AHCCCS Transition to DRG-based Payment

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DRG News

August 27, 2014

  • It has come to AHCCCS’ attention via recent discussions with interested parties that clarification regarding the development of the APR-DRG rates is appropriate. Historical paid claims data from AHCCCS fee-for-service and all AHCCCS Contractors were used to develop the budget-neutral reimbursement system, including base rates, all adjustors, and the outlier thresholds. This historical data is inclusive of all contracted and non-contracted payment rates, including discounts, in place during federal fiscal year 2011 (October 1, 2010 through September 30, 2011). For example, to the extent that plans and hospitals have contracted at less than the AHCCCS fee schedule (e.g., 95% of the AHCCCS fee schedule), that contracting experience has been used to develop the budget-neutral base DRG rates. AHCCCS Contractors and hospitals should consider this information when negotiating payment rates under the APR-DRG reimbursement system. Questions, may be directed to DRG@azahcccs.gov.
  • AHCCCS is committed to ensuring that hospitals not experience any cash flow disruptions due to any AHCCCS payer experiencing delays with APR-DRG claims processing implementation effective with dates of discharge on and after October 1, 2014. Systems’ testing is occurring at and between AHCCCS and its Contractors and with hospital partners. Additionally, mitigation strategies have been developed by all AHCCCS payers to ensure that claims are paid timely in the event of any delays or errors in APR-DRG claims processing. These strategies vary by payer; please discuss the specifics with AHCCCS and its Contractors directly.

    The change to APR-DRG reimbursement of inpatient claims is the most significant change in AHCCCS hospital reimbursement in over 20 years. AHCCCS expects a smooth transition but understands that this type of change can be accompanied by challenges and unforeseen circumstances. Please send any concerns to AHCCCS at DRG@azahcccs.gov if assistance is needed.

AHCCCS and its Contractors understand the critical partnership with our hospital providers, in service to AHCCCS members, and appreciate working together to make this transition to APR-DRG payments as smooth and quiet as possible.

 

Background

Since 1993, AHCCCS has paid hospital inpatient claims using a tiered per diem fee schedule that was developed internally. Rates were rebased in 1998 and subsequently inflated annually (except when otherwise permitted by legislation) using a nationally recognized inflation factor. Effective 10/01/2014, AHCCCS will begin reimbursing inpatient hospital services using a DRG-based payment system.

Compared with a tiered per diem system, which incentivizes quantity over quality, AHCCCS believes the DRG-based payment methodology is better aligned with the agency’s focus on improved patient safety and health outcomes for its members, and will result in reduced costs. It will enhance AHCCCS’ ability to implement performance review and cost-saving measures by facilitating measurement of inpatient readmissions and implementation of Medicaid’s prohibition on reimbursement for hospital acquired conditions. AHCCCS has contracted with Navigant Consulting http://www.navigant.com/ to provide assistance in analyzing , acquiring and implementing, a DRG-based inpatient hospital payment system. Some tasks associated with this project include:

  • Research and determine options for optimum DRG-based system for AHCCCS
  • Identify software integration issues to function within current IT structure
  • Assist with determining rates, weights, and outlier rules for DRG-based reimbursement
  • Perform hospital-specific modeling
  • Develop macro for out-of-state hospitals to estimate payments
  • Identify opportunities to maximize federal funding
  • Integrate payment methodology with ICD-10 implementation
 

Public Presentations

April 10, 2014 Presentation to the Healthcare Financial Management Association [PPT]

Updated Provider Communication

On November 14, 2013, AHCCCS distributed a letter to hospital stakeholders with a reminder about the upcoming change to the APR-DRG payment methodology effective October 1, 2014. Read that communication here:

Communication Letter [PDF]

 

AHCCCS Meeting to Discuss DRG Inpatient Methodology

On Thursday, June 14, AHCCCS hosted an open meeting to discuss the efforts in exploring an option to the current inpatient hospital per diem payment methodology.

Meeting Presentation [PPTX]

 

DRG Technical Workgroup

Information related to the Contractor Workgroup, including meeting notes and the Arizona DRG Payment Policies document, can be found here:

EDI Technical Workgroups

 

DRG Hospital Workgroup

AHCCCS appreciates the interest that the hospital community has expressed in participating in our DRG Workgroup. The below list includes the names of the hospital representatives that have been selected to work on this project. Hospital providers who are not on this team may contact one of the members below to ensure that their issues and concerns are raised to the workgroup.

  • Jeff Jackson, Dignity
  • Neal Jensen, Cobre Valley Hospital
  • Greg Kuzma, Northern Arizona Health
  • Dave Godeman, Iasis
  • Carol Bailey, Abrazo
  • John Neuner, Banner
  • Joan Goda, Carondelet
  • Craig McKnight, Phoenix Children’s
  • Bret Hicks, Tucson Medical Center
  • Vickie Clark, La Paz Hospital
  • Jim Dickson, Copper Queen Hospital
  • Scott Steiner, University Hospitals
  • Peter Finelli, CHS
  • Jim Haynes, AzHHA

Questions and comments to be considered in the workgroup may be addressed to
DRG@AZAHCCCS.gov.

Additional documents concerning DRG methodology will be published below:

Selection of a DRG Grouper for the Medicaid Population [PDF]

Presentation for September 6, 2012 Workgroup Meeting [PPTX]

Presentation for December 6, 2012 Workgroup Meeting [PPTX]

Presentation for January 18, 2013 Workgroup Meeting [PDF]

Presentation for April 25, 2013 Workgroup Meeting [PDF]

Handouts for April 25, 2013 Workgroup Meeting [PDF]

APR-DRG Version 30 National Weights [Excel]


November 18, 2013 Workgroup Meeting

Agenda [PDF]

Presentation [PPTX]

Data Components and Summaries (For Discussion Purposes Only) [PDF]

Payment Policy Issues [PDF]


December 17, 2013 Workgroup Meeting

Agenda [PDF]

Presentation [PPTX]

Preliminary Model Version 12/17/2013 [PDF]

Payment Policy Issues [PDF]

 

January 2014 Updates

APR-DRG Version 31 National Weights [Excel]

 

March 2014 Updates

Final Model Version March 2014 [PDF]

 

July 2014 Updates

Final Rule (Effective 09/06/2014) [PDF]

 

APR-DRG Calculator

AZ APR-DRG Calculator 2014-08-07 [Excel]

 

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