Sunday, June 3, 2012

Ambulatory Procedure Codes

Ambulatory Procedure Codes Explained
(APCs)
APC stands for Medicare's ambulatory payment classification. Hospitals use Medicare APC codes to bill the federal government for hospital services given to Medicare and Medicaid patients. Every item, machine or procedure used to care for a Medicare or Medicaid patient has a specialized code that is submitted by the hospital during the billing process.

What are APCs and where did they come from?

With passage of the balanced budget act of 1997, congress required HCFA to create an Outpatient Prospective Payment System (OPPS). The new payment system, which began being used this past summer, is known as "Ambulatory Payment Classifications" or "APCs."

What was the impetus to create APCs?

  • To transfer financial risk from Medicare to the hospital providing outpatient services.
  • To reduce Medicare beneficiary co-payments from 20% of Medicare BILLED CHARGES to 20% of the Medicare ALLOWABLE CHARGES
  • Change reimbursement for hospital outpatient services from a cost basis(unique to each hospital) to a more standardized prospective payment, similar to the physician fee schedule.
  • Prior to APCs hospitals had always been reimbursed for outpatient services on a cost reporting methodology. Hospitals used to report costs, and then were paid a percentage of those costs. Fundamentally, with the APCs, hospitals get paid a fixed amount regardless of costs for outpatient services, much as they have been getting fixed payments for inpatient services. Essentially, APCs are to outpatient services what DRGs are to inpatient services.

Does every service have it's own unique APC?

No. APC's group services together which are similar clinically and in regards to cost. Within one APC group are many services that are deemed to have comparable resource utilization for provision of services. The designated APC for a service is the method Medicare uses to determine reimbursement. All services within that APC will get the same payment. APCs apply only to the hospital reimbursement, and the Medicare physician fee schedule is not affected by APCs.

What determines which APC a particular service will get assigned to?

APCs are defined solely on the CPT codes. HCFA dropped its original proposal to modify payments based on diagnosis codes. Hospitals still need to report diagnosis codes, however, they will not affect payment.

What are the various APCs, and which apply to emergency department visits?

There are 225 surgical APCs. There are 188 "Ancillary Services" APCs (Radiology, Pathology, other diagnostics and special medications). There are 30 CPT codes which describe outpatient physician-patient encounters, and the 30 CPT codes map to seven "Medical Visit" APCs; four of the seven medical visit APCs deal with emergency department visits:

  • APC 610 (Low level visit) - CPT codes 99281,99282
  • APC 611 (Mid level visit) - CPT code 99283
  • APC 612 (High level visit) - CPT code 99284, 99285
  • APC 620 (Critical care) - 99291

How does a facility choose which level of service to assign? Does that level need to match the physician E/M level?

HCFA has stated that a hospital must follow its own system for assigning different CPT levels. The assigned levels must "reasonably relate to the intensity of hospital resources." Hospitals now need to define their services using the CPT E/M codes (99281-99285, and 99291). Hospitals can continue to use current ED levels of service but must map them to corresponding CPT E/M code for billing Medicare. HCFA will monitor outpatient visit facility level data, and could standardize coding requirements in the future. HCFA has stated that physician and hospital E/M codes do not need to correlate, and may assign different levels. This was contrary to what many people anticipated when APCs were being developed.

What services are included in the APC payments to hospitals for E/M visit levels?

Items included (no separate payment) within APCs include: incidental services (venipuncture), medical/surgical supplies and equipment, introduction of needle catheters, pharmaceuticals (most), observation services, capital related costs and surgical dressings.

Besides the visit level services (99281-99285 and critical care), what else are hospitals reimbursed for?

APCs for visit levels are a basic payment for facility and staff costs. Additional payments are made for additional procedures performed by the nurse or physician. Nursing services that get additional payments include IV infusions and IM injections. These procedures are NOT subject to discount for multiple procedures. This is a change for hospitals that in the past would charge for the medication, and in the charges for the medication was the nursing component. Now, with APCs, the facility is paid for the procedure (such as an injection or infusion), but not for the medication. The physician or nurse may perform the procedures.

Items excluded (additional payments are made) from visit APCs include: blood products, diagnostic laboratory services, radiographic studies, some expensive medications (such as thrombolytics), immuno-suppressives, Durable Medical Equipment (such as crutches and walkers) and some high cost, infrequently used medications. Two new APCs were created for splinting and strapping. All of the CPT codes for splinting and strapping map to these two new APCs (APC 05 for all leg splints, and APC 059 for all arm splints).

How are payments determined?

Each APC has its own relative weight. Payment for each APC varies, based on the relative weight of that APC. The "two times rule" requires that the ratio of the highest cost service to lowest cost service within an APC cannot be more than 2.

Medicare reimbursement formula:

Reimbursement for each APC equals: (APC "relative weight") (conversion factor). The conversion factor for 2000 is $48.48. For example, critical care code 99291 maps to APC 620. APC 620 has a relative weight of 8.60. The 2000 conversion factor is $48.487. The 2000 payment for critical care is: 8.60 x $48.487 = $416.99.

The Local Wage Index is factored. Sixty percent of the APC payment is deemed due to employee wages. So, 60% of APC payment is multiplied by the local wage index, and adjusted accordingly.  Forty percent of the APC is not subjected to the local wage index. After the APC is adjusted for the local wage index, a payment is determined, which is the "adjusted payment rate."  The co-pay is determined through a historical formula.

Can beneficiary co-payments vary from hospital to hospital?

