Wednesday, December 9, 2020

An Extra Way to Boost DRG Payments: the NCTAP, New Covid Add-On Payments

It's November news, but I just ran across a new way to get extra payments above a DRG from CMS.  It's called the New COVID Therapy Add On Payments, or NCTAP, and it was created by CMS in November under its longstanding general authority to tweak DRG pricing rules.  What happens: FDA EUA drugs such as remdesivir are paid separately, up to 65% of cost, for COVID inpatients.


Classically, DRGs are "hard rules" - you have an inpatient admission, you get paid for a DRG rate, and that's it, regardless of higher or lower costs and charges.   

For many years, there are only two exceptions to DRG bundling.

  • One is the NTAP - the New Technology Add On Payment for DRGs.   There is an elaborate (arduous) application process for new technologies, and if they both provide a meaningful novel health benefit AND are a substantial cost outside the DRG, there is a temporary add on payment (historically 50%, currently 65%).   In 2019, CMS made it a little easier to fast track breakthrough FDA technologies into the NTAP.    
  • The second longstanding method is the "outlier" DRG payment.  It's a limited benefit.  CMS reduces hospital charges to costs (e.g. charge deflation), then subtracts the DRG payment, then subtracts $30,000, then pays 80% of what's left.  
    • If the DRG pays $20,000 and the hospital's charges are $200,000, and the cost to charge ratio is 4, CMS assumes the costs for that admission were $50,000 costs, subtracts $30,000 factor, subtracts $20,000 already paid in the DRG, and so in this case the outlier payment is 80% times

20% DRG Bump for COVID (Old News Early 2020)

The CARES Act added a 20% supplement to every DRG payment for a COVID patient.  That is, the supplement comes direct from Congress, via legislation. 

This summer, CMS added a rule that the COVID patient must have a specific, positive COVID test for the DRG supplement to apply.    

Here Comes NCTAP (New News)

In policymaking released October 28, published November 6 (85 FR 71142), CMS created a 65% supplemental payment for COVID drugs, on its own initiative using existing legal powers.*  That's it.

  • See Fed Reg home page here, see Fed Reg publication here, see a trade journal article here.  

The 20% add-on payment is reviewed at 85 FR 71155, as is the existing inpatient NTAP, and the FDA COVID drug program is reviewed on p. 71156 as is the existing outlier payment system.  

Proceeding briskly, CMS introduces the NCTAP for new FDA COVID drugs, on page 71157.  

One of the most interesting tidbits for me is that CMS is creating the new +65% drug payment for COVID drugs, using existing authority to tweak DRG rules as it sees fit (at SSA 1886(d)(5)(I).)  Stating: "The Secretary shall provide by regulation for such other exceptions and adjustments to such payment amounts [of DRGs] under this subsection as the Secretary deems appropriate."


There isn't a lot of trade press about NCTAP, though of course everyone who summarized the Fourth Interim Final Rulemaking for COVID Public Health Emergency, noted it.   See e.g. a page in the AABB summary here.  See another summary at RevCycle here.and HealthLeaders here.


* In the diagnostics community, this rule was best known for adding some regulations around how public posting of COVID test prices are defined; 45 CFR 182.40,  p. 71204.  It also placed into regulations prior law covering COVID vaccines at no charge to the patient.