCH pays for under arrangements, the LTCH uses all interruption days in that patient’s LOS
Greater Than 3-Day Interruption Example
If a patient discharges from an LTCH on September 2, the greater than 3-day interrupted stay policy determines payment if the patient is readmitted to the same LTCH between September 5 and the applicable provider’s fixed period threshold.
For a greater than 3-day interruption, the LTCH must discharge the patient; admit them directly to an inpatient acute care hospital, IRF, SNF, or swing bed; and readmit them to the original LTCH within a specified period.
Facility Discharge to | Interrupted Stay Fixed Period |
---|---|
Inpatient acute care hospital | Between 4 and 9 consecutive days |
IRF | Between 4 and 27 consecutive days |
SNF or swing bed | Between 4 and 45 consecutive days |
- We treat an interrupted stay episode as 1 discharge for payment and make 1 LTCH PPS payment
- Interrupted stays are eligible for HCO payments
- We pay separately for an intervening inpatient stay at the acute care hospital, IRF, SNF, or swing bed
Uninterrupted Stay Examples
- The patient’s facility stay (acute care inpatient hospital, IRF, SNF, or swing bed) exceeds the fixed-day period
- The patient discharges to a facility type other than an acute care inpatient hospital, IRF, SNF, or swing bed
- The patient discharges to more than 1 facility or goes home between LTCH stays
- If the stay disruption doesn’t meet the interrupted stay definition, the original discharge ends the patient’s first stay
- If an LTCH readmits the patient, the second admission begins a new stay
- Payment for the first stay
- Payment for the stay after an LTCH readmission
Interrupted Stay Billing Requirements
- The from date is the original admission date
- The through date is the final discharge date
- Report payable days in the Covered Days field (value code 80)
- Report interrupted days in the Non-Covered Days field (value code 81)
- OSC from date is the initial LTCH discharge date
- OSC through date is the last LTCH date the patient isn’t present at midnight
- Don’t change the principal diagnosis when the patient readmits to an LTCH; if the patient has other medical conditions when they return, report the diagnosis codes on the claim
- Use revenue code 018X to show the number of interruption days
Discharge Payment Percentage Adjustment
An LTCH’s discharge payment percentage is the ratio of the LTCH’s discharges that got the standard federal rate payment to its total Medicare discharges number under the LTCH PPS. If an LTCH’s discharge payment percentage for a cost reporting period isn’t at least 50%, this payment adjustment policy applies after we calculate the percentage and notify the LTCH. For cost reporting periods subject to this adjustment, the discharge payment percentage adjustment is:
- An amount like the hospital IPPS payment
- An added HCO-cases payment based on the fixed-loss amount for an IPPS hospital in effect at the time of the LTCH discharge
The payment adjustment ends when the calculated cost reporting period’s discharge payment percentage is at least 50%. We may subject the LTCH to this adjustment again if, after reinstatement, the discharge payment percentage falls below 50%.
LTCHs subject to a cost reporting period payment adjustment can get a special probationary reinstatement. They can do this by getting the payment adjustment delayed if, for at least 5 consecutive months of the 6 months before the cost reporting period, they calculate the discharge payment percentage to at least 50%.
For any cost reporting period that the payment adjustment would apply without a delay, the payment adjustment applies for all discharges if the discharge payment percentage isn’t at least 50%.
The Long-Term Care Hospital Quality Reporting Program (LTCH QRP) makes quality of care information available so patients can make informed decisions about their health care options. It also encourages hospitals and providers to improve the quality of inpatient care they provide to patients by ensuring they’re aware of, and reporting on, best practices for their facilities and type of care.
Find current quality reporting measures on the LTCH QRP Measures Information webpage. Find more information in the CMS FAQs .
Eligible LTCHs that don’t participate in the LTCH QRP in a FY or don’t meet all reporting requirements get a 2.0% annual increase factor reduction.
LTCHs may qualify for a QRP reconsideration and exception and extension .
![ms drg assignment is not based on information that includes](https://www.cms.gov/images/SNF.jpg)
Medicare pays skilled nursing facility (SNF) services per diem under a prospective payment system (PPS). The SNF PPS per diem payment covers all Medicare Part A SNF services (routine, ancillary, and capital-related costs), except operating-approved educational activities and services excluded from SNF consolidated billing (CB) costs under Section 1888(e)(4)(E) of the Social Security Act .
We determine SNF payments by adjusting base payment rates for geographic differences in labor costs and case mix, and we calculate separate base rates for urban and rural areas.
Payment rates include an add-on to the Medicare Part B services cost estimate we pay for SNF patients during a Part A covered stay.
We base the standardized per diem rates on national data from urban and rural areas. Case mix and wage adjustments apply to these per diem rates. We pay SNFs at the full federal rate.
