Reimbursement
Ambulatory & Other M'care & M'caid Reimbusement Systems
OUTPATIENT SIDE -- AMBULATORY (Part 1)
Physicians (OutPt) paid on Resource-based relative value
scale (RBRVS)
BACKGROUND
Physician (other allied health professionals) services include
office visits, diagnostic/surgical procedures, therapies, wide
range of settings. RBRVS / Fee-for-service / CMS's
estimation of the value of service (not full price)
M'care beneficiaries have cost-sharing: deductible and
coinsurance
Relative Value Scale: permits comparisons of labor, costs
(supplies, equip, overhead), skill level (worth of the
services)
CPT
CPT
S.IL.
S.IL.
KNOW
+ (MP RVU)(MPGPCI)] = (SUM) x CF = MPFS
Cost-sharing: For covered services, M'care beneficiary
responsible for annual deductible and 20% coinsurance
(out of pocket or supplemental insur). After deductible,
provider receives 80% of PFS amount.
POTENTIAL ADJUSTMENTS
Budget Neutrality Adjustor (BN adjustor) Requires
refinements that federal payment systems do not result in
signficant differences in expenditures. Applied to (CF)
component of generic formula to maintain Budg. Neutrality
Upcoming expenditures must equal past expenditures
(accounting for inflation). Payments to Drs. cannot differ >
$20 million, otherwise apply another adjustment to CF.
Application of the adjustor varies from year to year.
Structure of Payment
Relative Value Unit (RVU): Weight of CPT code
S.IL.
[(work RVU)(work GPCI) + (PE RVU)(PE GPCI)
Outpt Facility Reimbursement (CMS) reimbursed by APC
Payments
RBRVS based on cost of furnishing physician services in
different settings, skill/training required, and time and risk
involved.
Facility/
Nonfacility
Calculation
CPT
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Geographic adjustment
This is why one must recognize importance of monitoring the
Federal Register
Conversion Factor
Clinician Type: 3 types
RVU & Geographic Practice Cost Index

Participating - Agree to accept Assignment of Benefits
(contract to bill M'care directly for covered expenses,
beneficiary only for coinsur. & deductible, & accept
M'care payment in full.)
Nonparticipating - (Opt Out) No assignment of benefits
contract and they do not get direct payments from
Medicare. Allows coinsurance portion can be higher
(paid to Dr).
Disadv: Slower payment turnaround/cashflow problem,
Less 5% of Participating payment, Patient pays/liable for
higher portion.
Anesthesiologists - Their own CF adj. for geographic
location (no GPCI tbl). Generic Formula:
RBRVS based on HCPCS Level I and Level II codes
Each code is assigned an RVU (wt) for time, skill level,
equipment needed. (high complexity = higher wt)
RVU: 3 elements


Physician Work (wt) for time spent providing service
and intensity, effort & judgment, skill, stress
 Physician practice expense (PE): costs for overhead,
(payroll, ofc expenses (rent, utilities, phone), medical
materials/supplies, equipment expenses, all other
expenses
o Facilities (Physician Office) More Overhead
o Nonfacilities (hospital/clinic) Less Overhead
 Malpractice (MP) /Professional Liability Insurance (PLI)
 Geographic practice cost indexes (GPCIs) Each
element of RVU adjusted based on geog. location.

[Base Unit + Time (in units)] x CF = MPFS

Nonphysician Providers - Midwives (NPs), therapists,
clinicians, social workers, etc. paid only 85% of full MPFS
amt and only when their services are NOT "incident to"
direct supervision of physician. If under direct (employed
by) supervision, they are paid by salary.
Conversion Factor: an across-the-board multiplier set by
CMS. CF converts RVU into M'care Provider Fee Schedule
(PFS). This is the gov't's direct control on M'care payments
to physicians and other professionals. CF posted in Federal
Register annually.
Sustainable Growth Rate (SGR): CF calculated using formula
called SGR to protect M'care trust fund. Matches updates
in Dr. reimb to growth in national economy.
