APC FAQ

FAQ 1: What are APCs?

APCs or "Ambulatory Payment Classifications" are the government's method of paying facilities for outpatient services for the Medicare program. A part of the Federal Balanced Budget Act of 1997 required HCFA (now CMS) to create a new Medicare "Outpatient Prospective Payment System"(OPPS) for hospital outpatient services -analogous to the Medicare prospective payment system for hospital inpatients known as "Diagnosis Related Groups" or DRGs. This OPPS was implemented on August 1, 2000. APCs are an outpatient prospective payment system applicable only to hospitals, and have no impact on physician payments under the Medicare Physician Fee Schedule. APC payments are made only to hospitals when the Medicare outpatient is discharged from the ED or clinic or is transferred to another hospital (or other facility) which is not affiliated with the initial hospital where the patient received outpatient services. If the patient is admitted from a hospital clinic or ED, then there is no APC payment, and Medicare will pay the hospital under inpatient DRG methodology.

FAQ 2:  How do APCs work?

Each APC is composed of services which are similar in clinical intensity, resource utilization and cost. All services (identified by submission of CMS' Healthcare Common Procedure Coding System (HCPCS) codes on the hospital's UB 04 claim form) which are grouped under a specific APC result in an annually updated Medicare "prospective payment" for that particular APC. (Many HCPCS codes are derived directly from the AMA CPT).  Since this payment is a prospective and "fixed" payment to the hospital, the hospital is at risk for potential "profit or loss" with each APC payment it receives. The payments are calculated by multiplying the APCs relative weight by the OPPS conversion factor and then there is a minor adjustment for geographic location. The payment is divided into Medicare's portion and patient co-pay. Co-pays vary between 20 and 40% of the APC payment rate. Eventually this percent will be capped at 20% of the payment rate.  

FAQ 3:  Why did CMS create APCs?

APCs were created to transfer some of the financial risk for provision of outpatient services from the Federal government to the individual hospitals, thereby achieving potential cost-savings for the Medicare program. By transferring financial risk to hospitals, APCs incentivize hospitals to provide outpatient services economically, efficiently and profitably.

FAQ 4:  What areas of hospital outpatient services are paid (under Medicare Part A) under the APC methodology?

APC payments apply to Outpatient Surgery, Outpatient Clinics, Emergency Department Services and Observation Services. APC payments also apply to outpatient testing (such as radiology, nuclear medicine imaging) and therapies (such as certain drugs, intravenous infusion therapies, and blood products). In 2014, CMS finalized five new categories of supporting items and services rather than the seven proposed. For certain cases, a separate payment would be made if the item or service is furnished on a different date of service as the primary service. The five final categories are:           

  1. Drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure;
  2. Drugs and biologicals that function as supplies; when used in a surgical procedure, including skin substitutes. Skin substitutes will be classified as either high cost or low cost and will be packaged into the associated surgical procedures with other skin substitutes of      the same class;
  3. Certain clinical diagnostic laboratory tests;
  4. Certain procedures described by add-on codes;
  5. Device removal procedures.

 For Observation (APC 8009), changes in 2014 determine that when clinic or ED visit is identified through alphanumeric codes, APC 8009 combines all qualifying extended assessment and management encounters (any clinic visit and Level 4 and 5 Type A ED visit, Level 5 Type B ED visit) into one composite payment.  Observation still requires 8 or more hours of extended assessment.

FAQ 5:  Are there hospital outpatient services which are NOT paid under APCs?

Yes, but bundling of services into one payment is an overarching theme for 2014 and beyond. Durable Medical Equipment is paid through non-APC methodology. However, most, if not all of the lab tests we order in the ED will now be bundled. Tests that are not bundled include diagnostic radiology studies, bedside ultrasounds, and EKG’s. Add-ons that are not bundled include IV infusions and IV push dose medications.

FAQ 6:  Are drugs and supplies paid for under APCs?

 Most drugs and supplies have their costs included in the payment for specific visit level or procedure APCs. This is generally applicable to drugs and supplies which cost less than $60 per day. For many drug or supply items which cost $60 or more, there is separate payment under unique APCs.

FAQ 7:  What are the APCs applicable to Emergency Dept. visits and in 2014 what will the "average" US hospital receive in payment for these ED APCs?
There are hundreds of HCPCS (Healthcare Common Procedure Coding System) codes pertinent to the ED which are payable under various APCs.

The most common are the Evaluation and Management APCs.