Federal rate adjustments reflect:
- A SNF’s wage index for FY 2024 wouldn’t be less than 95% of its final FY 2023 wage index, regardless of whether the SNF is part of an updated core-based statistical area (CBSA)
- For subsequent years, a provider’s wage index wouldn’t be less than 95% of its previous FY’s wage index
- The patient case mix (showing the number of resources typically needed for each patient’s clinical condition identified during the resident assessment process) using the Patient Driven Payment Model (PDPM) patient classification system
We update federal rates annually to reflect:
- Cost changes in goods and services SNFs purchase to provide care using the SNF market basket index. We adjusted the FY 2024 3.0% market basket increase upward to account for the forecast error adjustment of 3.6%, resulting in a SNF market basket percentage increase of 6.6%, which we reduced by the 0.2 percentage point productivity adjustment. This results in a FY 2024 SNF market basket update of 6.4%.
- A forecast error adjustment when the difference between forecasted and actual changes in the market basket exceeds a 0.5% threshold for the most recently available final FY data.
- Changes in local wage rates using the latest hospital wage index.
- Changes in facility performance in the SNF Value-Based Purchasing (VBP) Program.
PDPM classifies patients into 5 separate case mix index (CMI) adjusted components:
- Physical therapy (PT)
- Occupational therapy (OT)
- Speech-language pathology (SLP)
- Non-therapy ancillary (NTA)
Under the PDPM, only PT, OT, and NTA payments get variable per diem (VPD) resource-use adjustment rate changes over the stay.
Each patient classification component uses different measures:
- PT: Clinical Category, Functional Score
- OT: Clinical Category, Functional Score
- SLP: Presence of Acute Neurologic Condition, SLP-related Comorbidity or Cognitive Impairment, Mechanically Altered Diet, Swallowing Disorder
- NTA: NTA Comorbidity Score
- Nursing: Functional Score
To calculate each payment component , multiply the CMI linked to the patient’s case mix group (CMG) by the wage-adjusted component base rate, then by the VPD schedule-specific day, when applicable. Add each component payment to the non-case mix component payment rate to create the patient’s PDPM per diem rate.
![ms drg assignment is not based on information that includes This is a snapshot for calculating the PDPM classification process. For an explanation of the chart, contact your Medicare Administrative Contractor (MAC) Customer Service. For contact information, visit https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Review-Contractor-Directory-Interactive-Map on the Centers for Medicare & Medicaid Services (CMS) website.](https://www.cms.gov/images/PDPM.jpg)
Figure 4. Calculating PDPM Classification
Clinical Category & Functional Status
PT and OT components use 2 classifications: clinical category and functional status.
Clinical Category
We base the clinical category on the primary SNF stay diagnosis code by mapping the ICD-10-CM codes on the Minimum Data Set (MDS) in Item I0020B to a PDPM clinical category.
A surgical procedure during the previous inpatient stay may adjust the clinical category and map to 1 of these primary diagnosis clinical categories:
- Acute Infections
- Acute Neurologic
- Cardiovascular and Coagulations
- Major Joint Replacement or Spinal Surgery
- Medical Management
- Non-Orthopedic Surgery
- Non-Surgical Orthopedic/Musculoskeletal
- Orthopedic Surgery (Except Major Joint Replacement or Spinal Surgery)
Mapping the ICD-10-CM diagnosis or surgical category classifies a SNF resident into each of the clinical categories. Each year we consider stakeholder ICD-10-CM mapping suggestions.
Given similar costs among certain PT and OT clinical categories, we grouped certain patient clinical classification categories together.
PDPM PT & OT Clinical Categories
- Major Joint Replacement
- Spinal Surgery
- Orthopedic: Surgical Extremities Not Major Joint
- Cardiovascular & Coagulations
Functional Status
We calculate the PDPM PT and OT functional score in Table 9 using MDS 3.0 data based on 10 Section GG items that proved highly predictive of PT and OT costs per day:
- 2 bed mobility items
- 3 transfer items
- 1 eating item
- 1 toileting item
- 1 oral hygiene item
- 2 walking items
Section GG Item | Functional Score Range |
---|---|
GG0130A1 — Self-care: Eating Admission Performance | 0–4 |
GG0130B1 — Self-care: Oral Hygiene Admission Performance | 0–4 |
GG0130C1 — Self-care: Toileting Hygiene Admission Performance | 0–4 |
GG0170B1 — Mobility: Sit to Lying Admission Performance | 0–4 (average of 2 items) |
GG0170C1 — Mobility: Lying to Sitting on Side of Bed Admission Performance | 0–4 (average of 2 items) |
GG0170D1 — Mobility: Sit to Stand Admission Performance | 0–4 (average of 3 items) |
GG0170E1 — Mobility: Chair- or Bed-to-Chair Transfer Admission Performance | 0–4 (average of 3 items) |
GG0170F1 — Mobility: Toilet Transfer Admission Performance | 0–4 (average of 3 items) |
GG0170J1 — Mobility: Walk 50 Feet with 2 Turns | 0–4 (average of 2 items) |
GG0170K1 — Mobility: Walk 150 Feet | 0–4 (average of 2 items) |
Section GG Item | Functional Score Range |
---|---|
GG0130A1 — Self-care: Eating | 0–4 |
GG0130C1 — Self-care: Toileting Hygiene | 0–4 |
GG0170B1 — Mobility: Sit to Lying | 0–4 (average of 2 items) |
GG0170C1 — Mobility: Lying to Sitting on Side of Bed | 0–4 (average of 2 items) |
GG0170D1 — Mobility: Sit to Stand | 0–4 (average of 3 items) |
GG0170E1 — Mobility: Chair- or Bed-to-Chair Transfer | 0–4 (average of 3 items) |
GG0170F1 — Mobility: Toilet Transfer | 0–4 (average of 3 items) |
Under PDPM, we assess a patient’s cognitive status using the Brief Interview for Mental Status (BIMS). In cases where you can’t complete the BIMS, complete a Staff Assessment for Mental Status. We use the Cognitive Performance Scale (CPS) to score the patient based on the staff assessment responses. We base the new PDPM cognitive score on the Cognitive Function Scale (CFS), which combines scores from the BIMS and CPS into 1 scale that compares cognitive function across all patients.
