Ambulatory Payment Classifications

APCs

Definition• APC stands for Ambulatory

Payment Classifications• System for reimbursing acute

care facilities for outpatient services (e.g., Outpatient Prospective Payment System or OPPS)–Developed because of

success of DRGs

History of APCs

• OBRA – 1986– CMS directed to develop OPPS– 3M won bid 1988

• APGs developed by 1990 but not implemented

• BBA – 1997– CMS to implement PPS by 1999

• BBRA - 1999• APCs implemented 2000

What are APCs??

• Outpatient Payment Groups– Groups of codes with a fixed

payment amount• Based on HCPCS codes

– Both Level 1 and Level 2 used• Codes in the same APC must have

– Comparable clinical aspects– Comparable resource consumption

Why Another Payment System?

There was a rapid growth in outpatient services and ambulatory care expenditures and payments.

Some of the reasons were:

1. Cost efficiency incentives in the inpatient PPS (DRGs)

2. Medicare’s 1982 decision to qualify and recognize facility payment of ASCs (Ambulatory Surgical Centers)

3. Some private insurer incentives to hospitals to treat their beneficiaries in the outpatient setting

4. The decline in inpatient revenue due to DRGs5. Advancements in medical technology (i.e.

anesthetics and laparoscopes)

Purpose of APCs

• Cost control• Efficiency• Facilitate payment• Address beneficiary coinsurance

issues

Key Aspects of APCs• Packaging

– Services like laboratory (still paid on a fee schedule basis), most supplies, anesthesia, intraocular lenses, and observation care are included in the APC payment

• Drugs, pharmaceuticals, and biologicals usually not bundled

• Discounting– Multiple procedures provided during the same

patient encounter are provided at lower cost than they would be if provided at separate encounters

• Applies to services with status indicator T

Key Aspects of APCs

• Fixed payment rate– Hospitals and payers know in

advance how much they will be paid for certain services

• Three Year Transition Period– Transitional corridors allowed for a

three-year period that limited the payment reductions to hospital under OPPS

How Are APC Groups Created

• HCPCS codes are grouped together because they have– Similar clinical aspects

• Pacemakers can’t be grouped with bronchoscopies even if resource usage is similar

– Comparable resource consumption• Clinically similar codes are grouped by the

cost to perform the service– Two Times Rule

Two Times Rule Requirement

• HCPCS codes grouped into APCs based on comparable resource utilization

• Median costs determined for each HCPCS code– Average cost for each HCPCS code within

a specific APC• Codes are not similar if the resource

costs of the highest HCPCS is more than 2 times the cost of the lowest– Exceptions example, low use codes

Status Indicators• Letters assigned to each HCPCS

code to indicate its payment status• Examples

– “C” status indicator• Inpatient only list

– “A” status indicator• Other (non-APC payment system)

– “G” and “H” status indicators• Payment by pass-through

– “T” status indicator• Payment under APCs and subject to

multiple procedure discount

Types of Services Under APCs

• Service with status indicators K, S, T, V, X– Outpatient evaluation and management (status V)– Outpatient surgery (status S or T)– Outpatient ancillary services

• Radiology services (status S and X)• Pathology and laboratory services (status X)• Medical testing and evaluations and injections and infusions

performed in the outpatient facility (status K, S, T and X)– Certain drugs and biological (status K)

• Other services and supplies are either not paid separately, not covered, or paid via other methods

More About Status Indicators• Significant procedures with status (T) are

paid at a reduced rate when performed with other procedures during the same visit

• Significant procedures with status (S) are not discounted when multiple procedures are performed– When an S procedure is performed with other

procedures, the S still receives full reimbursement• Services with a status (N) are bundle into

other APCs and are considered incidental– A cardiac catheterization code drives the APC

payment• Ventriculography, coronary angiography, and S&I codes

are all bundled into APC for a heart catheterization

Exceptions to Fixed Payment Rates

• Outliers• Pass-through items• New technology

Outliers

• Outlier Payments mandated by BBRA-1999• Outlier threshold

– Multiply the total costs for services eligible for APC payment by an outpatient cost to charge ratio

– Costs must exceed 2.5 times more than the APC payment

• Less than 2.5 times more is considered standard fluctuation in cost of care

– Outlier payment is 75% of the amount that the cost exceeded the payment

• Originally computed per claim; now computed per service

Transitional Pass-Through Payments

• Additional temporary payments – 2 to 3 years• Allows evaluation of cost data for APCs • Specific drugs, devices and biologicals

