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Legislation Impact on MS-DRG Payments during the COVID-19 Public Health Emergency (PHE)

Published on 

Tuesday, March 23, 2021

 | Coding 

The U.S. government’s response to the COVID-19 pandemic and subsequent Public Health Emergency (PHE) has resulted in among other things, waivers and flexibilities for health care providers, expansion of

Telehealth services, an ever lengthening COVID-19 FAQs on Medicare Fee-for-Service (FFS) Billing document, and several legislative acts. This article focuses on legislative acts impacting payments to IPPS hospitals.


The Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted March 27, 2020. Section 3710 of this Act directed the Secretary to increase the IPPS weighting factor of the assigned diagnosis-related group (DRG) by 20 percent for patients diagnosed with COVID-19 and are discharged during the COVID-19 PHE. This increase in payment impacts patients discharges on and after January 27, 2020. Note, the CMS COVID-19 FAQs document referenced at the beginning of this article provides detail on how CMS implemented this increased payment.

The CARES Act also suspended the 2% sequestration payment adjustment applied to all Medicare FFS claims from May 1 through December 31, 2020. This payment adjustment was included in the Budget Control Act that was signed into law in August 2011 and became effective April 1, 2013. This Act required that $1.2 trillion in federal spending cuts be achieved over the course of nine years. With no action from Congress, sequestration would last until 2022. You can read more about the 2013 Sequestration in an American Medical Association FAQs document.

August 17, 2020: MLN SE20015 Updated to Address Potential Medicare Program Integrity List

CMS revised MLN article SE20015 by adding guidance “to address potential Medicare program integrity risks, effective with admissions occurring on or after September 1, 2020, claims eligible for the 20 percent increase in the MS-DRG weighting factor will also be required to have a positive COVID-19 laboratory test documented in the patient’s medical record. Positive tests must be demonstrated using only the results of viral testing (i.e., molecular or antigen), consistent with CDC guidelines. The test may be performed either during the hospital admission or prior to the hospital admission.”

Consolidated Appropriations Act, 2021

This Act was signed into law on December 27, 2020 and among other things extended the sequestration suspension period to March 31, 2021.

March 19, 2021: U.S. House Resolution – To Prevent Across-the-Board Direct Spending Cuts, and for other Purposes

Representative John A. Yarmuth (D-KY) introduced House Resolution (HR) 1868 on March 12th. This resolution, passed in the House on March 19, 2021, includes an extension of the sequestration suspension through December 31, 2021. The resolution was received in the Senate on March 22nd leaving only eight days for the Senate to deliberate and vote before the current end to the suspension.

Public Health Emergency Declaration

An additional piece of the puzzle to the legislative impact on MS-DRG Payments is the COVID-19 PHE declaration. Remember that the 20 percent increase weighting for patients with a diagnosis of COVID-19 will occur during the COVID-19 PHE. As it stands at the time of this article, the most recent renewal of the COVID-19 PHE determination is set to expire April 21, 2021.

RealTime Medicare Data March 2020 Sepsis Infographic

Marvin Zick authored an April 7, 2020 article titled, Update: Can COVID-19 Cause Sepsis? Explaining the Relationship Between the Coronavirus Disease and Sepsis. He notes in the article that “now that more scientific data are available on COVID-19, the Global Sepsis Alliance can more definitively state that COVID-19 does indeed cause sepsis.”

RTMD Footprint Average Payment and Average Length of Stay (ALOS) for Sepsis

Given the relationship between COVID-19 and Sepsis, the March infographic in this week’s newsletter focused on MS-DRG 870 (Septicemia or Severe Sepsis with Mechanical Ventilation >96 Hours). Claims data was pulled from RTMD’s footprint, which included 48 states and DC. Specifically, the infographic highlights changes in average payment and average length of stay (ALOS) for January through September claims for CMS Fiscal Year (FY) 2019 and 2020. For MS-DRG 870:

  • The average payment increased 11.5% or $5,340, and
  • The ALOS increased 4.5% or 0.68 days.

Diving deeper into the claims data, state specific findings revealed a wide range in the averages.

  • State specific percent of change in the average payment ranged from -13.7% to 26.4%, and
  • In general, states realized an increase in ALOS that ranged from 0.08 days to 3.07 days.

National Average Payment and ALOS for Sepsis

The RTMD database contains actual Medicare Fee-for-Service paid claims information. To contrast actual changes to national average changes, below highlights MS-DRG 870 changes based on the Optum 360° DRG Expert for the same time periods.

  • The national average payment increase in contrast to RTMD’s actual paid claims data was only $1,095.15, and
  • The ALOS actually decreased by 0.1 days.

At the time the DRG Expert was published, we were not in the throes of a pandemic nor could the resulting Legislative Acts have been anticipated.

As hospitals try to forecast budgets for coming years, it becomes essential to keep in mind that the 20% increase in MS-DRG weighting will only last until the end of the COVID-19 PHE and at the time this article was written, the 2% sequestration could possibly become effective again on April 1, 2021.

Article Author: Beth Cobb, RN, BSN, ACM, CCDS
Beth Cobb, RN, BSN, ACM, CCDS, is the Manager of Clinical Analytics at Medical Management Plus, Inc. Beth has over twenty-five years of experience in healthcare including eleven years in Case Management at a large multi-facility health system. In her current position, Beth is a principle writer for MMP’s Wednesday@One weekly e-newsletter, an active member of our HIPAA Compliance Committee, MMP’s Education Department Program Director and co-developer of MMP’s proprietary Compliance Protection Assessment Tool.

This material was compiled to share information.  MMP, Inc. is not offering legal advice. Every reasonable effort has been taken to ensure the information is accurate and useful.