These 12 SLP-related comorbidities predict higher SLP costs:
- CVA, TIA, or Stroke
- Hemiplegia or Hemiparesis
- Laryngeal Cancer
- Oral Cancers
- Speech & Language Deficits
- Tracheostomy Care (while a resident)
- Traumatic Brain Injury
- Ventilator or Respirator (while a resident)
PDPM has more information about mapping between ICD-10-CM diagnoses and SLP comorbidities.
After completing the BIMS or CPS, use the cognitive measure classification methodology in Table 11 to determine the BIMS and CPS scores.
PDPM Cognitive Level | BIMS Score | CPS Score |
---|---|---|
Cognitively Intact | 13–15 | 0 |
Mildly Impaired | 8–12 | 1–2 |
Moderately Impaired | 0–7 | 3–4 |
Severely Impaired | N/A | 5–6 |
NTA Comorbidity Score
We found NTA costs increase with 50 conditions and extensive services:
- Providers report these conditions and extensive services on the MDS 3.0 with the ICD-10-CM codes identified in Item MDS I8000
- The PDPM NTA accounts for relative costliness between comorbidity scores and comes from a patient’s weighted comorbidities count, rather than a simple comorbidities count
- To get this weighted count, we assign points between 1 and 8 to each of the 50 PDPM comorbidities to classify the patient’s NTA based on its relative costliness
To determine the patient’s NTA comorbidity score , determine all the patient’s qualifying comorbidities and add each comorbidity’s points. This sum is the patient’s NTA comorbidity score putting that patient into an NTA component classification group.
Streamlined Assessment Schedule
- Initial 5-day PPS assessment
- Interim Payment Assessment (IPA), an optional assessment completed at any point during the patient’s stay when clinical change occurs
- Discharge assessment
- Providers bill the default Health Insurance Prospective Payment System (HIPPS) late assessments code for non-compliant days
- Use the 5-day assessment HIPPS code for the rest of the stay unless the provider completes an IPA
- Late assessments affect VPD (for example, if a 5-day assessment is 2 days late, we adjust VPD for days 1 and 2 and calculate it using the default HIPPS code)
- 5-day assessment HIPPS code controls payment beginning on day 3 of the VPD schedule
PDPM HIPPS Coding
The PDPM HIPPS algorithm:
- Character 1: PT and OT Payment Group
- Character 2: SLP Payment Group
- Character 3: Nursing Payment Group
- Character 4: NTA Payment Group
- Character 5: Assessment Indicator
IPA Item Set
Providers may complete the IPA to report the patient’s PDPM classification change with no VPD schedule change. The IPA changes payment starting on the assessment review date, ending when the Part A stay stops, unless the provider completes another IPA.
State Assessments
States can choose PDPM item sets to calculate Medicaid payments. Each state determines if providers use PDPM comparisons and payment data for Medicaid. If so, states may require Omnibus Budget Reconciliation Act (OBRA) PDPM assessment data, like comprehensive and quarterly assessments. These item sets use Section GG, Item I0020B ICD-10-CM primary medical condition and J2100 recent surgery requiring active SNF care.
MDS 3.0 Technical Information has more information.
Section I: SNF Primary Diagnosis: I0020B lets providers use an ICD-10-CM code to report a patient’s primary diagnosis. This item asks, “What’s the main reason for admitting this person to the SNF?” Code Item I0020B when Item I0020 is coded as any response 1–13. We retired Item I0020A. Use only I0020 and I0020B.
Section J: Patient Surgical History: J2100–J5000 capture major surgical procedures during the hospital stay immediately before SNF admission. We use these items with the diagnosis captured in I0020B to classify patients into PT and OT case-mix categories.
Section O: Discharge Therapy Items: MDS, Section O uses Items O0425A1–O0425C5 for each therapy discipline mode (for example, individual, group, or concurrent therapy), and therapy amount (in minutes) the patient gets. Users get an error message if that discipline’s group and concurrent minutes total more than 25% of total therapy.
Section GG: Interim Performance: To get a patient’s interim performance, use MDS Section GG items for patient functional assessments. The new column look-back period is a 3-day window before the IPA’s Assessment Reference Date.