CMS estimates growth of nat'l economy to create a target
for M'care spending on Dr. services. A negative update
sets CF less than the previous year.
Special Circumstances - Modifiers



Bilateral - 1st (total charge paid), 2nd (50% charge) =
150%
Multiple procedures - (-51) 1st (100%) + 2nd-5th (50%)
+ 6th or more (require review)
Physician Assisting in Surgery - Assistant (16%) of PFS
amt for the primary surgeon.
Reimbursement
Ambulatory & Other M'care & M'caid Reimbusement Systems
Underserved Area (Part 2)
HPSA = Health Professional Shortage Area
Bonus pmnt (incentive) for providing services designated in
an HPSA. Based on the location of the service. AQ modifier
to specify HPAS eligibility for zip codes not entirely in HPAS
area. Receive 10% bonus quarterly.
Quality
PQRS = Physician Quality Reporting System endorsed by
a consensus org such as at'l Quality Forum or devel'd
by physic. assoc.
Participation is Voluntary. Physicians doing specialty studies
of group measures. (Optional participation in Category II
codes for Quality Studies).
EP - Eligible Professional. EPs and reimb. specialists should
carefully review indiv. measures, grp measures, & specs bcs
CMS may add/delete/alter measures each year.
EPs may choose to report on indiv. or grp measures (except
back pain has to be grp). EPs choose to rpt quality data
thru claims-based or registry-based submissions (except
CABG has to be thru registry).
Claims-based submission uses CPT Category II or G codes.
Registry-based - EPs submit info to PARS-qualified clinical
data registry & registry submits quality data (to CMS).
Incentives req'd by TRHCA (act) may be positive or negative.
Positive
2012-14: EPs successfully reporting qual. meas. (w/in 2 mo.
of the end of a reporting period) receive (bonus = 0.5% of
allowable charges)
Negative
2015: EPs who do not satisfactorily rpt qual. data under
PQRS are subject to 1.5% reduction of their MPFS.
2016: Reduction is 2%.
Technology (by ARRA HITECH)
E-prescribing Incentives
EHR Incentives
Physician submits Rx to pharmacy electronically.
EPs rpt data on e-prescribing w/G codes (Jan 1-Dec 31)
Incentives (Mandatory after 2012)
Positive incentives for rpting.
2011-16: EPs who are "meaningful EHR users" may receive
incentive pmnts thru CMS reimbursement (w/limits)
Negative unsuccessful EPs pmnts are negatively adj.
2012: by 1%. (99% of MPFS).
2013: by 1.5% (98.5%)
2014: by 2% (98%)
2015: M'care will apply penalty to EPs who cannot
demonstrate meaningful use. No penalty under M'caid.
Restrictions:
 M'care EPs cannot earn bonuses under both eRx and
EHR
 Hospital-based EPs are ineligible for M'care or M'caid
EHR incentive program.
Ch-7: Page | 2
Temporary Bonuses from Affordable Care Act (ARA)
 Primary Care Incentive Pmnt (PCIP) Btwn 2011-16,
primary care phys. (PCP) receive 10% increase in pmnts
for specific services. E/M services for office, nursing
home, or home health visit.
PCPs eligible for HPSA bonus may also receive the
PCIP bonus.
 HPSA Surgical Incentive Pmnt (HSIP) Gen'l surgeons
providing services in HIPSA are eligible for incentive
pmnt. 10% of Profees (M'care B)
Eligible surgeons may only receive HSIP bonus, not
also HPSA bonus.
OPERATIONAL ISSUES
Close mgmt of operations critical for small offices w/little
margin:
 Processes to ensure full, accurate reimbursement
 The impact of unnecessary admin. costs
Coding & Documentation
Poor coding & inadequate doc. negatively affect (adj) RBRVS
reimb. (see Tbl 7.10, 11, 12)
Unnecessary Administrative Costs
Staffing has a large impact on small practices. People are
hired to deal with processing claims & trying to get
reimbursement (contacting multiple health plans for prior
authorizations, billing requirements, claim submission &
adjudication procedures, formularies).