Yes. Hospitals can now compete on the basis of price by lowering patient co-payments. There are minimum and maximum co-payments established for all APCs. Hospitals can elect to reduce co-payments for each calendar year. The decision to reduce co-payments must be for the entire APC category and must apply to the entire year. Hospitals must collect at least the minimum co-payment.

What are some of the new coding issues facing hospitals?

Hospitals are required to use modifiers when both visit levels and procedures are coded to avoid claims of unbundling. Use of modifiers is brand new to hospital coders. Hospitals should still list supplies/medications, although no separate payments will be made. Diagnosis codes should still be assigned to document the medical necessity of services provided.  Status codes are assigned to APCs. Surgical procedures that are assigned to an APC with a Status code "T" will pay the full payment for the highest value service. Additional services provided within the same, OR OTHER APC GROUP designated with a "T" status will be paid at 50% of the listed payment. APCs designated with an "S" or an "X" are not subject to the discount for multiple procedures.

How are observation services affected?

No additional payment will be made for observation services which creates an increased financial incentive for physicians to make disposition decisions in a more timely fashion (admit rather than "observe" for hours in the ED). Observation services are bundled into the facility levels. The hospitals will not get extra payment for continued ED observation if the patient is already at the highest APC level. Additionally, there is now an incentive to quickly admit critically ill patients in to inpatient status instead of remaining in outpatient status while in the ED; the hospital will get reimbursed under a DRG instead of an APC if the patient expires.

Hospitals may still want to report observation services even though they are not getting paid for it. HCFA will continue to monitor for future payment consideration; however if hospitals stop reporting the service, it may be more difficult for HCFA to assess this need.

What are the projected payment implications of APCs?

HCFA is now projecting a minimal decrease or actual increase in payments as a result of implementation of APCs. HCFA is phasing in payments over a four-year transition period. For four years, hospitals experiencing lower payments than they would have without APCs will receive additional payments. Hospitals that generate more revenue during the 4-year transition will get to keep the additional payments.

How must hospitals adapt to the APC reimbursement methodology?

APCs are a fee schedule based on services provided, much like the physician fee schedule. This fee schedule represents a new approach for hospitals that used to be reimbursed based on their costs. All outpatient services are defined in the CPT manual; there are about 300 distinct procedures provided in the ED. These specific procedures must be listed on the UB92 billed to Medicare.

Hospitals must identify physician and nursing procedures for outpatient areas—something that they have not needed to do previously for reimbursement.

Procedures had previously been bundled into the facility levels. Procedures are now billed separately, which for the hospital is essentially like unbundling of services compared to their prior practice. Procedures such as laceration repairs, EKG monitoring, splinting, CPR, etc. must now be identified and coded appropriately (including the use of modifiers) in order to be reimbursed by Medicare at the rate for the corresponding APC. Outpatient nurses need to be trained to identify the procedures they perform and to support the visit level assigned through documentation. There must be an established tiered visit level structure, and coding staff must follow the requirements for assigning the various levels.

CPT/HCPCS codes are generally a new concern to hospital coders. Hospitals may want to consider outsourcing their coding of emergency department visits. Hospital coders have not had to concern themselves with the issues surrounding outpatient ED services. Training and/or retaining coding staff with expertise in CPT/ HCPCS methodology may prove difficult, and revenue may be lost if coding is done poorly. Maintenance of the charge master is another huge operational challenge that hospitals are facing; if coders have successfully adapted to assigning the appropriate codes, the charge master must be able to identify these codes. Extensive revisions to the charge masters are needed. The charge masters must be able to identify all procedures and list them appropriately as identified in the APC categories. Hospitals may not want to apply APC criteria to all of their payers, because by ignoring each payer's unique billing criteria revenue may be lost.

Is economic physician profiling one step closer?

Yes. Late physician documentation will delay submission of hospital bills. Additionally, unlike with other hospital services, late charges are unlikely to be allowed once the APC is determined and paid. Medicare will be assigning the APC codes based on the codes submitted by the hospital. Once the APC is assigned, there will not be an easy mechanism for revision. Emergency physicians will need to be timely and thorough in completing their documentation.

Resource utilization by physicians will come under increased scrutiny. Higher expense medications now represent pure cost, as they provide no added revenue. Choices of medications and the cost of supplies used go directly to the hospital's bottom line. There may be more economic impetus to develop practice guidelines. As mentioned earlier, the choice to admit a patient, versus observing in the ED results in a DRG payment versus an APC payment. The codes assigned will need to be supported through physician and nurse documentation as will the medical necessity of those services. Although there is no requirement for physician documentation to support the visit level assigned, physician documentation will add to the coding in areas where nursing documentation is lacking. In addition, in practicality, coders will be looking to physicians to appropriately and comprehensively identify their own procedures in order to assign the most accurate codes.

What are some future considerations of APCs?

HCFA has not stated that they plan on expanding APCs in to one payment for all services provided in hospital outpatient departments, including the emergency department. However, a single hospital payment would clearly simplify the reimbursement system for Medicare. If there was one global payment that included physician services, ED physicians could find themselves in a difficult position; how would that one lump payment be split up? Would it be left up to the hospital to determine how to split up the payment? It could prove quite difficult dividing up the payments between the ED physicians, medications, radiology, supplies, respiratory therapy etc. and other physician services.

Additionally, if Medicare saves money through implementation of APCs, it might not be long before we see other payers attempting to utilize the same reimbursement methodology.

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