Swing Bed PPS PDPM Assessment uses several existing MDS items:
- K0100: Swallowing Disorder
- I1300: Inflammatory Bowel Disease
- I4300: Active Diagnosis: Aphasia
- O0100D2: Special Treatments & Programs: Suctioning Post-Admit Code
I1300: Inflammatory Bowel Disease is an existing MDS item added to the 5-day PPS Assessment and IPA.
Concurrent & Group Therapy Limit
The PDPM combined limit for both concurrent (1 therapist with 2 patients doing different activities) and group therapy (1 therapist with 2–6 patients doing the same or similar activities) can’t equal more than 25% of the therapy that SNF patients get for each therapy discipline.
The PPS Discharge Assessment checks therapy limit compliance and includes the number of minutes per mode, per discipline, for the entire PPS stay.
Interrupted SNF Stay Policy
An interrupted SNF stay happens when a patient leaves Part A-covered SNF care, then readmits to Part A-covered SNF care in the same SNF (not a different SNF) within the interruption window.
Note: If a resident drops to a non-skilled level of care or leaves Part A SNF care, we consider the patient discharged because of the interrupted stay policy, even if the patient remains in the facility.
The interruption window is a 3-day period beginning on the first non-covered day after a Part A-covered SNF stay and ending at 11:59 pm on the third consecutive non-covered day.
The first non-covered day may be different if the patient leaves the facility or Part A coverage:
- If the patient physically leaves the SNF, the first interruption window is the departure day
- If the patient stops Part A coverage but stays in the SNF, the first interruption window is the day after the final Part A coverage day
If the patient meets both conditions, we consider the subsequent stay a continuation of the last interrupted stay because of VPD and assessment schedules:
- The VPD schedule continues from the last discharge day. For example, if the SNF patient discharges from Part A on day 17 (that is, day 17 was the last covered SNF day), payment rates start on day 18 upon readmission.
- The assessment schedule continues from the Part A discharge day. We don’t require a new 5-day assessment when the patient readmits, but the provider may decide to complete the IPA.
If the patient readmits to the same SNF outside the interruption window, or when the patient readmits to a different SNF (regardless of length of time between stays), the interrupted stay policy doesn’t apply, and we consider the subsequent stay a new stay. In these cases, the VPD schedule resets to day 1 payment rates, and the assessment schedule also resets to day 1, requiring a new 5-day assessment.
Administrative Level of Care Presumption Under PDPM
SNF PPS administrative presumption automatically classifies a patient who’s correctly assigned 1 of the designated, more intensive case mix classifiers on the 5-day PPS assessment to a SNF level of care through the assessment reference date.
Patients not assigned to a designated classifier get an individual determination using existing administrative criteria. This doesn’t automatically classify as meeting or not meeting the level of care definition.
PDPM classifiers designated under this administrative presumption use:
- Nursing groups covered by Extensive Services, Special Care High, Special Care Low, and Clinically Complex nursing categories
- PT and OT groups TA, TB, TC, TD, TE, TF, TG, TJ, TK, TN, and TO
- SLP groups SC, SE, SF, SH, SI, SJ, SK, and SL
- NTA component’s uppermost (12+) comorbidity group
PDPM Payment for AIDS Patients
PDPM focuses AIDS patient costs by assigning the highest classification point value (8 points) of any condition or service under its NTA component and adds 18% to the nursing component.
The consolidated billing (CB) provision is like hospital bundling and requires SNFs to include all Medicare-covered services a patient gets during a covered Part A stay on the Part A bill, except a small list of excluded services billed separately under Part B by an outside entity.
Whether Part A covers the patient’s stay, CB requires SNFs to bill us for all patient PT, OT, and SLP services. You must submit all Part A stay claim services performed by an outside entity, except specifically excluded services outside the PPS bundle, which are separately billable under Part B.
While CB excludes the services above and applies to the practitioner’s personally performed professional services, the exclusion doesn’t apply to a physician’s “incident to” services provided by someone else as incident to the practitioner’s professional service. We subject these incident to services provided to SNF residents by others to CB, so the SNF must bill us. The Consolidated Appropriations Act, 2023 , excludes coverage for marriage and family therapists and mental health counselors from CB, effective January 1, 2024.
Learn more about CB in the MLN® SNF Consolidated Billing web-based training.
Place of service (POS) codes identify where a patient gets a service. Enter the correct 2-digit code on Medicare claims to ensure proper payment for physician services provided to patients in inpatient facilities like SNFs and hospitals. POS codes frequently associated with SNF extended care services include:
- Inpatient hospital: 21
- SNF (with Part A coverage): 31
- Nursing facility (for SNF with no Part A coverage): 32
If a patient is seen in a physician’s office, but is an inpatient of the hospital, use POS code 21 for inpatient hospital. The POS code reflects a different setting than the address and ZIP Code of the practice location (the physician’s office).
The SNF Quality Reporting Program (QRP) makes quality of care information available so patients can make informed decisions about their health care options. It also encourages hospitals and providers to improve the quality of inpatient care they provide to patients by ensuring they’re aware of, and reporting on, best practices for their facilities and type of care.