Efficiency has the potential to reduce these unnecessary
costs.
Summary
RBRVS pmnt system is a fee-for-service pmnt method. CMS's
estimation of the value of
a phys. services
 Physician's work
 Practice expenses,
 Malpractice
determine RVU of phys. services.
The RVU is adjusted for
geographic location (converted to $ amt with CF)
Other adjustments
 budget neutrality
 type of clinician providing service
 special circumstances, add'l geographic
considerations
 other factors
Accurate coding and complete documentation underpin full
and accurate physician reimbursement.
Reimbursement
Ambulatory & Other M'care & M'caid Reimbusement Systems
Ch-7: Page | 3
Hospital Outpt Prospective Payment System (H-OPPS,
p. 175) (Oh, please play something!)
1983 IPPS went live & went so well that the they moved
many other sectors to the same type of system. Hospital side
moved in Aug. 2000.
3M HIS 1988-90 developed & came up with ambulatory
patient groups (APGs). 1995 APGs updated. CMS didn't pick
this up yet.
1997 BBA set dates for M'care to move to PPS in 1999.
1998 CMS released proposed rule for OPPS (using
ambulatory pmnt classifications (APCs), revised APGs.
Maintenance of H-OPPS (p. 178)
CMS maintains OPPS by annual review of APC groups and
relative wts.
APC Advisor Panel assists (15 experts) with analysis and
recommendations, but CMS makes final ruling for updates
and changes to OPPS.
MedPAC provides Congress & CMS w/recommendations to
improve OPPS. CMS considers, but can do what it wants.
CMS makes final updates and changes to OPPS.
Revisions to OPPS released in Federal Register within 45 day
(Mid-November) of the start of the CY.
Hold-harmless Status: Gov't lesgislation(BIPA, 2000)
provided exclusions for (supplementary modifications to
APC system) specialized facilities: Child's, cancer, hosp's.
No penalties for not participating in OPPS.
Pass-through APC category developed for high-cost drugs,
biol. agents, devices. Provided method for dealing with
exclusions.
Ambulatory Payment Classification System (APC)
Each APC grp comprises procedures or services that are
clinically comparable w/respect to resource use. Group like
things together.
Packaging: occurs when reimb for minor ancillary services
assoc. w/significant procedure are combined into a single
pmnt for the procedure.
Bundling: occurs when pmnt for mult. significant procedures
or mult. units of the same procedure related to an outpt
encounter or episode of care is combined into a single unit
of pmnt.
Groupers in APC: The logic includes ancillary pkging and
bundling.
These are all CMS incentives for HC facilities to improve their
efficiency by avoiding unnecessary ancillary services,
supplies,, & pharmaceuticals, and by substituting less
expensive, but equally effective, options.
OPPS Methodology (p. 176)
OPPS devel'd for outpt services to help encourage a more
efficient delivery of care for outpt beneficiaries.
Reimbursement for H- Outpt Services - 3 methods
 Fee schedules: A fee schedule system establishes a
separate pmnt amt for each item/service and no
packaging. Ex: Amb. Transp, PT, OT, Lab services
 Prospective Payment (APC): costs for certain items &
2ndary services assoc. w/primary proced. are pkg'd
into the pmnt for that procedure. Ex: ESRD services
 Cost-based: Certain items/services (acquis. of
tissues/vaccines, etc) continue to be paid on
reasonable cost basis.
 RBRVS is a fee-for-service pmnt.
Reporting of Services & supplies under H-OPPS
Payment Status Indicator: Every HCPCS code assigned this to
establish how that service, procedure, or item is paid (fee
schedule, APC, reasonable cost, unpaid).
OPPS covers only outpt services, even tho HCPCS was
designed for all physician services.
