Moving Toward Better Outcomes and CM Return on Investment

Continuous changes in regulations and reimbursement structures necessitated adjustments in hospital operations and particularly in care/case management (CM) operations toward more effective and well-documented care. However, the speed of changes in the health care industry and that of adjustments in operational processes never seem to go at the same pace. It is almost like expecting a tsunami after an earthquake occurs in the ocean. No one quite knows when or where it will hit.

Another drawback to that discrepancy is that the pace of change is inconsistent amongst the different areas that are affected by it. In this article, the focus is on Medicare changes and its tsunami-like impact on CM over the last few years. These changes, along with ensuing changes by other payers modeling Medicare’s payment model, made almost every facility rethink its approaches to care delivery and documentation.

First, a Piece of History

After many years in the making, the Social Security Act of 1965 became a reality so that access to care challenges and other evolving needs could be addressed. This resulted in Title 18 (Medicare) and 19 (Medicaid) benefits along with programs like maternal and infant care under Title 5, and community centers and Head Start programs under the Economic and Opportunity Act (Richmond and Fein, 1995). Regardless of the purpose at the time, these programs triggered upward spiraling of costs and a for-profit system that rewarded quantity services instead of quality services. As some would call it, this enactment initiated the “health care mess” that we wade in today.

In the 1980s, the advent of managed care, explosive growth of employer-sponsored health insurance, and the emphasis on disease management and CM programs as measures to control unnecessary utilization of health services demonstrated cost-effective measures. However, national expenditures on health continued to rise, hitting up to 16 percent of the gross domestic product (GDP), almost double what it was in 1980. Further, public funding inclusive of Medicare, Medicaid, and SCHIP paid for 45 percent of all health care costs which suggested a continued rise in spending. According to Sered and Fernandopulle (2005), the Medicare program of federal funding is the largest public funding source, and Medicaid is the second largest. In many ways, Medicare rules set the stage for other payers to follow.   

The two most influential Medicare initiatives that changed CM were Medicare prospective payment system (PPS) and diagnostic related groups (DRGs), currently MS-DRGs.

Using prospective payment systems of the 1980s under DRGs was Medicare’s way of controlling unnecessary utilization. Following many years of hospitals’ efforts to learn the ways of tracking principal and secondary diagnoses as well as documenting complications and chronic conditions, DRGs changed into Medicare Severity DRGs, or MS-DRGs, instead under the Final Ruling of Inpatient Prospective Payment System (IPPS) of 2008.

Medicare Severity DRGs brought changes not only in the number of groupings, which was changed from 538 to 745, but also in relative weights (RW)—what is considered noncontributory chronic condition versus complex chronic care or major co-morbid condition that impacted the weight of the DRG and consequent payment. It also affected what is an acceptable inpatient versus outpatient procedure for reimbursement, and additionally what is considered a hospital acquired condition (HAC). This determined what is not reimbursable versus what was present on admission.