The SNF QRP applies to freestanding SNFs, SNFs affiliated with acute care facilities, all non-critical access hospitals (CAHs), and non-swing bed rural hospitals.
Find current quality reporting measures on the SNF QRP Measures and Technical Information webpage. Find more information in the SNF QRP FAQs .
To meet the SNF QRP requirements, SNFs must submit Resident Assessment Instrument MDS quality data and the CDC National Healthcare Safety Network (NHSN) summary data. Any SNF determined to be non-compliant with the quality reporting requirements may be subject to a two percentage (2%) point reduction in their annual payment update for the applicable year.
SNFs may qualify for a QRP reconsideration and exception and extension .
Through the SNF Value-Based Purchasing (VBP) Program , we award incentive payments to encourage SNFs to improve the quality of care they provide to patients. For the FY 2024 program year, performance in the SNF VBP Program is based on a single measure of all-cause hospital readmissions.
In 2024, the SNF VBP adopts new quality measures and makes updates to the scoring methodology. Beginning in 2025, it will also include a health equity adjustment and adopt new processes to validate data.
We reduce the adjusted federal per diem rate by 2% and adjust the resulting rate by the earned FY SNF amount.
The SNF Readmission Measure is the measure we use to evaluate SNFs in the SNF VBP Program. The program ties portions of SNFs’ payments to their performance on this measure, which we calculate by assessing the risk-standardized rate of all-cause, unplanned hospital readmissions for Medicare Fee-for-Service SNF patients within 30 days of discharge from a previous nearby hospitalization.
SNFs get quarterly and annual performance reports. We use this data to publicly report SNF performance information on the Care Compare website.
42 CFR 413.338 has more information.
Acute Care Hospital Inpatient Prospective Payment System (IPPS)
- 2024 Acute Care Hospital IPPS Final Rule
- CMS Acute Inpatient PPS
- CMS Newsroom: FY 2024 Hospital IPPS and LTCH PPS Final Rule
- Medicare Provider Reimbursement Manual
Ambulatory Surgical Center (ASC) Payment System & Coverage
- 2024 ASC Final Rule
- CMS ASC Center
- CMS Newsroom: CY 2024 Hospital OPPS and ASC Payment System Final Rule
- Guidance for Surveyors: ASCs
- Medicare Claims Processing Manual, Chapter 14
- 42 CFR 414.229 (Capped Rental Items)
- 42 CFR 414.400 Subpart F (Competitive Bidding for Certain DMEPOS)
- DMEPOS Order Requirements
- Durable Medical Equipment (DME) Center
- Fee Adjustment Monitoring
- Medicare DMEPOS Payments While Inpatient
- CY 2024 Home Health PPS Final Rule
- CMS Home Health PPS
- CMS Newsroom: CY 2024 Home Health PPS Final Rule
- Guide to Home Health Help Desks
- 2024 Hospice Wage Index and Payment Rate Update Final Rule
- CMS Hospice Center
- CMS Newsroom: FY 2024 Hospice Payment Rate Update Final Rule
- Hospice Regulations
- Hospice Quality Reporting Program (HQRP) Training Resources
- HQRP Requirements and Best Practices
- Medicare Benefit Policy Manual, Chapter 9
Hospital Outpatient Prospective Payment System (OPPS)
- 2024 OPPS Final Rule
- 42 CFR 419 — Prospective Payment System for Hospital Outpatient Department Services
- CMS Hospital Outpatient PPS
- Prior Authorization and Pre-Claim Review Initiatives
Inpatient Psychiatric Facility Prospective Payment System (IPF PPS)
- 2024 IPF PPS Final Rule
- CMS Newsroom: FY 2024 Medicare IPF PPS and Quality Reporting Final Rule
- IPF PPS Regulations
- Medicare Benefit Policy Manual, Chapters 2–4
- Section 190.5.1 of the Medicare Claims Processing Manual, Chapter 3
Inpatient Rehabilitation Facility Prospective Payment System (IRF PPS)
- 2024 IRF PPS Final Rule
- CMS IRF PPS
- CMS Newsroom: FY 2024 IRF PPS Final Rule
- FY 2024 IRF PPS Pricer
Long-Term Care Hospital Prospective Payment System (LTCH PPS)
- 2024 LTCH PPS Final Rule
- CMS LTCH PPS
- LTCH Web Pricer
Skilled Nursing Facility Prospective Payment System (SNF PPS)
- 2024 SNF PPS Final Rule
- CMS Newsroom: FY 2024 SNF PPS Final Rule
- Medicare Claims Processing Manual, Chapters 6–7
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CPT codes, descriptions and other data only are copyright 2023 American Medical Association. All Rights Reserved. Applicable FARS/HHSARS apply. Fee schedules, relative value units, conversion factors and/or related components are not assigned by the AMA, are not part of CPT, and the AMA is not recommending their use. The AMA does not directly or indirectly practice medicine or dispense medical services. The AMA assumes no liability for data contained or not contained herein.