To move off the inpt-only list, a procedure must be
performed in outpt settings at least 60% of the time. To be
reimbursed, procedures indicated as inpt only must be
provided to M'care beneficiaries in an inpt setting, and
pmnt made under IPPS.
Excluded Facilities
CAHs; hospitals outside the 50 states, DC, Puerto Rico, Indian
Health Service
Ancillary Packaging: If present, ancillary service APC groups
will automatically combine into a significant procedure or
surgical service group:
 Guidance services
 Image processing services
 Intraoperative services
 Imaging supervision & interpretation svc
 Diagnostic readiopharmaceuticals
 Contrast media
 Observation services
When ancillary service w/pmnt status indicator Q1 is
performed on the same date of service as a service with an
S, T, V, or X pmnt status indicator, then the ancillary service
is packaged and has a pmnt rate of $0.00.
If the ancillary service is performed without any S,T,V, or X
services, then pmnt is provided for the ancillary service.
APCFinder (Procedure drives the APC)
Biopsy, liver, percutaneous (needle)... Guidance is status N
with no payment bcs it is packaged in w/status T
procedure.
Bundling combines supply and pharmaceutical costs or
medical visits w/assoc. procedures or services. Combining
things together to make 1 pmnt. Bundled services w/HCPCS
code have pmnt status indicator N.
Reimbursement
Ambulatory & Other M'care & M'caid Reimbusement Systems
Structure of APC System (p. 182)
Only 10 of 23 Payment Status Indicators (PSI) drive APC
pmnts.
 Clinic or ED visit (PSI V)
 Significant procedure, mult reduction applies (PSI T)
APC
PSI
Payment Rate (Fig. 7.5)
1
T
100%
2
T
50%
3
T
50%
4
S
100%
T - Discounted
5
S
100%
S-$

Significant procedure, not discounted when mult
(PSI S)
 Ancillary service (PSI X)
 Non-pass-thru drugs/nonimplantable biol. agents, incl.
therapeutic radiopharm (PSI K)
 Pass-thru drugs or biol agents (PSI G)
 Pass-thru device categories (PSI H)
 Partial hospitalization (PSI P)
 Blood or blood product (PSI R)
 Brachytherapy sources (PSI U)
Each HCPCS code is assigned to one and only one APC.
Tbl 7.19: G,H: Pass-thru, Calculate APCs, but cost-based pmnt
K, P, R,S,T,U,V,X: APC Payments
Q1, Q2, Q3: Conditionally pkg'd APC pmnts.
Discounting (p. 184)
Mult surg. procedures w/pmnt status indicator T performed
during the same operative session are discounted. The
highest-weighted procedure is fully reimbursed. All
other procedures w/PSI T are reimbursed at 50%.
Copayment (p. 182)
CMS moved to OPPS to ensure beneficiary copmnt amt from
hosp to hosp is consistent (20% of total charges). Charges
are the same in same region bcs of wage index adj.
Both M'care facility component and beneficiary copmnt
components are adj'd for differences in wage indexes. This
is the only adj made to APC pmnt rates to account for
differences among hosp's. 60% of the facility amt is wage
index adj'd.
Copmnt may be collected at time of service or on a
retrospective basis.
Fig. 7.7: Wage Index Adjustment Formula for OPPS
(p. 187)
[(Nat'l unadjusted pmnt amt x 60%) x wage index]
+ (Nat'l unadjusted pmnt amt x 40%)
= Locality payment
or
(Base rate x 60%) + (base rate x 40%) = Local Pmnt
Ch-7: Page | 4
New Technology APCs (p. 183)
These APCs house modern procedures and services until
enough data are collected to properly place them in an
existing APC or a new APC for the service/procedure.
Category III codes.
Classified by history which is being collected over time.
41 have PSI S with no discount
41 have PSI T and subject to mult-procedure discounting
Composite APCs
Allows for mult services that are typically performed together
by one APC rather than mult APC.
