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Success with APCs: despite their complexity, APCs offer providers opportunities to increase payment for outpatient services - ambulatory payment classification - Statistical Data Included

Healthcare Financial Management, Sept, 2002 by David N. Fee

"Success with APCs" may seem like a contradiction in terms, given the struggles many hospitals have had meeting the complex and changing requirements of the ambulatory payment classification (APC) system. However, an ongoing, systematic approach to APCs can improve operations and enhance revenue flow The APC payment system, which was launched August 1,2000, by the Centers for Medicare and Medicaid Services (CMS), has coincided with a significant reduction of hospital operating margins. Even so, many hospitals have had profitable and favorable transitions to the outpatient prospective payment system (PPS). Four key areas that healthcare financial managers need to consider as they work to strengthen their organizations' payment under the outpatient PPS are coding and the role of the charge description master (CDM), billing processes, information technology (IT), and organizational issues.

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Coding and the Role of the CDM

Before the outpatient PPS was established, properly coding an outpatient chart was not critical to payment from Medicare or other insurers. In some cases, only one or two CPT/HCPCS codes were needed to submit the claim. The outpatient PPS, however, requires providers to include every service performed as stated on the UB-92 claim form to receive adequate payment.

As a result, coding is a revenue-producing task. Outpatient coding is as important to hospitals as other services and can make the difference between operating in the black or in the red. The challenge is to ensure that coding is correct, complete, and compliant.

In an outpatient setting, such as provider-based clinics, coding is performed by the physicians or clinic staff For general outpatient services, the health information management (HIM) department usually is responsible for entering the diagnosis codes for all outpatient visits, as well as procedure codes for same-day surgery and emergency department (ED) visits. (In some hospitals, the HIM department performs all coding of charts.) Ancillary services, such as clinical laboratory tests or radiology services, typically are coded through the order-entry system using the CDM. This procedure represents a large volume of services. In fact, about 75 percent of services on hospital claims are coded through the CDM.

Coding and HIM departments. Outpatient coding historically has been assigned to less-skilled coders. This prioritization should no longer be the case. Coding charts of ambulatory patients now is more difficult, involving confusing regulations, such as payment for observation services and proper use of modifiers, and uncertainty about how to code certain conditions and procedures. Because of this uncertainty and the nationwide shortage of trained coders, in-house skills development is a good investment. This training can be provided through seminars, on-site training sessions, on-line learning, and courses at local colleges. Whichever method is selected, the program should prepare participants to receive certification. The American Health Information Management Association (www.ahima.org) can answer questions about coding training.

Role of the CDM. Continually updating the CDM is critical, because problems with the CDM cause the majority of coding errors. Many types of errors are possible, including invalid codes, improper charges, missing services, and missing modifiers. For example, CMS has published in the public-use files on its Web site a list of CPT/HCPCS codes used in rebasing APCs for January 2002. (a) The list shows minimum, maximum, and average charges for each code. For CPT code 88309 (tissue exam by a pathologist) the minimum charge submitted to CMS for payment was $1.25, the maximum $589.65, and the national average $57.95. Although the cost structures of hospitals vary, few hospitals can perform this service for only $1.25. A review of the CDM will identify cases such as these. Correcting the CDM for CPT code 88309 will not have an immediate impact for Medicare beneficiaries because this procedure is paid according to APC. Submitting accurate data to CMS, however, will improve the payment for Medicare services over time, whereas payments from other third-party payers may reflect the corrected amounts immediately With outpatient PPS, changes to the coding system are made quarterly, so keeping the CDM current and correct is more difficult and critical than before the outpatient PPS was implemented.

Hospitals need to be more aggressive in managing the CDM; annual reviews no longer are sufficient. Regular reviews of the CDM can be performed by one or more of the following: a consultant (commonly done annually), software (several vendor solutions recently have been introduced), and internal staff.

Billing-Process Improvement

Under the outpatient PPS, review of the billing process is critical. The outpatient PPS includes new editing requirements that may reduce revenues and extend cash flow when claims are denied or returned because they contain errors.

The billing process should be reviewed and steps implemented as necessary to ensure that errors are caught before claims are submitted. (This review may not eliminate all edits. Because claims need to reflect the documentation on the chart, some claims will need to include a line-item edit message, even if that means denial of some line items.)

Health Care Industry

Success with APCs: despite their complexity, APCs offer providers opportunities to increase payment for outpatient services - ambulatory payment classification - Statistical Data Included

Healthcare Financial Management, Sept, 2002 by David N. Fee

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