FY08 is just around the corner; do you know where your CV service line is?

How Medicare changes will affect your cardiovascular service line: FY08 is just around the corner; do you know where your CV service line is?

Nancy A. Lyle

Since its inception in 1983, the diagnosis-related groups system has remained relatively unchanged with respect to the construct and methodologies for determining relative weights and payment. However, on Aug. 1, 2006, the Centers for Medicare and Medicaid Services issued FY07 final rules that take considerable steps toward reforming and improving the accuracy of Medicare’s inpatient prospective payment system. Medicare’s most recent changes to the IPPS have strategic implications for cardiovascular services particular to academic medical centers as well as teaching, specialty, and community hospitals.

Many of the recent IPPS changes were based on recommendations from the 2005 Medicare Payment Advisory Commission’s March 2005 report to Congress regarding physician-owned specialty hospitals. In that report, MedPAC concluded that the current Medicare payment system created financial incentives that encouraged hospitals to focus on specific DRGs that were more profitable. The commission recommended considerable changes to the IPPS system to improve the accuracy of DRG payments; those recommendations served as the impetus and foundation for CMS’s FY07 proposed rules and subsequent policy. Although the initial focus was physician-owned specialty hospitals, the CMS changes have implications for all acute care hospitals.

Overview of CMS FY07 IPPS Final Recommendations

Although the changes to Medicare’s IPPS were not as far-reaching as initially proposed, they represent the first step in what promises to be sweeping reform. CMS announced that it will transition over the next three years from a charge-based method for determining DRG relative weights to a cost-based methodology. CMS believes this new method of calculating DRG weights will better align hospital payments with the actual cost of patient care and eliminate bias caused by using hospital charges.

Among several other changes, Medicare’s inpatient rates for operating expenses will increase by 3.4 percent for those hospitals that report the 20 Hospital Quality Alliance-approved measures. Hospitals that do not participate will receive only a 1.4 percent increase. Many of these quality indicators are related to cardiovascular care; nonetheless, in order for hospitals to receive the full market basket increase in FY07, all 20 quality indicators must be reported. CMS plans to continue expanding the quality criteria that hospitals must track and report to support its objective of improving quality of care for the Medicare population.

Implications for Cardiovascular Services

Modifications to the DRG payment system will have significant bearing on CV services because the payer mix is predominantly Medicare. Traditionally, the CV service line has been one of the most lucrative business lines for most hospitals, from a financial perspective as well as the significant market size it represents. With considerable changes implemented by CMS in FY06, along with the reform outlined over the next three years, many CV programs will be faced with future payment reductions, particularly in the historically profitable DRG cases.

The FY07 final rules outlined reductions in relative weights for several CV DRGs–in particular, percutaneous coronary intervention/stents, coronary artery bypass grafts, and defibrillators. However, with the 3.4 percent market basket increase, only a few will have reduced payments. Numerous CV DRG weights and payments increased–most notably heart transplant, valves, pacemakers, heart-assist devices, and medical conditions. The surgical DRG “winners” represent some of the most resource- intensive patients within the CV service line.

How will CV services be affected in the future? Two key CMS changes on the horizon that will likely have the greatest impact on CV services include:

* Shifting from a charge-based system to a cost-based method for determining DRG weights. This transformation will likely result in significant declines in reimbursement as charges for CV ancillary services have historically been appreciably marked up from their actual costs, resulting in a greater bias in the overall DRG relative weight.

* Adopting a consolidated DRG system that accounts for severity of illness by FY08. Although CV programs that treat a preponderance of high-acuity patients will benefit from the new DRG system, many teaching and specialty heart hospitals that have historically treated the “bread and butter” cases will observe a reduction in their ease mix and Medicare reimbursement.

