This phase includes all pre-transplant clinical visits, multiple tests, and evaluations to determine a patient’s candidacy for liver transplant. All work involved in screening the patient for candidacy to the point of a decision by the patient selection committee is considered to be part of the pre-transplantation evaluation phase.

The patient selection committee approves the patient to be placed on the liver transplant waiting list. While on the liver transplant waiting list, patients may have to undergo minimal maintenance testing and other procedures to ensure a continuation of transplant candidacy. Liver transplant patients receive a Model for End-Stage Liver Disease (MELD) score to determine how urgently he/she needs a transplant. To maintain updated MELD scores, a patient needs to have the appropriate lab tests every 1–4 weeks on a continuous basis until the time of transplant. There may be additional tests that are required to confirm the candidacy of the patient (OPTN 2014).

The patient is admitted to the hospital for the liver transplant procedure. This phase comprises all services related to the transplant episode itself and includes such items, based on the payer, as the hospital and professional fees, organ acquisition, and transportation costs. This phase usually begins 24 h prior to the transplant and concludes the day of discharge.

This phase begins the day after discharge and ends after a contractually predetermined amount of time. Patients are followed closely to ensure proper organ function.

Living donation follows similar phases for pre-donation, acceptance as a living donor, donor surgery, and post-donation follow-up (Table 2).

These phases of transplant and living donor care are important as they directly relate to payer methodology.

Medicare is one of the major payer sources for transplant services. Medicare is a federally funded program that provides health insurance to those aged 65 and older, certain younger individuals with disabilities, and individuals with end-stage renal disease. For transplant patients, Medicare also covers immunosuppressive drugs for 3 years posttransplant only if the patient is transplanted at a CMS-approved facility (Norris 2014). Medicare also covers healthcare costs for living donors. There are four main parts of Medicare:

CMS approves transplant programs that wish to participate in the Medicare program. The final rule, with an effective date of June 28, 2007, established for the first time Medicare conditions of participation for kidney, pancreas, liver, intestine, heart, lung, and heart-lung transplant centers. This rule sets forth clear expectations for safe, high-quality transplant service delivery in Medicare-participating facilities. Medicare will not pay for the organ acquisition transplant event under Part A or immunosuppressive medications under Part B unless the transplant is performed at a Medicare-certified transplant hospital. All medications can be paid under Part D if the transplant is performed at a non-Medicare-certified center. The program must perform at least 10 liver transplants within the 12 months prior to initial approval.

Medicare can account for as much as 26 % of the liver transplant payer attribution when Medicare fee-for-service and Medicare Advantage Plans are combined. Based on the OPTN data of June 6, 2014, Medicare fee-for-service and Medicare Advantage Plans numbered 1,050 and 630, respectively, of a total number of 6,455 liver transplants.

There are three components of cost: physician services, hospital services, and organ acquisition costs. Medicare’s payment system is a threefold process. The process consists of a diagnosis-related group payment, the Medicare Cost Report, and ambulatory payment classifications.

The diagnosis-related group (DRG) payment is derived through a specific formula based on disproportionate share (DSH), Graduate Medical Education (GME), Indirect Medical Education (IME), and labor index, among others. Liver transplant was originally listed as DRG 480 (Acute Care Hospital 2013). In 2007, the DRG system was further refined to include medical severity, which is labeled as MS-DRG. The MS-DRG for liver transplant is divided into two categories based on transplants with and without major complications and comorbidities (MCC):

Some common complications and comorbidities related to a liver transplant are hepatitis, diabetes, acute hepatic failure, and primary liver cancer. The MS-DRG must cover all costs directly related to the transplant surgery and inpatient hospital stay following the surgery (Files for FY 2008; FY 2014 Final Rule Tables 2014).

The Medicare Cost Report is a payment arrangement in which additional reimbursement is made to a transplant program for all appropriate Medicare allowable pre-transplant expenses in phases 1 and 2 to the point of admission for transplantation. These expenses are known as the organ acquisition costs (Fig. 2). The organ acquisition costs are comprised of the cost of the organ and transportation, plus direct and indirect expenses that are allocated to the pre-transplant portion of activity prior to the admission of the patient for transplant (Fig. 3). However, treatment and disease management of the transplant patient are not considered organ acquisition costs.

Additionally, the salaries and benefits of administrative and clinical liver transplant staff that have pre-transplant responsibilities and have documented their pre-transplant time through monthly time studies (alternating 1 week time studies each month) are considered an organ acquisition expense. The time studies must be completed by, but not limited to, medical directors, transplant coordinators, social workers, financial coordinators, dieticians, pharmacists, and administrative personnel (Rogers 2013).

For physicians, only the time spent on pre-transplant administrative tasks relating to their medical or surgical director roles may be included on the cost report. The physician’s pre-transplant clinical time is not included on the cost report, as physicians already bill separately for this time. Medicare will reimburse for administrative tasks based on the reasonable compensation equivalent (RCE), which is based on physician specialty (Levinson 2006 and Norris 2014). The RCE limits were designed with metropolitan location adjustments, but CMS will eliminate these adjustments and increase the RCE limits overall as of January 1, 2015 (CMS/HHS 2014). For example, a liver transplant surgical director is compensated a total of $50,000 for administrative duties. The surgical director logs 200 h of pre-transplant time annually. The surgery 2015 RCE limit rate is $246,400 (CMS/HHS 2014). The following calculation illustrates the amount that can be reimbursed under the Medicare Cost Report:

Therefore, only $23,692 would be placed on the cost report for the physician’s administrative tasks (in comparison to$50,000), and the Medicare Cost Report ratio would be applied.