 Mental health service composite APC 0034
 Cardiac electrophysiological eval & ablation composite
APC 8000
 Low-dose rate prostate brachytherapy composite APC
8001
 Multiple Imaging composite APCs
o Ultrasound composite APC 8004
o CT & CTA w/out contrast composite APC 8005
o CT & CTA w/contrast composite APC 8006
o MRI & MRA w/out contast composite APC 8007
o MRI & MRA w/contast composite APC 8008
Observation Services
An outpt in observation: Bundling costs for observ services
into the APC pmnt for the procedure or visit.
Exception APC 339 for which 3 clinical conditions qualify as an
observ service: Chest pain, CHF, Asthma
Partial Hospitalization
An intensive outpt program of psychiatric services. May be
provided by hospital outpt depts & M'care-certified
community mental health centers. (Day care) Unit of
Service for partial hosp. is one day. Therefore, APC
paymentis based on a per diem amt.
Interrupted Services
73 Interrupted surgery before anesthesia (50%)
74 interrupted surgery after anesthesia
(100%)
52 Reduced Services
(50%)
Potential for an adjustment made to pmnt amt.
High-Cost Outlier
This is more for inpt, but a device or medication may apply on
outpt side.
Financial assistance to the facility for unusually high-cost
services.
Cost must exceed 1.75 times the APC pmnt AND the cost
must also exceed the APC pmnt plus a fixed dollar
threshold of $1900. THEN they take 50% of the
difference (the hosp. is still losing money, but not as
much as before this adjustment).
Reimbursement
Ambulatory & Other M'care & M'caid Reimbusement Systems
Rural Adjustment
Rural sole-community hosps (SCHs) cost was 7.1% > urban
hosp. therefore SCHs are paid an additional 7.1% of the
total amt.
Ch-7: Page | 5
Pricer software completes steps 2-7. After step 7, pmnt
made to the facility & data from the encounter added to
nat'l claims history file. Outpt standard analytical file
and OPPS file are extracts from nat'l claims history file
and are used for statistical analysis and research.
Cancer Hosp Adjustment
IPPS-Exempt for some Hosps.
Pass-Through Payments
Exceptions to the M'care PPS system. For high-cost drugs,
devices, etc. Will be assigned a Status Indicator of a
Pass-through.
These are paid on a cost-basis. Can stay pass-thru status for
at least 2 yrs, but not more than 3 yrs. when it will be
bundled into APC pmnt for the procedure in which the
item is used or into an indiv. APC group.
Transitional Corridor and Hold-Harmless Pmnts
Hold-Harmless payments are permanent for IPPS-exempt
cancer centers & children's hospitals.
Eligible facilities receive a quarterly interim hold-harmless
pmnt that provides additional reimbursement when the
pmnt received under OPPS is < the pmnt the facility
would have received for the same services under the
prior reasonable cost-based system. (Makes up
difference.)
Ambulatory Payment Classification Assignment
1. Code the encounter accurately and completed. You
have to know the CPT code to get to the APC.
2. Pull in Chargemaster driven codes
3. Run it through a code editor to check edits & see if it is
appropriately coded and modify it appropriately, if
necessary.
4. Find APC status indicator (Probably more than 1 APC on a
claim).
5. Put claim thru a scrubber (OCE)
Payment Determination
1. APC Assigned.
Claims are sent to the MAC.
Edits found on the OCE
2. APC pmnt rate established.
Relative wt of APC x CF for that CY
3. Wage index adj'd to nat'l unadjusted facility component.
60 / 40 split (see Fig. 7.7)
Wage index from Federal Register
4. Fee schedule amts applied
Labs paid
5. Reasonable cost amnts applied.
Vaccines paid at reasonable cost
6. M'care pmnts (all of the above) are added together.
7. Outlier add-on applied.
Outlier calculation completed in pricer software for
all eligible procedures & serv., then added to M'care
pmnt.
3M & Quantim are encoders (find codes) and groupers (find
APCs or DRGs). Pricer Calculates (determines actual
pmnt amt).