Preparing for the Changes

How can your organization prepare for these changes? The first step is to analyze your CV program’s current strategic capabilities along with the impact Medicare changes will have on the service line (both FY07 and anticipated future modifications). The analysis should include evaluation of the following:

* The impact of FY07 changes to DRG weights and reimbursement based on the CV program’s current Medicare volumes

* The long-term impact of CMS moving to a cost-based method for determining case mix and reimbursement

* The impact of a severity-adjusted DRG system on the case mix and reimbursement

* Documentation and coding practices and opportunities for enhancement

* Strategic implications and proactive strategies to ensure future stability (using a portfolio model)

The CV service line’s strategic capabilities should also be evaluated in relation to the marketplace. Barriers to market growth and financial performance should be identified through a situational analysis that considers both internal as well as external factors such as current volumes and market share, breadth of service offerings, strength of assets, competencies, technology, brand strength, distribution channels, cost management, and operational and governance structures.

Evaluation Methodologies

Evaluating the impact of Medicare changes on the CV service line and formulating effective strategies are vital to the long-term stability of the program. Suggested methodologies include the following.

Evaluating the impact of changes to DRG weights and payments. The following steps can he taken to estimate the effect on your CV program:

1. Identify the CV program’s Medicare volumes by DRG for FY06.

2. To calculate the FY06 reimbursement per DRG, multiply each DRG’s relative weight by the hospital’s standardized amount. Then multiply the FY06 volumes by the reimbursement per DRG. This calculation will provide the expected overall reimbursement for each DRG.

3. To calculate FY07 DRG reimbursement per DRG, multiply each DRG’s relative weight by the hospital’s standardized amount. Then multiply the FY06 volumes by the FY07 DRG payment; this will determine the hospital’s expected overall reimbursement for each DRG.

4. To estimate the payment differences, subtract FY06 payments from FY07.

5. To evaluate the overall impact, total the projected reimbursement for FY07 and subtract from the total for FY06. This will provide an overall estimated financial impact that the CMS changes will have on the CV service line for FY07. (This impact analysis does not consider changes in market share, payer mix, or payments resulting from outliers.)

Each hospital’s Medicare volumes and patient mix by DRG will influence the overall financial impact on the CV service line. The net impact for most hospitals will be relatively limited in FY07 as a result of the 3.4 percent market basket increase. In fact, many hospitals will realize an overall net increase in their payments. This could result in organizations being lulled into a false sense of security, particularly if they fail to evaluate the long-term impact of these changes and prepare for the future. The most significant changes affecting the CV service line will occur in the future as the new cost-based reimbursement is fully implemented.

Evaluating the impact of cost-based reimbursement. The following steps can be taken to assess the impact that cost-based relative weights will have on CV payments:

1. Identify your CV program’s current Medicare volumes by DRG (FY06).

2. Using the analysis outlined previously, compare the FY06 and FY07 DRG relative weights with those proposed for FY09 (full cost-based). Determine the payment rates using your hospital’s standardized amount. To determine the overall reimbursement for each specific DRG, multiply the FY06 volume by the reimbursement per DRG for each of the three years.

3. To evaluate the total impact that cost-based payment will have on each DRG, subtract the FY09 payment from FY06 and FY07 payments, respectively.

4. To evaluate the overall impact that cost-based payment will have on the CV service line, total the projected reimbursement for FY09 and subtract from the total expected reimbursement for FY06 and FY07, respectively.

5. To determine the volume required to offset the net revenue declines, divide the difference in DRG payments (FY07 and FY09) from FY07 expected payment and then multiply that figure by FY06 volumes.

The payment difference from FY07 to FY09 is projected to be considerable, particularly for CABG, PCI, and defibrillator cases, while small positive gains will occur in the CV medical DRGs.

Evaluating product mix using a portfolio model. What are the strategic implications for the CV service line with regard to investments, growth, and portfolio mix transitions? A portfolio model can provide a framework for guiding strategic decisions by identifying and capitalizing on products that offer the greatest economic potential and market size coupled with business strengths of the service line. Today, more than ever, effective prioritizations around investment decisions are critical to the organization’s long-term viability.

