Current healthcare reimbursements may create incentives for excess use of ventilators to treat COVID-19 patients. Recent research has shown that healthcare providers, including hospitals, have experienced substantial financial losses as a result of the COVID-19 pandemic. Alternative, less-invasive treatments for critically ill COVID-19 patients could potentially improve patient outcomes. But these approaches expose hospitals to losing even more revenue because of higher reimbursements for ventilator care.
Emerging Treatment Alternatives
Source: National Heart Lung and Blood Institute
Intubation involves inserting a breathing tube into the windpipe so the ventilator can pump air into the lungs (see illustration). Among COVID-19 patients admitted to hospitals, at least a quarter require care in the ICU, and the majority are put on ventilators at some point. Hospitalization and ventilation are more likely for Medicare patients who are older and have more comorbidities, making them susceptible to severe COVID-19. Each day on mechanical ventilation increases risk of complications and death, and risks remain elevated for at least a year after weaning.
Prior to the COVID-19 pandemic, treatment guidelines on when mechanical ventilation is necessary were fairly clear-cut. Guidelines were based on decades of research and experience on existing respiratory conditions. However, when COVID-19 arrived, so did the uncertainty about the best timing and criteria for ventilator use in ICUs.
As clinicians learn more about this disease, expert opinions, along with treatment patterns, are shifting towards using less intensive oxygen therapy treatments (like high-flow nasal oxygen) and prone positioning as the first line of treatment for many COVID-19 patients with respiratory failure/ASRD, while intubation is used as the last resort.
Alternative approaches may improve patient outcomes and reduce costs associated with ventilator use. While mechanical ventilation is often a crucial life-saving measure for severe respiratory failure, it carries significant risks, including high risk of death, lung injury, or other complications for survivors. Even when this intervention successfully brings patients back from the brink of death, “weaning” off the ventilator is a difficult and risky process for survivors. Before the COVID-19 pandemic, in-hospital mortality among ventilated patients was 35%, and only 31% of patients were discharged home from the hospital. The death rate among ventilated COVID-19 patients is even higher, reaching at least 60% in New York hospitals in April.
Payment Depends on Treatment Approach
According to updated CMS coding guidelines [PDF], as of April 1, 2020, patients with a primary diagnosis of COVID-19 are reimbursed under billing codes (known as diagnosis-related groups, or DRGs) 177-179, Respiratory Infections and Inflammations, with the exact code and reimbursement depending on the presence and severity of complications or comorbidities. However, if mechanical ventilation is required, the codes are 207-208, Respiratory System Diagnosis with Ventilator Support. The exhibit presented below shows the estimated Medicare base payments for these codes, which include operational and capital payments as well as the 20% bump-up in payment that CMS has applied to COVID-19 admissions since April (doctors’ fees are separate and additional).
CC: complication or comorbidity; MCC: major complication or comorbidity; MS-DRG: Medicare Severity-Diagnosis Related Group. Shown are Medicare’s standard payment amounts for a hospital with wage index=1, that is, non-teaching hospitals and non-disproportionate share (DSH) hospitals. The majority of hospitals treating COVID-19 patients are teaching and DSH hospitals in major metropolitan areas with wage index >1. Thus, actual payments, and differences between payments for different DRGs, are likely higher. Source: Authors’ analysis of Medicare payment amounts.
Hospital reimbursements appropriately reflect the fact that ventilated patients spend over a week in the ICU hooked up to expensive equipment and need to be monitored closely and weaned slowly. But taking care of critically ill COVID-19 patients treated with alternative oxygen therapies in the ICU may be quite resource-intensive as well, with nurses having to tend to awake patients, help them with prone positioning, and constantly monitor for exacerbations that could require intubation.
Choosing the best treatment approach for COVID-19 patients encounters a potential problem in the reimbursement system: COVID-19 admissions that involve ventilation are reimbursed at a much higher rate than the alternatives (see chart). Medicare enrollees with COVID-19 receiving mechanical ventilation over 96 hours (MS-DRG 207) are reimbursed at over $42,000, while COVID-19 patients with ASRD treated with other therapies would likely be MS-DRG 177, which is paid at around $14,000.
This means that hospitals implementing less-intensive treatment approaches would start losing a lot of revenue on COVID-19 patients. If doctors first try less-intensive therapies for a Medicare COVID-19 patient with ARDS, and the patient doesn’t require intubation at all (or dies before being intubated), hospital would lose about $28,000 in revenue on that patient admission. In addition, delaying ventilator use or extubating earlier significantly reduce hospital revenue if continuous time spent on ventilator becomes less than 4 days – about $23,000 difference for someone who spent 96 versus 97 hours on a ventilator.
This problem is not limited to Medicare payments. Most commercial insurance companies and state Medicaid programs now use the DRG-based payment system, which has even higher payment difference in reimbursements for ventilator versus non-ventilator COVID-19 treatments. According to Kaiser Family Foundation research, commercial reimbursement for admissions classified as MS-DRG 207(ventilation > 96 hours) tops $100,000, while is MS-DRG 177 (respiratory infection with major complications) is around $34,000 – a whooping $66,000 difference.
From the patient perspective, the choice and duration of treatment strongly affect quality of life and care experiences. How many patients, given a choice, would prefer to be intubated, put into a medically induced coma, and exposed to greater risk of complications and death if an alternative therapy with similar efficacy is available? Out-of-pocket costs to patients are also higher for more costly hospital stays. Patients are on the hook for deductibles, copayments, and 20% coinsurance payments for physician charges.
Hospitals Have a Strong Financial Incentive to Use Ventilators
The payment for critically ill COVID-19 patients treated with oxygen therapy, or other alternatives to mechanical ventilators, is disproportionately low and may be inadequate given the resources required to treat these patients. Thus, hospitals have a strong financial incentive to stick with the original approach: “intubate early and often.” It may be true that fewer patient days and nursing hours are involved when patient is managed with alternative treatments, but unless hospitals are at capacity, it is hospital revenues that drive their margins in the short run.
Most clinicians just want to do what’s best for their patients. However, approaches to treating COVID-19 patients with ARDS differ a lot across hospitals. This may have major effects on patient outcomes as well as on hospital revenues, especially in areas where COVID-19 patients are a major source of revenue for hospitals. There is an urgent need to make COVID-19 treatment costs less sensitive to ventilator use and align incentives for hospitals to adopt best treatment practices.
Lisa M. Lines