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Conditions that Impact MS-DRG Assignment for Newborns
- By Laurie M. Johnson, MS, RHIA, FAHIMA, AHIMA Approved ICD-10-CM/PCS Trainer
- December 10, 2019
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Birth weight is used by APR-DRGs and MS-DRGs, and it impacts the assigned group.
The topic of newborns is rarely addressed when we talk about coding or clinical documentation integrity. Birth weight, prematurity, extreme prematurity, and other significant problems are all conditions that impact the MS-DRG assignment.
Newborns are assigned to MS-DRGs in Major Diagnostic Category (MDC) 15. An interesting fact regarding this MDC is that there is not a surgical division for it. Here are some important definitions that impact the MS-DRG assignment:
- Neonate – an infant less than four weeks old
- Prematurity – the birth weight of 1,000-2,499 grams, or gestational age of 27-36 completed weeks of gestation
- Extreme prematurity – birth weight less than or equal to 999 grams, or gestational age of 23-26 completed weeks of gestation
The diagnosis codes on the newborn’s episode of care should begin with “P,” which would indicate a perinatal condition. It is important to be aware that not all diagnosis codes assigned to the newborn begin with “P,” as there are some “regular” codes that can be assigned as well. The diagnosis codes that begin with “O” can only be assigned to the mother’s episode of care. An edit will display if the codes are used incorrectly.
The above definitions relate to a coding perspective. The diagnoses of prematurity are assigned to MS-DRGs 791 and 792, depending on the presence of major problems. The diagnosis of extreme prematurity is assigned to MS-DRG 790.
Major problem diagnoses may also impact Full Term Neonates (MS-DRG 793) or Neonate (MS-DRG 794) codes. Examples of major problems include maternal conditions affecting the newborn; birth injuries; metabolic disturbances of the newborn; adverse effects of drugs; Rh or ABO incompatibility, and some congenital deformities.
Some code examples of the aforementioned categories are P07.14 (other low birth weight newborn, 1,000-1,249 grams); T50.4X5A (Adverse effect of appetite depressants, initial encounter); P36.4 (Sepsis of newborn due to Escherichia coli); P10.0 (Subdural hemorrhage due to birth injury); and P74.21 (Hypernatremia of newborn).
Conditions such as observation and evaluation of newborns for suspected conditions do not impact the MS-DRG assignment (see category Z05). Normal newborns are grouped by the principal diagnosis, which is most frequently found in category Z38. Some conditions that may be expected to impact the MS-DRG grouping are newborns affected by a prolapsed cord, newborns being light for gestational age, and extreme immaturity of a newborn of unspecified weeks of gestation. The unspecified information identifies a need for clinical documentation integrity.
From a clinical documentation integrity perspective, the newborn record should specify if the infant was born in the hospital or outside the hospital; congenital versus acquired conditions; gestational age; and birth injuries. Birth injuries can affect all body systems, so the specific body system and the extent of the injury are important in assigning the correct diagnosis code.
Remember that birth weight is used by APR-DRGs and MS-DRGs, and it impacts the assigned group. The specific codes can be found in the MS-DRG Definitions Manual, version 37, available online at https://www.cms.gov/icd10m/version37-fullcode-cms/fullcode_cms/P0017.html .
Programming Note:
Listen to Laurie Johnson’s live reports every Tuesday on Talk Ten Tuesday , 10-10:30 a.m. EST,
- TAGS: MS-DRG
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Laurie M. Johnson, MS, RHIA, FAHIMA, AHIMA Approved ICD-10-CM/PCS Trainer
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Q&a: identifying the ms-drg for unreleated surgical procedures.
Q: Could you please explain unrelated surgical procedure DRGs? For example, a patient with a principal diagnosis of pneumonia whose surgical procedure transurethral resection of the prostate (TURP), MS-DRG 168. Also can you explain how we can differentiate between extensive operating room (OR) procedure and non-extensive OR procedure.
A: Many CDI specialists with a clinical background are what I like to call, encoder dependent. What I mean by that is we’ve been trained to “code” using an encoder and create our working MS-DRGs based on “grouper” software. It is often helpful to understand how to manually assign a MS-DRG. The basics steps for assigning a MS-DRG are as follows:
- Identify all the applicable diagnoses in the health record
- Identify the principal diagnosis (the condition after study to be chiefly responsible for occasioning the admission)
- Determine its associated ICD code (we currently use ICD-9-CM, but we’ll eventually use ICD-10-CM)
- Identify the base/medical DRG noting its Major Diagnostic Category/body system
- Identify any/all procedures
This is where it can get a little tricky. The UHDDS (Uniform Hospital Discharge Data set) defines the principal procedure as
- One that was performed for definitive treatment, rather than one performed for diagnostic or exploratory purposes, or was necessary to take care of a complication
- If there appear to be two procedures that are principal, then the one most related to the principal diagnosis should be selected as the principal procedure
If there was a procedure performed take the following steps:
- Determine the associated procedure codes (currently based on ICD-9-CM Vol. 3 codes and soon to be ICD-10-PCS) and determine if the procedure code associated with the principal procedure as listed in the DRG Expert?