Many healthcare organizations use a portfolio model to determine service line priorities; the same model can be used to evaluate products within a service line. Examples of factors considered in a portfolio model include:

* Contribution margin or profit margins per discharge

* Size of market

* Market share or volume

* Annual growth rate

* Impact of growing market

* Reimbursement trends

* Ease of creating market shift

The sample portfolio model shown in the exhibit has been adapted to health care from early models; it uses a weighted score whereby external market factors (market appeal) are considered against internal business criteria (business strengths). Increasingly, healthcare organizations are faced with challenges concerning capital constraints, declining reimbursement, and competitive pressures; portfolio models are useful tools that can provide leaders with information to guide their decision making and ensure effective prioritization around resource allocation.

Proactive Strategies Paramount to Future Financial Stability

CMS estimates that the refined DRG system will shift payments to those hospitals treating a higher acuity of patients. Undoubtedly, financial performance will depend on sufficient documentation and accurate coding. Consider the following strategies for all CV service lines:

* Focus efforts on revenue cycle initiatives; this will become increasingly vital to maintaining the CV service line’s financial performance (particularly documentation and coding).

* Employ rigor and structure to cost management strategies, including case management, supply chain initiatives, and staffing models. The effective management of valve, defibrillator, pacemaker, and stent costs will be essential to maintaining a profitable CV service line.

* Validate investment opportunities and identify those services that may not warrant continued growth efforts or further capital investments.

* Calculate growth requirements necessary to offset future declines in reimbursement.

* Ensure that the CV service line has a current strategic business and marketing plan that addresses targeted segments and explicit growth strategies (product design and development, distribution channels, pricing, and promotional strategies).

Specific Implications for CV Programs in Academic Medical Centers

Academic medical centers typically treat higher-acuity patients, and, therefore, theoretically stand to benefit from the DRG payment reform. However, three barriers could prevent AMCs from realizing these gains: low volumes in surgery and interventional procedures, high costs associated with AMCs, and inadequate documentation and coding. Specific strategies AMCs may want to consider include:

* Increasing market share and volumes, particularly PCI/stents and CABG to offset the reimbursement declines and cover direct costs

* Shifting portfolio mix and focusing on growth strategies, particularly the complex DRGs such as valves, pacemakers, heart transplant, heart-assist devices, cardiac congenital disorders, and congestive heart failure (based on portfolio analysis). (In some cases, this will require expanding the market area to capture additional volume.)

* Aggressively managing costs through case management, supply chain initiatives, and staffing models

* Capitalizing on opportunities to improve documentation and coding to demonstrate the actual case mix of the population treated

Specific Implications for CV Programs in Teaching and Specialty Hospitals

Teaching and specialty hospitals will most likely be adversely affected by the DRG payment reform, as their service mix characteristically comprises high volumes in the very DRGs targeted for payment reductions. These hospitals have historically demonstrated leadership in establishing clinical guidelines and efficiently managing their high-volume, high-cost DRGs. However, for teaching and specialty hospitals to maintain their margins, they must continue their emphasis on cost management and market share growth. Specific strategies that teaching and specialty hospitals may want to consider include:

* Developing growth strategies to offset declines in reimbursement, particularly interventional procedures and surgery

* Shifting the portfolio mix to medical DRGs (based on portfolio analysis and competitor landscape)

* Continuing cost management and supply chain initiatives

* Capitalizing on opportunities to improve documentation and coding to substantiate a higher case mix index and payment

Specific Implications for CV Programs in Community Hospitals

Community hospitals that have had a predominantly medically focused CV program will realize small gains in revenue. Those community hospitals that have initiated or are in the process of considering an interventional and/or open-heart surgery program should re-evaluate this strategy in terms of breakeven analysis. Additional volumes and market share will be required in the future to substantiate a viable program. Specific strategies that community hospitals may want to consider include:

* Focusing growth strategies on the medical DRGs and invasive diagnostic procedures (based on findings from portfolio analysis)

* Focusing on case management within medical DRGs

* Capitalizing on opportunities to improve documentation and coding to substantiate a higher case mix index and payment

* Re-evaluating volumes and market share requirements to ensure a feasible service (if considering initiating an interventional and/or open-heart surgery program)

Proactive Strategies Today Can Mean Future Strength

Most acute care hospitals depend financially on CV services, which typically represent a significant percentage of their net income. With sweeping Medicare changes on the horizon, the paradigm may be shifting. An organization’s ability to effectively execute growth strategies to offset declines in reimbursement will be critical to long-term financial performance of the CV service line. Those hospitals unable to realize growth may need to consider shifting their portfolio mix to a predominantly medically based service line or, in some cases, more complex surgical DRGs.