– Chemotherapy drugs and adjuvant and supportive drugs used with them

– Immunosuppresive drugs– Orphan drugs (by FDA definition)– Radiopharmaceuticals– New medical devices, drugs, and biologic agents

• Not paid as a hospital outpatient service as of 12/31/96• And cost of the items is significant

– Coinsurance may be less than 20%

New Technology APCs

• Specific APC groups created for new treatment technologies– Services that do not fit into any other APC

• Temporary payments during assessment periods

Outpatient Evaluation and Management Codes

• Describe use of space in facilities• Describe use of supplies in facilities• Describe involvement of hospital

employees in E/M services• Can’t Be Used If…

– Patient admitted within 48 hours– Patient taken to surgery– Patient receives other global service

• Example: Dialysis

Codes with Status V• Only codes used in outpatient settings

– Outpatient clinic• Office or Other Outpatient Service (99201 – 99215)• Office or Other Outpatient Consults (99241 – 99245)• Confirmatory Consults (99271 – 99275)• HCPCS exams (G0101, G0175, G0245, G0246, G0264)• Ophthalmology codes for appropriate exams (92002 –

92014)

– Patients in observation status• Hospital Observation Services (99217 – 99220 and

99234 – 99236)

– Emergency Room• Emergency Department Services (99281 – 299285)

APCs for E/M• Codes for E/M visits route to 6 APC groups

– APC 0600 Low-level clinic visits• 92012, 99201, 99202, 99211, 99212, 99241, 99242, 99271, 99272, 99431,

G0101, G0245, G0246, G0264– APC 0601 Mid-level clinic visits

• 92002, 99203, 99213, 99243, 99273– APC 0602 High-level clinic visits

• 92004, 92014, 99204, 99205, 99214, 99215, 99244, 99245, 99274, 99275, G0175

– APC 0610 Low-level emergency visits• 99281, 99282

– APC 0611 Mid-level emergency visits• 99283

– APC 0612 High-level emergency visits• 99284, 99285

CMS on Level of E/M Service• Hospitals identify and follow a method for

choosing the level of service – "As long as the services furnished are

documented and medically necessary and the facility is following its own system, which reasonably relates the intensity of hospital resources to the different levels of HCPCS codes, CMS will assume that it is in compliance with these reporting requirements."

• There should not be a high degree of correlation between the code reported by the physician and that reported by facility.

Choosing the Level of Service

• Systems for choosing the level of E/M are developed by each facility– Facilities must follow their own systems– Facility codes would not often match providers

• “New" and "established" pertain to whether the patient already has a medical record

• Use 99281 for screening services in the ER when no treatment is furnished

CMS on Documentation

• Facilities that use documentation to determine the level of E/M have little problem supporting the codes. – If physicians, nurses, or clerical staff assign codes without

reference to documentation, routine periodic audits should be performed to ensure that documentation supports the level of service

• This includes facilities that crosswalk to link their acuity levels to E/M codes. – Documentation is the final arbiter of the level of service– Inappropriate assignment of E/M codes is viewed as a

compliance issue

Observation Care• Originally packaged item

– Bundled into ER and Surgery APCs• Separate payment now allowed for 3

diagnostic categories:– Chest pain– Asthma– Congestive heart failure

• May use admitting diagnosis• Patient must be in observation for at least 8

hours and no more than 48 hours

Critical Care• Critical care is classified as a "significant

procedure" (APC 0620) under the OPPS.– Hospitals use code 99291 to report outpatient

critical care services • Used in place of a code for a medical visit or

emergency department service.• Use CPT definition of "critical care" and coding

guidelines – Exceptions

• Facilities only paid for one period time with code 99291

• Services usually bundled into Critical Care codes may be billed separately when furnished on the same day

Other Coding Difference

• Surgery package includes all anesthesia but does not include pre- and post-operative global visits– Bill with separate E/M when provided in facility-

based clinic• Do not use global maternity codes

– Use “Delivery Only” codes and code for prenatal and postnatal care with E/M codes if provided in facility-based clinic

• Do not use “global” codes (i.e., with interpretation and report) for services like EKGs– Use the “tracing only” codes

Inpatient Only List

• Status Indicator “C”• Services that must be performed inpatient due

to– Invasive nature of procedure– Need for at least 24-hours of recovery or monitoring

time before the patient can be safely discharged– Performance in the inpatient setting because of

underlying condition of patient• Codes removed from list due to re-evaluation

and technology changes• 2003 allowed payment for Inpatient Only

services in outpatient for emergencies

ASC List

• ASC is Ambulatory Surgery Center– Free-standing outpatient surgery

center not associated with a hospital• ASC list includes procedures that

require ORs but not admission for procedure or recovery– Procedures not on ASC list are “out-of-

scope”• Procedures that might be performed in

outpatient but might require emergent admission

Factors in APC Payment Calculation

• Relative weight• Conversion factor• Wage adjustment factor• Copayment

Annual updates affect – APC groups, payment adjustments, conversion factor, and payment weights

