Knowledge Base Article

The designation of an ICD-10-PCS code designated as an O.R. or Non-O.R. procedure affects the MS-DRG assignment. Codes designated as an O.R. procedure will group the inpatient stay to a surgical MS-DRG. Codes designated as Non-O.R. procedures would not impact the MS-DRG assignment so the inpatient stay would be grouped to a Medical MS-DRG. In general, surgical MS-DRGs are a higher relative weight meaning higher payment for the inpatient stay.

The transition of procedure code re-designation began with CMS including proposals in the FY 2017 IPPS Proposed Rule.  In the FY 2017 IPPS Final Rule, CMS indicated they had received requests and recommendations for over 800 procedure codes and were unable to fully evaluate and finalize comments received for FY 2017. A year later, allowing for time to evaluate requests and recommendations, CMS did in fact propose to re-designate over 800 current ICD-10-PCS codes as Non-O.R. Procedures in the Proposed Rule and finalized 770+ code re-designations.

CMS noted “the proposed changes for FY 2018 go beyond the FY 2017 proposed (and finalized) MS-DRG updates to change the designation of procedure codes from O.R. to non-O.R. that were done for purposes of replicating the logic of the ICD-9 MS-DRGs….for FY 2018 and future fiscal years, we are no longer replicating the ICD-9 MS-DRGs…we are using ICD-10 coded claims data for the first time to propose changes to the ICD-10 MS-DRG classifications and to compute the relative weights. Therefore, our proposals and final policies for FY 2018 are based solely on the ICD-10 claims data from the FY 2016 MedPAR file.”

FY 2019 IPPS Final Rule

CMS continued reviewing ICD-10 claims data for FY 2019 and finalized the re-designation of nine (9) ICD-10-PCS codes from O.R. Procedures to Non-O.R. Procedures and seventy (70) ICD-10-PCS codes from Non-O.R. to O.R. The following two tables detail the volume of codes changed by Code Group. 

 Potential Financial Impact of Changes

In the absence of a valid O.R. Procedure code, hospitals will still receive reimbursement for the Medical Principal Diagnosis. The challenge is to identify the potential financial impact of the MS-DRG shift from a Surgical MS-DRG to a Medical MS-DRG. To do this I turned to our sister company, RealTime Medicare Data (RTMD) to provide the CY 2017 paid claims data for Alabama for all ICD-10-PCS codes with an O.R. Procedure re-designation where it was the Principal Procedure on the paid claim. This following table highlight the O.R. to Non-O.R. Re-designation findings.

MMP conducted a similar review of the changes made in FY 2018. Through claims analysis we were able to identify the Medical MS-DRG that would have been billed in the absence of the O.R. procedure. In general, we found that hospitals could expect anywhere from a 35% to 45% decrease in payment. Applying the same findings to FY 2019, that would equate to the state of Alabama realizing a potential $1.6 million to $2.1 million decrease in paid claims revenue.

This last table highlights the Non-O.R. to O.R. re-designation findings.

 If you reverse the expected decrease in payment to an expected increase of 35% to 45%, this would equate to the state of Alabama realizing a potential $271,000 to $348,000 increase in paid claims revenue.

For those interested, detailed discussion about the ICD-10-PCS code re-designations can be found on pages 41249 through 41257 of the Final Rule.