In the future, all programs will be required to place a greater emphasis on growth strategies, improving operational efficiencies, cost management strategies, and revenue cycle initiatives to maintain their profit margins. By employing proactive strategies today, the program’s future financial stability and organization value can be maintained and even strengthened. With FY08 around the corner, the time to act is now in preparing for tomorrow’s changes. The stability of your CV service line depends on it.

AT A GLANCE

Evaluating the impact of Medicare changes on your organization’s CV service line and formulating effective strategies are vital to the long-term stability of the program. Suggested methodologies include:

* Evaluating the impact of changes to DRG weights and payment

* Evaluating the impact of cost-based payment

* Evaluating product offerings using a portfolio model

Nancy A. Lyle is a principal, Triad Consulting Group, Inc., Portland, Ore. (NLyle@triadconsulting groupinc.com).

EVALUATING THE IMPACT OF FY07 DRG WEIGHTS

AND PAYMENTS ON YOUR CARDIOVASCULAR PROGRAM

Impact Analysis FY06

Reimbursement

per DRG *

(RW x

Example CV DRGs Medicare Relative Standardized

(not inclusive) Volume Weight Amt)

Heart Transplant & VAD–Total 30

DRG 103 20 18.5617 $95,623

DRG 525 10 11.4282 $58,874

Valves–Total 395

DRG 104 120 8.2201 $42,347

DRG 105 275 6.0192 $31,009

CABG–Total 645

DRG 106 25 7.0346 $36,240

DRG 547 170 6.1948 $31,913

DRG 548 230 4.7198 $24,315

DRG 549 120 5.098 $26,263

DRG 550 100 3.6151 $18,624

PCI–Total 1,620

DRG 518 370 1.6544 $8,523

DRG 555 350 2.4315 $12,526

DRG 556 150 1.9132 $9,856

DRG 557 400 2.8717 $14,794

DRG 558 350 2.2108 $11,389

Pacemakers–Total 166

DRG 117 35 1.3223 $6,812

DRG 118 38 1.6380 $8,438

DRG 551 48 3.1007 $15,974

DRG 552 45 2.0996 $10,816

Defibrillators–Total 218

DRG 515 120 5.5205 $28,440

DRG 535 48 7.9738 $41,078

DRG 536 50 6.9144 $35,621

Medical DRGs–Total 850

DRG 127 (Heart Failure) 650 1.0345 $5,329

DRG 135 (Cardiac Congenital) 200 0.8917 $4,594

Total volume 3,728 Total for FY06

Impact Analysis FY06 FY07

Total

Reimbursement

Example CV DRGs (Volume x DRG Relative

(not inclusive) Reimb) Weight

Heart Transplant & VAD–Total $2,501,209

DRG 103 $1,912,468 18.8653

DRG 525 $588,741 12.2268

Valves–Total $13,609,073

DRG 104 $5,081,649 8.2903

DRG 105 $8,527,423 6.0567

CABG–Total $16,937,621

DRG 106 $905,995 6.7383

DRG 547 $5,425,285 6.1390

DRG 548 $5,592,394 4.6440

DRG 549 $3,151,573 5.0246

DRG 550 $1,862,373 3.5904

PCI–Total $18,919,914

DRG 518 $3,153,469 1.6388

DRG 555 $4,384,183 2.3066

DRG 556 $1,478,421 1.7747

DRG 557 $5,917,597 2.7616

