RUG-IV vs. Hybrid RUG-III Payments

Financial Recommendation: Reserve Funds for the inevitable adjustment of your MDS RUG-IV Payments and reduction to Hybrid RUG-III Rates, in the Spring of 2011.

CMS has decided that Medicare Part A payments during this transition period will be at the RUG-IV rate. There is a significant difference between the RUG-IV and Hybrid RUG-III rates. Therefore, it will be prudent for each facility to be aware that at some point, the Fiscal Intermediary (FI) will be making adjustments to the RUG-IV payments. The facility should not plan on a finalization of payments until they have worked through the payment adjustments, possibly as late as the Spring of 2011. At this time, they plan to review and adjust all payments made prior, and reconcile them to the Hybrid RUG-III rates. As you are all aware, adjustments to Medicare Part A payments can be undertaken by the reduction, or complete take back, of future payments to meet what they have determined is your final payment obligation.

Harmony recommends facilities consider the possibility of creating or utilizing some type of revenue "slush" fund to avoid this difficulty meeting daily financial obligations.  We estimate that the best plan will be to set aside or reserve approximately 20% of your RUG-IV revenue to ensure that you will have adequate funds to meet your financial obligations once your FI begins the adjustment of your payments to the Hybrid RUG-III rates in 2011.

Harmony has devised a methodoligy for calculating and tracking the actual Hybrid RUG-III rate and revenue differential for FY 2011.  Harmony is sharing this policy with annual clients and is available to assist facilities in calculating this monthly equation.

Harmony Consultants are available should you have any questions, regarding the payment and adjustment process. You may contact Sue Lounsbury our Regional Billing/Financial Consultant, your Harmony Regional Consultant, or our corporate office, should you have any questions and/or require assistance. Lastly, Harmony recommends that the facility get in touch with the FI and/or provider service representative for clarification of Medicare Part A payments, and/or interpretation of future Remittance Advice documentation.