APC

HCPCS (s)                                

Allowable Payment

609

                  99281

$ 55.65

613

                  99282

$100.91

614

                  99283

$166.45

615

                  99284

$293.71

616

                  99285

$455.93

626

                  G0380 Level 1 Type B ED

$ 51.92

627

                  G0381 Level 2 Type B ED

$ 61.67

628

                  G0382 Level 3 Type B ED

$ 91.71

629

                  G0383 Level 4 Type B ED

$163.27

630

                  G0384 Level 5 Type B ED

$312.43

617

99291 (Critical Care, 1st hour)  

$634.94

618

G0390 (Trauma w/critical care)  

$961.51

8009

Extended Assessment & Management (Observation)

$1,199

 Other common APCs in the ED

APC

HCPCS (s)                                

Allowable Payment

0013

                   Simple repair

$ 83.73

0326

                   Intermediate repair 2.5-12.5

$199.03

0006

                  10060 I&D abscess (simple)

$159.66

0094

                  31500 E-T intubation

$159.65

0094

                  92950 CPR

$159.65

0437

 96372 (90772) IM/SubQ injection

$ 43.78

0438

                  96374 (90774) IV injection

$105.90

0439

   96365 (90765) IV infusion, first hr.

$172.18

0436

  96366 (90766) IV infusion, add on

$ 29.50

0099

                  93005 12 lead EKG w/o inter

$ 27.12

0260

                  71020 2 view Chest X-rays

$ 57.35

0332

                  70450 C-T scan of Brain

$126.47

FAQ 8:  How are APC payments calculated?  

APC payments are determined by multiplying an annually updated "relative weight" for a given service by an annually updated "Conversion Factor". CMS publishes the annual updates to "relative weights" and the "conversion factor" in the November "Federal Register". The APC "conversion factor" for 2014 is $72.6720.  In 2013, the APC Conversion Factor was $71.313.

For example, to calculate the APC payment for APC 006 (includes I&D of simple abscess—CPT 10060):

Relative Weight for APC 006 =2.1970    Conversion Factor for 2014=$72.6720

1.7592 X $72.6720 = $159.66 payment for APC 006 for year 2014 (for the "average US hospital)".

There is further modification of the APC payment according to adjustments for "Local Wage Indices". Medicare determined that 60% of the APC payment is due to employee wage costs. Since different areas of the country have widely divergent local wage scales, 60% of each APC payment is adjusted according to specific geographic locality.

 

FAQ 9:  How do hospitals determine which Evaluation and Management service levels to assign for ED and clinic services-as they relate to APCs and other payment methodologies?  

For 2014, Medicare still has not published "national standard" for hospital assignment of E/M code levels for outpatient services in clinics and the ED. CMS did, however, collapse clinic, outpatient and office visit levels of service into one payment which combines new and established patient visits into one payment. Emergency medicine remained exempt from the collapse of the E/M levels for 2014.

CMS has stated that each hospital may utilize its own unique system for assignment of E/M levels, provided that the services are medically necessary, the coding methodology is accurate, consistently reproducible, and correlates with institutional resources utilized to provide a given level of service.  CMS continues to monitor the E/M levels coded on a national basis and indicated that 2010 claims data used for the 2013 review indicates normal and relatively stable distribution of clinic and emergency department visit levels compared to 2009 data.  CMS has noted a slight shift toward higher numbers of level 4 and 5 visits relative to lower level visits for Type A emergency department visit levels.  CMS will continue to monitor this trend through claims volume data.  (NOTE:  Only the distribution of the Medicare patients discharged from the ED is counted, because ED services for those patients admitted as inpatients are bundled into the facility DRG).

In 2007 CMS established a lower level of ED called a Type B ED for services offered in a facility based ED that was not open 24/7. See the November 27,2007 Federal Register for further discussion on Type A and B ED’s.

http://edocket.access.gpo.gov/2007/pdf/07-5507.pdf 

While there are no specific CMS national guidelines CMS has given providers direction in the form of general guidelines including the following:      

  1. The coding guidelines should follow the intent of the associated CPT code descriptor in that the guidelines should be designed to reasonably relate the intensity of hospital resources to the different levels of effort represented by the code.
  2. The coding guidelines should be based on hospital facility resources. The guidelines should not be based on physician resources.
  3. The coding guidelines should be clear to facilitate accurate payments and be usable for compliance purposes and audits.
  4. The coding guidelines should meet the HIPAA requirements.
  5. The coding guidelines should only require documentation that is clinically necessary for patient care.
  6. The coding guidelines should not facilitate upcoding or gaming.
  7. The coding guidelines should be written.
  8. The coding guidelines should be applied consistently across patients in the clinic or emergency department to which they apply.
  9. The coding guidelines should not change with great frequency.
  10. The coding guidelines should be readily available for fiscal intermediary (or, if applicable, MAC) review.
  11. The coding guidelines should result in coding decisions that could be verified by other hospital staff, as well as outside sources.

FAQ 10:  Is there a requirement that the HCPCS codes submitted for payment to Medicare by the hospital and by a treating physician in the ED be identical, or "match"?