DRG 558 $3,986,244 2.0814

Pacemakers–Total $1,812,557

DRG 117 $238,421 1.3713

DRG 118 $320,659 1.6687

DRG 551 $766,739 3.0364

DRG 552 $486,738 2.0860

Defibrillators–Total $7,165,545

DRG 515 $3,412,762 5.2293

DRG 535 $1,971,755 7.3741

DRG 536 $1,781,028 6.6043

Medical DRGs–Total $4,382,844

DRG 127 (Heart Failure) $3,464,098 1.0490

DRG 135 (Cardiac Congenital) $918,745 0.9405

Total volume $65,328,761

Impact Analysis FY07

Reimbursement

per DRG

([dagger]) (RW

Example CV DRGs x Standardized Payment Change

(not inclusive) Amt) from FY06 (%)

Heart Transplant & VAD–Total

DRG 103 $100,015 4.6%

DRG 525 $64,821 10.1%

Valves–Total

DRG 104 $43,951 3.8%

DRG 105 $32,110 3.6%

CABG–Total

DRG 106 $35,723 -1.4%

DRG 547 $32,546 2.0%

DRG 548 $24,620 1.3%

DRG 549 $26,638 1.4%

DRG 550 $19,035 2.2%

PCI–Total

DRG 518 $8,688 1.9%

DRG 555 $12,228 -2.4%

DRG 556 $9,409 -4.5%

DRG 557 $14,641 -1.0%

DRG 558 $11,035 -3.1%

Pacemakers–Total

DRG 117 $7,270 6.7%

DRG 118 $8,847 4.8%

DRG 551 $16,098 0.8%

DRG 552 $11,059 2.2%

Defibrillators–Total $–

DRG 515 $27,723 -2.5%

DRG 535 $39,094 -4.8%

DRG 536 $35,013 -1.7%

Medical DRGs–Total

DRG 127 (Heart Failure) $5,561 4.4%

DRG 135 (Cardiac Congenital) $4,986 8.5%

Total volume Total for FY07

Impact Analysis FY07 Difference

Total

Reimbursement

Example CV DRGs (FY06 Volume x

(not inclusive) FY07 DRG Reimb) FY07-FY06

Heart Transplant & VAD–Total $2,648,502 $147,293

DRG 103 $2,000,295 $87,828

DRG 525 $648,206 $59,465

Valves–Total $14,104,315 $495,242

DRG 104 $5,274,143 $192,494

DRG 105 $8,830,172 $302,749

CABG–Total $17,188,585 $250,965

DRG 106 $893,081 $(2,914)

DRG 547 $5,532,825 $107,540

DRG 548 $5,662,660 $70,265

DRG 549 $3,196,562 $44,989

DRG 550 $1,903,458 $41,085

PCI–Total $18,624,245 $(295,669)

DRG 518 $3,214,608 $61,139

DRG 555 $4,279,970 $(104,213)

DRG 556 $1,411,291 $(67,129)

DRG 557 $5,856,271 $(61,326)

DRG 558 $3,862,104 $(124,139)

Pacemakers–Total $1,860,957 $48,400

DRG 117 $254,449 $16,028

DRG 118 $336,173 $15,513

DRG 551 $772,682 $5,943

DRG 552 $497,654 $10,915

Defibrillators–Total $6,953,939 $(211,606)

DRG 515 $3,326,789 $(85,973)

DRG 535 $1,876,509 $(95,246)

DRG 536 $1,750,641 $(30,387)

Medical DRGs–Total $4,612,057 $229,214

DRG 127 (Heart Failure) $3,614,841 $150,743

DRG 135 (Cardiac Congenital) $997,216 $78,471

Total volume $65,992,600 $663,839

Sum of all Impact

CV DRGs

Note: National standardized rate used for examples.

* FY06 standardized rate ($5,151.65).

([dagger]) FY07 standardized rate

($5,301.52 includes full 3.4% market basket).

Source: Triad Consulting Group, Inc., Houston, Texas 1996-2007.

