APCs: Issues and Answers
Sponsored By:
APCNow Web Site
www.APCNow.com
Presented By:
Duane C. Abbey, Ph.D., CFP
Abbey & Abbey, Consultants, Inc.
Duane@aaciweb.com
http://www.aaciweb.com
http://www.APCNow.com http://www.HIPAAMaster.com
Version 10.0 - Generic
Notes © 1994-2009, Abbey & Abbey, Consultants, Inc.
CPT® Codes – © 2008-2009 AMA
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 1
Presentation Faculty
Duane C. Abbey, Ph.D., CFP – Dr. Abbey is a healthcare consultant and educator with
over 20 years of experience. He has worked with hospitals, clinics, physicians in various
specialties, home health agencies
and other health care providers.
His primary work is with optimizing reimbursement under various Prospective Payment
Systems. He also works extensively with various compliance issues and performs
chargemaster reviews along with coding and billing audits.
Dr. Abbey is the President of Abbey & Abbey, Consultants, Inc. and his firm provides a wide
range of consulting services across the country including chargemaster reviews, APC
compliance reviews, in-service training, physician training, and coding and billing reviews.
Dr. Abbey is the author of nine books on health care including:
•“Non-Physician Providers: Guide to Coding, Billing, and Reimbursement”
•“Emergency Department: Coding, Billing and Reimbursement”,
•“Chargemasters: Strategies to Ensure Accurate Reimbursement and Compliance”,
•“Chargemaster Coordinators Handbook”, and
•“Compliance for Coding, Billing and Reimbursement”.
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 2
Disclaimer
This workshop and other material provided are designed to provide accurate and
authoritative information. The authors, presenters and sponsors have made every
reasonable effort to ensure the accuracy of the information provided in this
workshop material. However, all appropriate sources should be verified for the
correct ICD-9-CM Codes, ICD-10-CM Diagnosis Codes, ICD-10-PCS Procedure
Codes, CPT/HCPCS Codes and Revenue Center Codes. The user is ultimately
responsible for correct coding and billing.
The author and presenters are not liable and make no guarantee or warranty;
either expressed or implied, that the information compiled or presented is errorfree. All users need to verify information with the Fiscal Intermediary, Carriers,
other third party payers, and the various directives and memorandums issued by
CMS, DOJ, OIG and associated state and federal governmental agencies. The
user assumes all risk and liability with the use and/or misuse of this information.
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 3
APCs: Issues & Answers
Objectives
 To review the changes for the Medicare APC payment system for CY2009
with attention to anticipated changes based on trends.
 To review various APC weight changes and updates.
 To understand key issues within APCs and the final changes.
 To discuss increased packaging and bundling within APCs.
 To appreciate the need for hospitals to assess changes and make
suggestions and comments to CMS.
 To review the various data files that CMS provides with APCs.
 To appreciate technical component E/M coding for the ED and providerbased clinics.
 To discuss the different CMS changes including supplies, drugs and
devices.
 To briefly review changes for ASCs relative to APCs and other APC related
issues.
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 4
APCs: Issues & Answers
Acronyms/Terminology
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APCs – Ambulatory Payment Classifications
APGs – Ambulatory Patient Groups
ASC – Ambulatory Surgical Center
CAH – Critical Access Hospital
CCRs – Cost-to-Charge Ratios
CPT – Current Procedural Terminology
E/M – Evaluation and Management
FFS – Fee-for-Service
HCPCS – Healthcare Common Procedure Coding System
ICD-9-CM – International Classification of Diseases, Ninth Edition, Clinical
MAC – Medicare Administrative Contractor
MedPAC – Medicare Advisory Commission
MPFS – Medicare Physician Fee Schedule
NCCI – National Correct Coding Initiative
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 5
APCs: Issues & Answers
Acronyms/Terminology
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NCD/LCD – National/Local Coverage Decision
NTIOL –New Technology Intraocular Lens
OCE – Outpatient Code Editor
OPD – [Hospital] Outpatient Department
OPPS – [Hospital] Outpatient Prospective Payment System
PHP – Partial Hospitalization Program
PM – Program Memorandum
PPS – Prospective Payment System
QIO – Quality Improvement Organization
SI – Status Indicator
ASC – Ambulatory Surgical Center
RBRVS – Resource Based Relative Value System
MPFS – Medicare Physician Fee Schedule  Developed through RBRVS
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 6
APCs: Issues & Answers
General Comments
 APCs are becoming increasingly complex and more difficult to understand.
 Enormous Federal Register entries are now the norm.
 APCs represent a payment system that is out of control.
 Significantly increased bundling through packaging is being added.
 APCs appear to be moving more toward APGs.
 There are wide variations in payments from year to year.
 Significant compliance concerns exist within the overall APC payment
system.
 In some cases these compliance concerns result because of lack of
explicit guidance from CMS.
 At some point the RAC auditors will become more involved in APCs.
 APCs and the underlying coding systems (i.e., CPT and HCPCS) generate
constant change and the need to update.
 Tracking and verifying that correct payment is received is difficult.
 It is critical to track adjudication and overall payment.
 Major issues with hospital charges, CCRs and the cost report are present.