Living donors for liver transplant are also included in the Medicare Cost Report. The costs for living donors include donor evaluation provided by the physician or hospital, donor liver resection, post-donation complications, and routine follow-up provided by the hospital (Fig. 2). All other services are billed fee-for-service on the account of the recipient; the hospital may not bill the donor. Additionally, travel and lodging for pre-donation needs are not included in the Medicare Cost Report for recipients, donors, or family members (Rogers 2013).

To determine if a cost is considered an organ acquisition cost, please see Fig. 4.

Transplant programs maintain an organ acquisition cost center or account to accumulate these charges during any given year and report these charges on the hospital’s Medicare Cost Report at year end for reimbursement at the level of the hospital’s costs. The Medicare ratio is applied to all allowable pre-transplant expenses placed on the cost report. There are three fundamental determinants to calculate a transplant program’s Medicare Cost Report ratio and reimbursement. The first is the number of liver recipients transplanted with Medicare as the primary payer. The term “Medicare primary” refers to a program’s number of transplants with Medicare as the primary payer. The second ratio determinant is the number of liver recipients that Medicare has paid as a secondary payer, which refers to the number of transplants that had Medicare as a secondary payer to the patient’s employer insurance. The third determinant is the number of deceased donor livers procured in the transplant hospital. Taking these factors into account creates the following ratio:
An example of what these Medicare ratio determinants mean to a transplant program’s Medicare reimbursement is shown using an example of a liver program that performs 50 transplants per year with hypothetical pre-transplant costs for 1 year of one million dollars (see Tables 3 and 4). Accurately accounting for these Medicare ratio determinants is critical to ensure that all allowable cost reimbursements are received by the transplant hospital. In this hypothetical example, the Medicare ratio is 10 % greater, and the cost-based reimbursement is$100,000 greater than if the transplant hospital used Medicare primary liver transplant patients as the only determinant in the formula.

If pre-transplant services are appropriately captured, the Medicare Cost Report can result in significant cost reimbursement for a transplant program (Marshall and Swearingen 2007; Beach-Langlois and Yankasky 2011).

The Office of the Inspector General (OIG) may audit a transplant program’s compliance with CMS regulations. A transplant program needs to accurately support and verify all cost submissions, as overreporting on the cost report can result in heavy fines. Common noncompliance findings by the OIG include posttransplant- and non-transplant-related costs inappropriately included in the organ acquisition costs, inadequate documentation of unsupported costs, medical director fees exceeding reasonable compensation equivalent limits, and Medicare organs not properly documented (Abecassis 2006; Rogers 2013).

The third Medicare payment mechanism is Ambulatory Payment Classifications (APCs) that cover posttransplant outpatient services. Each APC has an established payment rate. The transplant program may be reimbursed for more than one APC in a single patient case, unlike DRGs. APCs apply only to hospitals. If a transplant patient seeks posttransplant care at a physician’s office, the physician will be reimbursed based on Medicare Part B.

Medicare Advantage Plans (MAP) are designed to allow individuals that meet the age requirement, of 65 years, and receive Medicare, to have the option of assigning their benefits management to a Medicare Advantage Plan. These plans are typically managed by a commercial payer and, as such, are considered a commercial plan. The transplant benefits in these MAPs may differ from plan to plan. Additionally, the payments for transplant services to transplant hospitals are negotiable just like a commercial managed care plan. The traditional Medicare payment mechanism of pre-transplant costs, organ acquisition, DRG, and posttransplant outpatient reimbursement (APC) is not relevant in the MAP model of reimbursement. Additionally, the MAP transplant patients cannot be used in calculating the Medicare ratio for the annual Medicare Cost Report.

MCOs contract with specialty transplant networks that have a high clinical and financial competitiveness. MCOs will rate institutions on their clinical, administrative, and financial competence and designate programs that meet these criteria as centers of excellence. Transplant programs want this designation because it typically leads to an increase in volume and better reimbursement rates. To be designated as a center of excellence, a transplant program must be an OPTN/UNOS member in good standing and certified by CMS. The transplant program must also complete an OPTN/UNOS standardized request for information (RFI), meet an annual volume of liver transplants ranging from 25 to 40 depending on the MCO, and have acceptable patient and graft survival outcomes as verified by the Scientific Registry of Transplant Recipients (SRTR). The OPTN/UNOS RFI requires a transplant program to provide information on its facility, quality, volumes, outcomes, staff coverage, and credentials. The transplant program also needs to include descriptions of its unique qualities and initiatives on the RFI. When the MCO has received this information, most organizations will require a site visit to assess the facility in its entirety. Once a program meets the MCO’s criteria, it is deemed a center of excellence, and the program can begin the contract negotiations through its managed care department.