- If the code isn’t in the DRG Expert index of procedures, it is for one of two reasons: Either it is not a “reimbursable” procedure (i.e., one that will affect the MS-DRG assignment) or is it a major OR procedure
- If there isn’t a procedure or it doesn’t impact DRG assignment, does the medical DRG allow for movement i.e., can patients be put into different groups based on the presence or absence of a complicating condition (CC) or major complicating condition (MCC)
- If so, check to see if any of the remaining diagnoses, which are now considered “secondary diagnoses” are CCs or MCCs
- Finalize the working DRG
- If the procedure code is in the same MDC/body system as the principal diagnosis assign the new surgical MS-DRG (this is the most common scenario and is often referred to as a “match”)
- If the procedure code is not in the same MDC/body system a different process is used to assign the surgical MS-DRG
The MS-DRG system is based on the assumption that if there is a “reimbursable” medical intervention/procedure that the case/claim will remain in the same body system (MDC) as the principal diagnosis will apply. However, there are occasions when the principal procedure is not related to the principal diagnoses because it is associated with a different MDC/body system as in the example you describe, which will require you to take some additional steps, including:
- Turn to the start of “DRGs Associated with All MDCs.”
- Scan the procedure codes listed under DRG 984 Prostatic O.R. Procedure Unrelated to PDX to try to locate the applicable procedure code. These are codes that range from 60.0 to 60.99 within ICD-9-CM Vol. 3. If the applicable code is found under DRG 984 then the case will fall within a DRG referred to as a “triplet” where either a CC or a MCC can “move” the DRG. Check the remaining diagnoses codes to see if any are classified as a CC or MCC and finalize the working DRG based on the value of the applicable secondary diagnoses resulting in a final DRG between 986 and 984
Your example of a principal diagnosis of pneumonia (respiratory system MDC) with a procedure of a TURP will fall into one of these DRGs because the TURP is not a procedure located within the respiratory MDC/body system, but is classified as a prostate procedure and found under DRG 984. Your final MS-DRG assignment will depend on the presence or absence of secondary diagnose classified as a CC or MCC.
If the procedure code is not found under DRG 984, scan the procedure codes listed under DRG 987 Nonextensive O.R. Procedure Unrelated to PDX to try to locate the applicable procedure code. These codes span several pages within the DRG Expert. If the applicable code is found under DRG 987 then the case will fall within a DRG referred to as a “triplet” where either a CC or a MCC can “move” the DRG. Check the remaining diagnoses codes to see if any are classified as a CC or MCC and finalize the working DRG based on the value of the applicable secondary diagnoses resulting in a final DRG between 987 and 989.
If the procedure code is not found under DRG 984 or DRG 987 and it was not associated with a page when referencing a procedure index or if it was found, it was in a different MDC/body system than the PDX then the assumption is the case/claim belongs in DRGs 981-983. This final step requires a leap of faith since it is based on a process of elimination where this is the “last resort” for DRG assignment. These DRGs are heavily scrutinized by external auditors as assignment within these DRGs can erroneously inflate reimbursement if the case was improperly assigned. As above, this is a DRG is a “triplet” where either a CC or a MCC can “move” the DRG. So check the remaining diagnoses codes to see if any are classified as a CC or MCC and finalize the working DRG based on the value of the applicable secondary diagnoses.
Editor’s Note: Cheryl Ericson, MS, RN, CCDS, CDIP, answered this question. At the time of this article's original release, she was the CDI Education Director for HCPro Inc.
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Terms in this set (9) Remember the factors influencing MS-DRG assignment: 1. principal and secondary diagnosis and procedure codes. 2. sex. 3. age. 4. discharge status. 5. presence or absence of major complications and comorbidities (MCCs) 6. presence or absence of complications and comorbidities (CCs) groupers.
MS-DRG assignment is based on information that includes. Diagnoses (principal and secondary); Surgical procedures (principal and secondary; Discharge disposition or status; Presence of major or other complications and comorbidities (MCC or CC as secondary diagnosis) ... The case-mix index is the average MS-DRG weight based on the specific ...
The MS-DRG title/assignment would not include the: Close the DRG summary and drag the C18.7 down to the second position in the code screen. Which coding message do you receive? (Return the C18.7 code to the primary position after reviewing your answer.) The DRG may change as a result of reordering.
Each of the Medicare Severity Diagnosis Related Groups is defined by a particular set of patient attributes which include principal diagnosis, specific secondary diagnoses, procedures, sex and discharge status. The purpose of this chapter is to specify the patient attributes which define each MS-DRG. This chapter is organized around the twenty ...
MS-DRGs. Medical MS-DRGs. 23 Medical MS-DRGs are assigned based upon the principal diagnosis, as in this example from MDC 04 Diseases & Disorders of the Respiratory System. They are further refined based on the presence or absence of MCCs and/or CCs. MCCs are higher weighted - e.g. more resource intensive than CCs.