EVALUATING THE IMPACT OF COST-BASED DRG WEIGHTS

AND PAYMENTS ON YOUR CARDIOVASCULAR PROGRAM

Impact Analysis DRG Relative Weight

FY09

Example CV DRGs Medicare (Full

Volumes Cost-

FY06 FY06 FY07 Based)

Heart Transplant & VAD–Total 30

DRG 103 20 18.5617 18.8653 18.4971

DRG 525 10 11.4282 12.2268 11.9179

Valves–Total 395

DRG 104 120 8.2201 8.2903 8.1185

DRG 105 275 6.0192 6.0567 5.9639

CABG–Total 645

DRG 106 25 7.0346 6.7383 6.3863

DRG 547 170 6.1948 6.1390 5.9081

DRG 548 230 4.7198 4.6440 4.4471

DRG 549 120 5.0980 5.0246 4.9162

DRG 550 100 3.6151 3.5904 3.4981

PCI–Total 1,620

DRG 518 370 1.6544 1.6388 1.4695

DRG 555 350 2.4315 2.3066 2.1443

DRG 556 150 1.9132 1.7747 1.5716

DRG 557 400 2.8717 2.7616 2.5631

DRG 558 350 2.2108 2.0814 1.8807

Pacemakers–Total 166

DRG 117 35 1.3223 1.3713 1.3809

DRG 118 38 1.6380 1.6687 1.7028

DRG 551 48 3.1007 3.0364 3.0615

DRG 552 45 2.0996 2.0860 2.1002

Defibrillators–Total 218

DRG 515 120 5.5205 5.2293 5.2402

DRG 535 48 7.9738 7.3741 7.3035

DRG 536 50 6.9144 6.6043 6.5110

Medical DRGs–Total 850

DRG 127 (Heart Failure) 650 1.0345 1.0490 1.0744

DRG 135 (Cardiac Congenital) 200 0.8917 0.9405 0.9664

Total volume 3,924

Impact Analysis Payment per DRG

FY09

Example CV DRGs ([dagger])

FY07 (Full Cost-

FY06 * ([dagger]) Based)

Heart Transplant & VAD–Total

DRG 103 $95,623 $100,015 $98,063

DRG 525 $58,874 $64,821 $63,183

Valves–Total

DRG 104 $42,347 $43,951 $43,040

DRG 105 $31,009 $32,110 $31,618

CABG–Total

DRG 106 $36,240 $35,723 $33,857

DRG 547 $31,913 $32,546 $31,322

DRG 548 $24,315 $24,620 $23,576

DRG 549 $26,263 $26,638 $26,063

DRG 550 $18,624 $19,035 $18,545

PCI–Total

DRG 518 $8,523 $8,688 $7,791

DRG 555 $12,526 $12,228 $11,368

DRG 556 $9,856 $9,409 $8,332

DRG 557 $14,794 $14,641 $13,588

DRG 558 $11,389 $11,035 $9,971

Pacemakers–Total

DRG 117 $6,812 $7,270 $7,321

DRG 118 $8,438 $8,847 $9,027

DRG 551 $15,974 $16,098 $16,231

DRG 552 $10,816 $11,059 $11,134

Defibrillators–Total

DRG 515 $28,440 $27,723 $27,781

DRG 535 $41,078 $39,094 $38,720

DRG 536 $35,621 $35,013 $34,518

Medical DRGs–Total

DRG 127 (Heart Failure) $5,329 $5,561 $5,696

DRG 135 (Cardiac Congenital) $4,594 $4,986 $5,123

Total volume

Estimated Impact:

Impact Analysis Cost-Based Payment

per DRG (FY06 – 09)

Example CV DRGs

Difference Difference

(FY07 – 09) (FY06 – 09)

Heart Transplant & VAD–Total

DRG 103 $(1,952) $2,439

DRG 525 $(1,638) $4,309

Valves–Total

DRG 104 $(911) $693

DRG 105 $(492) $609

CABG–Total $– $–

DRG 106 $(1,866) $(2,383)