No. CMS has stated that Medicare does not expect a "high degree of correlation" of the HCPCS codes submitted by hospitals vs. those submitted by physicians. CPT codes were developed by the AMA to capture physician cognitive and procedural services and were never intended for capturing the utilization of hospital resources, Medicare recognizes there may be significant differences in coding between the hospitals and physicians-even though the patient received services from both entities during the same outpatient encounter.  Consider this scenario, the ED resources include support of the ED physician and any consultant who comes to the emergency department.  As the facility HCPCS reflects the support and assistance provided to both physicians, you could expect to see a higher level of care for the facility than for the emergency physician.  Conversely, the physician level of service may exceed the E/M coded by the facility. The key concept is that facility and professional coding and billing are two distinct systems.

FAQ 11:  Can hospitals bill Medicare for the lowest level ED visit for patients who check into the ED and are "triaged" through a limited evaluation by a nurse but leave the ED before seeing a physician?

In 2011 OPPS, CMS restated its position on "Triage-only" visits confirming that it does not specify the type of staff who may provide services.  "A hospital may bill a visit code based on the hospital's own coding guidelines which must reasonably relate the intensity of hospital resources to different levels of HCPCS codes.  Services furnished must be medically necessary and documented”.

However, in a 2012 CMS indicated in a Facility FAQ, that Hospital outpatient therapeutic services and supplies (including visits) must be furnished incident to a physician's service and under the order of a physician or other qualified practitioner. CMS stated that an ED visit would not be paid if the patient encounter did not meet the incident to requirement (the patient would need to be seen by an ED physician or non-physician practitioner).  Services provided by a nurse in response to a standing order also do not satisfy this requirement.  Since diagnostic services do not need to meet the requirements for incident to services, they may be coded even if the patient were to leave without being seen by the physician.

FAQ 12:  Do ICD-9 (Diagnosis codes) play a role in APC payments?

No, ICD-9 codes do not determine ED facility reimbursement and since 2007 they are no longer required for observation coding. ICD-9 codes can establish medical necessity for the level of services or procedures billed and Medicare's edit system thus looks for certain ICD-9 codes for some services. These ICD-9 scan be identified by looking up CMS's local and national coverage decision(LCDs and NCDs) documents for each procedure.

See the Observation FAQ for additional information on any OPPS changes for Observation services.

FAQ 13:  How have APCs affected hospital outpatient coding?

Prior to Aug. 1, 2000, hospitals were reimbursed by Medicare for outpatient services on a "cost-basis". CPT codes were not required on the UB-92 claim forms and hospitals received reimbursement based on their reported "costs" for drugs, supplies, E&M services (such as ED visits),etc.

Under OPPS, it is essential to document and capture all services provided by the hospital, since the efficiency and resource utilization of the hospital will determine whether the hospital incurs a "profit or loss" on each Medicare outpatient encounter. Thus, it is imperative that hospital staff accurately and completely document any and all services provided to Medicare beneficiaries in the outpatient areas.

Physicians can greatly assist their hospitals by being as diligent as possible in their documentation efforts. For example, physician documentation of such services as insertion of a CVP line (CPT 36556 (APC 0621) and 36557 (APC 0622) will assist the hospital coders in assignment of these codes—with ultimate payment by Medicare of APC621 ($849.71) and APC 0622 ($193.98) to the "average US hospital").Increasing cooperation between physicians and hospitals in medical records documentation is critical to the economic survival of both members of the "healthcare team".

FAQ 14:  How do hospitals report procedures when billing an E/M level?  

Evaluation and Management Services and other procedures are distinct and separately billable services.  By billing a surgical procedure code that describes the service, the facility is paid for the resources used to support the performance of the procedure.  Facility charges include support for any and all providers; emergency physician, mid-level provider or consultant who provided services in the emergency department for a patient.

Most supplies and medications associated with the procedure will be paid as a combined payment for the surgical service.  The E/M service is billed separately and includes the services related to the Evaluation and Management service. It is permissible for hospitals to reference surgical procedures in their E/M criteria as a proxy for the acuity and resources for the Evaluation and Management services prior to and following the procedure.  In the 2008 OPPS final rule, CMS clarified “In the absence of national visit guidelines, hospitals have the flexibility to determine whether or not to include separately payable services as a proxy to measure hospital resource use that is not associated with those separately payable services.” Hospitals must be able to substantiate any decision to include otherwise separately payable services as a determining factor in the ED level assignment and be able to clearly articulate why those services reflect a proxy for additional hospital resource consumption.

FAQ 15:  How does billing for Critical Care under APCs differ from the critical care service billed by the physician?

 Although CMS instructs hospitals to follow the content of the CPT Critical Care descriptors, there is one significant difference when billing facility Critical Care services.  Physician billing of Critical Care time allows the counting of non-face-to-face time spent working on the patient’s behalf, APC facility billing does not.  All time billed for Critical Care by hospitals under APCs must account for patient face-to-face time and cannot duplicate time spent by more than one individual simultaneously at the bedside. Thus, hospitals need to be aware that Critical Care time for the facility is counted differently than physician time and should address separate documentation of this service.

Last Updated 04/2014

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