Notice Regarding Upcoming Releases of the MS-DRG Grouper and MCEThe current versions of the MS-DRG Grouper and MCE use Java software and are currently based on Java version 8. Support for Java version 8 will end by November 2026. Hospitals and their software vendors who implement these programs in a mainframe environment will be impacted by this change.
In conclusion, the Medicare Severity Diagnosis-Related Group (MS-DRG) system is a classification system used to categorize and reimburse healthcare providers for inpatient hospital services. It improves the accuracy and fairness of Medicare payments by considering the severity of a patient's condition and the resources required for their treatment.
In this episode we review the Diagnostic Related Groups aka the MS-DRG assignment process in detail on how to find MDC's (Major Diagnostic Category) and the ...
DRG is used by Medicare to reimburse hospitals for inpatient stays based on the patient's diagnosis and the care provided during the hospital stay. This means that hospitals are paid a fixed amount for each patient based on the DRG assigned to the patient. DRGs were first introduced in 1982 as part of the Medicare Prospective Payment System ...
Encompassing 20 body areas and gathered into around 500 groupings, MS-DRGs are determined based on the ICD-10-CM primary diagnosis codes assigned to the case. Complications and comorbidities (CC) add to the severity and reimbursement of the episodes of care. Proper MS-DRG assignment requires the right tools based on ICD-10-CM and PCS codes and ...
The Case Mix Index (CMI) is the direct calculation that ties to the DRG. Initially, CMS designed the CMI to calculate hospital payments. Now, it is a standard indicator of hospital disease severity in the United States and internationally. CMI is calculated based on the average relative DRG weight of hospital inpatient discharges and by summing ...
Common Acronyms and MS-DRG Meanings 15 Resources 17 . I n tr od u c ti on Diagnosis-related group (DRG) is a system to classify hospital cases into one of approximately 500 ... Assignment to the following DRGs is based on more than the principal diagnosis. ... would be included in treating the principal diagnosis.
ICD-10-CM/PCS MS-DRG v37.0 Definitions Manual. Since patients can have multiple procedures related to their principal diagnosis during a particular hospital stay, and a patient can be assigned to only one surgical class, the surgical classes in each MDC are defined in a hierarchical order. Patients with multiple procedures are assigned to the ...
Medicare severity-diagnosis-related groups, abbreviated as MS-DRGs, are categories of inpatient hospital stays. The Medicare system uses them to determine reimbursements for hospitals, skilled nursing facilities, and hospices. A hospital stay can range from one day to 100 days. The most expensive MS-DRGs have the longest average stays.
Step 1 for MS-DRG assignment (Pre-MDC assignment) the principal diagnosis is not considered for MS-DRG assignment; rather, a defined set of ICD-10-PCS procedures are used to assign the MS-DRG. Pre-MDC procedures, transplants, and tracheostomies can be performed for diagnoses for multiple MDCs. Once the admission has been determined to qualify ...
BackgroundSection 1886(d) of the Act specifies that the Secretary shall establish a ification system (referred to as DRGs) for inpatient discharges and adjust payments under the IPPS based on appropriate weighting factors assigned to each DRG. Therefore, under the IPPS, we pay for inpatient hospital services on a rate per discharge basis that varies according to the DRG to which a beneficiary ...
The MS-DRGs consist of lists of ICD-9-CM codes grouped in a given order based on logical relationships defined between the lists. Since CMS plans that any ICD-10-CM/PCS-driven modifications will build on the strengths of the current MS-DRGs, they must first replicate the current MS-DRG structure using comparable lists of ICD-10-CM/PCS codes.
January 12, 2024. A Medicare diagnosis related group (DRG) affects the pre-determined amount that Medicare pays your hospital after an inpatient admission. Understanding what it means can help you gain insight into the cost of your care. As you probably know, healthcare is filled with acronyms. Although you may be familiar with many of them ...
We make updates to IPPS payment rates, including updates to base rates, wage indexes, Medicare Severity Diagnosis Related Group (MS-DRG) definitions and weights, and the outlier fixed-loss amount.IPPS base rates are updated annually based on the applicable market basket index and estimates of charges in productivity. For FY 2024, the increase in operating payment rates for general acute care ...
Birth weight is used by APR-DRGs and MS-DRGs, and it impacts the assigned group. The topic of newborns is rarely addressed when we talk about coding or clinical documentation integrity. Birth weight, prematurity, extreme prematurity, and other significant problems are all conditions that impact the MS-DRG assignment. Newborns are assigned to MS-DRGs in Major Diagnostic […]
The basics steps for assigning a MS-DRG are as follows: Identify all the applicable diagnoses in the health record. Identify the principal diagnosis (the condition after study to be chiefly responsible for occasioning the admission) Determine its associated ICD code (we currently use ICD-9-CM, but we'll eventually use ICD-10-CM) Identify the ...
Study with Quizlet and memorize flashcards containing terms like List the steps the four steps of MS-DRG assignment., The reason for severity of illness refinement performed on the DRG system was that it allowed:, In the IPPS, what is the term for each hospital's unique standardized amount per encounter rate that is based on historic claims data? and more.