December/January 2001

Building Alliances

By Frances J. Fowler, FAAHC

Shutting Down the Rumor Mill

HCFA reveals the facts of the proposed rule for PPS for acute rehabilitation.

Rumors about the prospective payment system (PPS) have run rampant through the rehabilitation industry since the Balanced Budget Act was passed in 1997. But finally, the Health Care Financing Administration (HCFA) released the long-awaited proposed rule for PPS for acute rehabilitation.

Because of the rumors, many rehab providers are confused about exactly how and when they will feel the impact of PPS and how the changes will affect them. Therefore, it is critical to clarify misperceptions about the proposed rule and to set up expectations for the implementation phase.

Rumor #1

HCFA’s existing rules for designating acute rehabilitation providers do not apply.

This rumor suggests that HCFA might do away with the existing rules and regulations pertaining to acute rehabilitation. This is not the case. Providers who hoped for an opportunity to generate growth by accommodating a higher proportion of patients with non-rehabilitation-related diagnoses will see their plans dashed.

Rumor #2

The PPS implementation date will be further delayed, allowing a comfortable cushion time for training.

Wrong. PPS for acute rehab is scheduled to go into effect in fiscal year April 1, 2001 or later, if your fiscal year starts later.

Regardless of when a provider’s fiscal year begins, however, all providers must transmit patient assessment ratings beginning April 1, 2001. Because implementing such a complicated patient assessment rating system requires about 6 months of development and training, all providers nationwide will be working on a tight and stressful schedule.

Rumor #3

Providers will be able to choose either federal rates or the 2-year transition rates.

Unfortunately, HCFA’s proposed rule does not allow providers to elect payment during the transition into PPS. A 2-year transition period is mandated. However, the schedule has a few unusual twists. The first involves the transition time period. Because HCFA delayed the October 2000 implementation to April 2001, the plan now is to shorten the transition to make up for lost time. That means that providers whose fiscal year starts on or after October 1, 2001, will be forced to begin with year 2 of the transition. In effect, these providers lose the first year of the transition period. Thus, their payment will be more heavily weighted toward the federal rate (calculated as 33% facility rate and 67% federal rate). Providers who thought they had the advantage of being last to fall under PPS may find themselves with the shortest window in which to adapt and, subsequently, with less than favorable financial outcomes. Second, because all acute rehab providers must start delivering assessment data to HCFA on April 1, 2001, regardless of the provider’s fiscal year, the systems must be in place to rate patients by that date.

Rumor #4

If you know PPS for skilled care, you do not need to worry about acute rehabilitation.

Not true. Although conceptually, the systems for skilled care and rehabilitation are founded on the same principles, the similarity ends there. For starters, acute rehab will be reimbursed per discharge rather than per day. The methodology more fully incorporates aspects of patient care than was the case with skilled care PPS, such as comorbidity, age, motor score, and cognitive scores (for some groups of patients.)

In addition, HCFA has set aside a portion of the total rehab dollars to provide for care to the 21% of patients that do not fall into the general classification included in the clinical management groups. These include: patients whose length of stay is under 72 hours, patients who die while in rehab, and patients whose length of stay is longer than what HCFA deems appropriate.

Rumor #5

Payment under PPS will favor most providers.

The degree to which this rumor will hold true is still to be tested. However, initial review of the actual rates raises concern, particularly when one considers that capital is included in the rates as quoted. The proposed rule does differentiate reimbursement for patients based on functional impairment and adjusted for such factors as comorbidity. However, in practical terms, it is questionable if the rates set by HCFA will be sufficient to cover costs for higher-cost patients.

The difference in payment is substantial between patients classified as more functional compared to those rated as functionally impaired. Payments for patients classified at a higher functional level are generally in the $3,000 to $4,000 range. Given HCFA’s guideline that all patients receive 3 or more hours of therapy a day, it is difficult to understand how this goal can be achieved and still allow operation in a financially sound manner.

Payment for patients with lower functional capabilities is definitely better. However, when one considers the care requirements, even the high-end dollar payment for strokes, $11,800 to $12,900, appears tight. This is particularly the case when one considers that capital is also included in the payment. Regardless of the number of comorbid conditions, there is only one adjustment factor. This adjustment approximately equates to another $800 to $1,000 per discharge.

Rumor #6

The patient assessment tool, the Minimum Data Set Post Acute Care (MDS-PAC), will be easy to administer.

This is definitely not the case. To the contrary, even HCFA admits that the assessment by skilled staff takes about 65 minutes to complete. For staff unfamiliar with this process, the time can average up to 2 hours per patient. Given that the assessment is to be completed on day 4, day 11 (if appropriate), and on the day of discharge, additional staff will be needed.

While the time and personnel required to rate the patient add more cost, the complexity of the assessment tool also mandates that time be set aside to train staff for this function. Accuracy in rating the patient is critical to the level of reimbursement. For the average rehab program (30 beds at 75% occupancy), missing the rating by just one level per patient could equate to lost revenues of approximately $600,000 to $1,000,000 annually, depending on the mix of patients. The PPS system contains more than 186 CMGs into which a patient can be classified.

Rumor #7

Teaching hospitals will receive additional payments.

HCFA quashed this rumor by asserting that additional costs associated with teaching rehab centers could not be demonstrated. As a result, teaching hospitals will not receive additional payments. Surprisingly, however, HCFA did consider rural rehab providers. A 15% add-on payment ensures that rural providers of acute rehabilitation will not be negatively impacted by the proposed rule.

Provider Checklist

While the proposed rule lays speculation to rest, it also provides an opportunity for insight into what providers need to do now to ensure a good outcome for this transition.

• Develop a picture of what your program will look like under PPS payment.
• Develop your action team. Be certain to include finance, information systems, and medical records in your system.
• Develop your own action plan and timeline. For example, since patients will be assessed starting April 1, decide now when training should take place and who will do it.
• Plan to spend money. There is no way that this transition can take place effectively without adequate financial resources. The amount will vary among providers, but budget a minimum of $50,000. Capital expenditures must include information systems that allow you to calculate payment based on the rating being provided to HCFA. Depending on your current cost and Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) limit, it might be wise to spend dollars before entering into PPS payment, since reimbursement may be more favorable now.

Frances J. Fowler, FAAHC, is president of Fowler Healthcare Affiliates’ national consulting practice in Atlanta. She can be reached at (770) 955-5957 or fha@mindspring.com.

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