Other Outpatient Facility Payment Systems

• Fee schedule• Outlier and pass-through payment• Composite rate methodology

UB-92 and APCs• Importance of coding in APC system• UB-92

– Codes– Dates of Service– Service units– Bill Type– Revenue Codes

Annual Updates and Changes• Required by law and may change

– APC groupings– Payment adjustments– Conversion factor– Payment weights

• Changes to APCs may result from– Changes in technology– Changes in CPT codes– Codes removed from Inpatient Only List– New procedures or services

• CMS publishes Proposed Rule for comments– Final Rule is issued after comment period and any adjustments

2001 Changes• Revisions to APCs due to new or

deleted HCPCS codes• Procedures removed from Inpatient

Only list• APCs reconfigured for some devices

removed from pass-through list• New APCs for Radiology using contrast

2002 Changes• Outlier threshold and payment

percentage changed• Outlier payment computed per service

rather than per claim• Observation care payment allowed for

three diagnoses• Packaging changes• New guidelines for pass-through

payments• Exceptions to the 2-times rule

2003 Changes

• Exceptions to the Inpatient Only list were made for these services performed in emergencies

• Observation care payment based on admitting diagnosis

• Pass-through payments were updated• Codes developed for trial billing

2004 Changes

• Outlier payments revised again• Payments for new technology

readdressed• Nuclear medicine payment system

revised• Standard system for choosing level

of E/M services were not implemented but CMS acknowledged need

E/M Standard

• CMS received industry criticism for lack of a standard E/M level methodology for all providers. – CMS recognized that a national standard is

needed.• 2002 OPPS proposed rule, CMS deferred comment on

establishing a standard.– Several organizations submitted their version of

E/M criteria. • Most hospitals have developed what is called a "point

system" for selecting E/M levels– A decision on a standard methodology still has not

been made

Legislative Changes• Several changes have affected APCs

since implementation• Benefits Improvement and Protection

Act (BIPA)– Took effect in December 2000– Changes to APCs

• Accelerate reductions in beneficiary copayment amounts

• Set up categories of devices for pass-through payment

Outpatient Code Editor• Analyzes hospital outpatient claims for

coding edits using CCI• Validates ICD-9 and HCPCS codes• Assigns APCs

• Identifies errors• Indicates actions needed

National Correct Coding Initiative

• The NCCI is a set of billing edits developed by HCFA to identify coding patterns resulting in overpayment to the providers

• More than 107,000 Correct Coding Initiative edits are incorporated into the outpatient code editor for OPPS– Edits determine what procedures and

services cannot be billed at the same time when they are furnished for the same patient on the same day

Assignment of Codes and APCs

• Appropriate procedure and diagnosis codes are extracted from the medical record– Encoding software helps with bundling issues

and assignment of APCs• Codes may also be assigned in specific

departments– Related charges are added by the

Chargemaster

Charge Description Master (CMD)

• A computerized master price list of everything the facility can prove to patients– Includes supplies, diagnostic tests, pharmaceuticals,

procedures, and other room time– Hundreds of thousands of items are included in

chargemaster to link services provided in a hospital and the generation of claim forms

• Chargemaster is maintained by the Chargemaster Coordinator including– Annual updates (e.g., code changes)– Updates specific to the CDM– Monthly audits to determine whether bills follow billing

regulations

CDM Continued

• Some claims are generated almost entirely from the Chargemaster– Chemotherapy– Interventional radiology– Radiation therapy

• Some services that previously were chargemaster driven require coding to be performed by the HIM department under APCs

Significant Abbreviations

• APC– Ambulatory Payment

Classification• APG

– Ambulatory Patient Group• ASC

– Ambulatory Surgery Center• BBA

– Balanced Budget Act• BBRA

– Balanced Budget Refinement Act

• CDM– Charge Description Master

• CMS– Center for Medicare and Medicaid

Services• DME

– Durable Medical Equipment• DRG

– Diagnosis Related Group• HCPCS

– Healthcare Common Procedure Coding System

• OBRA– Omnibus Budget Reconciliation Act

• OPPS– Outpatient Prospective Payment

System