DRG 547 $(1,224) $(592)

DRG 548 $(1,044) $(738)

DRG 549 $(575) $(200)

DRG 550 $(489) $(78)

PCI–Total

DRG 518 $(898) $(732)

DRG 555 $(860) $(1,158)

DRG 556 $(1,077) $(1,524)

DRG 557 $(1,052) $(1,206)

DRG 558 $(1,064) $(1,419)

Pacemakers–Total

DRG 117 $51 $509

DRG 118 $181 $589

DRG 551 $133 $257

DRG 552 $75 $318

Defibrillators–Total

DRG 515 $58 $(659)

DRG 535 $(374) $(2,359)

DRG 536 $(495) $(1,102)

Medical DRGs–Total

DRG 127 (Heart Failure) $135 $367

DRG 135 (Cardiac Congenital) $137 $530

Total volume

Total Impact:

Impact Analysis Cost-Based

Reimbursement

Example CV DRGs

Difference Difference

(FY07 – 09) (FY06 – 09)

Heart Transplant & VAD–Total $(55,417) $91,876

DRG 103 $(39,040) $48,787

DRG 525 $(16,376) $43,089

Valves–Total $(244,591) $250,651

DRG 104 $(109,296) $83,197

DRG 105 $(135,295) $167,454

CABG–Total $(612,739) $(361,774)

DRG 106 $(46,653) $(59,567)

DRG 547 $(208,101) $(100,560)

DRG 548 $(240,090) $(169,825)

DRG 549 $(68,962) $(23,973)

DRG 550 $(48,933) $(7,848)

PCI–Total $(1,588,102) $(1,883,771)

DRG 518 $(332,093) $(270,953)

DRG 555 $(301,153) $(405,366)

DRG 556 $(161,511) $(228,640)

DRG 557 $(420,941) $(482,267)

DRG 558 $(372,405) $(496,545)

Pacemakers–Total $18,426 $66,826

DRG 117 $1,781 $17,809

DRG 118 $6,870 $22,383

DRG 551 $6,387 $12,330

DRG 552 $3,388 $14,303

Defibrillators–Total $(35,763) $(247,369)

DRG 515 $6,934 $(79,039)

DRG 535 $(17,966) $(113,212)

DRG 536 $(24,732) $(55,119)

Medical DRGs–Total $114,990 $344,204

DRG 127 (Heart Failure) $87,528 $238,271

DRG 135 (Cardiac Congenital) $27,462 $105,933

Total volume $(2,403,196) $(1,739,357)

Impact Impact

Volume Required

Impact Analysis to Offset [down

arrow] Net Revenue

Example CV DRGs Annual

Discharges

(FY07 – 09)

Heart Transplant & VAD–Total 0.64

DRG 103 0.39

DRG 525 0.25

Valves–Total 6.65

DRG 104 2.47

DRG 105 4.18

CABG–Total 22.60

DRG 106 1.30

DRG 547 6.39

DRG 548 9.75

DRG 549 2.58

DRG 550 2.58

PCI–Total 142.46

DRG 518 38.23

DRG 555 24.63

DRG 556 17.17

DRG 557 28.71

DRG 558 33.72

Pacemakers–Total (1.74)

DRG 117 (0.25)

DRG 118 (0.78)

DRG 551 (0.40)

DRG 552 (0.31)

Defibrillators–Total 0.59

DRG 515 (0.18)

DRG 535 0.24

DRG 536 0.53

Medical DRGs–Total (21.19)

DRG 127 (Heart Failure) (15.68)

DRG 135 (Cardiac Congenital) (5.51)

Total volume

Note: National standardized rate used for examples.

* FY06 standardized rate ($5,151.65).

([dagger]) FY07 standardized rate

($5,301.52 includes full 3.4% market basket).

Source: Triad Consulting Group, Inc., Houston,

Texas 1996-2007.

COPYRIGHT 2007 Healthcare Financial Management Association

COPYRIGHT 2007 Gale Group