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 7
APCs: Issues & Answers
APC Background Information
 APC Fundamentals
 Encounter Driven System
• Some Exceptions – Example: Two separate blood transfusions on
the same day or two imaging services at different times on the
same day.
 CPT/HCPCS Code Driven
• If the service is not coded with a CPT or HCPCS (and/or proper
modifiers), then there will be absolutely no payment!
 APC Grouper  Multiple APCs from Given Claim
 Inpatient-Only Procedures
• Surgery, if performed outpatient, will not be paid at all! (Patient
Liability?)
• How is this list determined?
 Covered, Non-Covered and Payment System Interfaces
• Example: Self-Administrable Drugs
 Pass-Through Payments – Directly Based on Charges Made – Covert
Charges to Costs How?
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 8
APCs: Issues & Answers
APC Background Information
 APC Weight, and Thus Payment, Determination
 Hospital Charges Converted to Costs
• How is this done?
• Do we charge for everything?
• Do we charge correctly for everything?
 Statistical Process Using the Costs
• Geometric Mean
• Mean Cost for Given APC/Mean Cost for All APCs = the APC Weight
 Variation of Costs Within a Given APC Category
• 2 Times Rule – If highest cost is more than twice the lowest cost
then violation.
• 2 Times Rule Exception List
 Examples:
o APC=0080 Diagnostic Cardiac Catheterization
o APC=0604 Level 1 Hospital Clinic Visits
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 9
APCs: Issues & Answers
APC Background Information
 Use of Claims to Statistically Develop the APC Weights
 Because outpatient encounters often involve multiple services, the APC
grouping process often (if not a majority of the time) generates multiple
APCs.
 CMS can use only pure claims, that is, claims that group to a single
APC. These are called ‘singleton’ claims.
 CMS is trying very hard to get around this situation because most of
the claims filed by hospitals never get considered when the actual APC
weights are determined.
• Small Example: CPT=86891 – Intra- or Post-Operative Blood
Salvage
 A device is used to save blood, reprocess the blood and
generally re-infuse.
 Is it possible to have ONLY 86891 on a claim?
 What kind of payment do we have for 86891?
 What are the costs involved?
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 10
APCs: Issues & Answers
APC Background Information
 APC Cost Outliers
 Complicated Two-Tiered Formula  Cost Threshold to $1,800.00
 Based on Excessive Costs - How are costs determined?
 Nationally, does CMS make full outlier payments?
 Provider-Based Rule (42 CFR §413.65)
 Provider-Based Clinics
 Provider-Based Clinical Services
 Potentially, two claim forms filed – CMS-1450 (UB-04) for technical
component and CMS-1500 (1500) for professional component.
 Reduction in payment for professional component
• Site-of-Service Differential in RBRVS (MPFS)
• Place-of-Service (POS) driven on CMS-1500
 Series of Criteria to Meet If to be Provider-Based
• On-Campus versus Off-Campus
• See Physician Supervision Developments  Important
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 11
APCs: Issues & Answers
APC Background Information
 ASCs – Ambulatory Surgical Centers
 In CY2008 Started a Hybrid of APCs and RBRVS
 FR entries for APCs will now also be for ASCs
 ASC Surgery List
• Regular ASC Surgeries
• Office-Based Surgeries  New Additions
• Conditions for Coverage (CfCs)  New Acronym
• Additions and Deletions to Lists
 Payment Formula
• ASC Surgery  65% of APC
• Office-Based Surgeries – Lesser of:
 65% of APC or
 Non-Facility PE RVU from MPFS
• Physician Paid Facility MPFS (As With Hospitals)
 Separate Payment for Certain Ancillary Services
 Did all the features of APCs translate over?
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 12
APCs: Issues & Answers
CPT/HCPCS Changes For CY2009
 As usual there are hundreds of changes for both CPT and HCPCS. Also,
there was an unusually large number of changes for ICD-9-CM.
 Injections/Infusions
• These have all been renumbered!!
• Coding guidance has, in theory, been revised. Need to carefully
compare 2008 guidance versus 2009 guidance.
 Laparoscopy
• Six New Codes – Hernias
 Radionuclide Brachytherapy
 ESRD – Twenty New Codes – Applicability?
 Cardiovascular Device Monitoring –
• Twenty-One New Codes – Extensive Coding Guidance
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 13
APCs: Issues & Answers
Increased Bundling
 CMS - Significantly Increased Bundling
 Long Federal Register Discussion
• From Page 42667, August 2, 2007 –
“Packaging costs into a single aggregate payment for a service,
encounter, or episode of care is a fundamental principle that
distinguishes a prospective payment system from a fee
schedule. In general, packaging the costs of supportive items
and services into the payment for the independent procedure
or service with which they are associated encourage hospital
efficiencies and also enables hospitals to manage their
resources with maximum flexibility.”
 From a hospital’s perspective, is the above statement at all
true?
 What are “supportive” items/services?
 What are “independent” procedures?
 How does this relate to ‘Separate Procedure Consolidation’
under APGs?
Slide # 14
© 1999-2009 Abbey & Abbey, Consultants, Inc.
APCs: Issues & Answers
Increased Bundling
 CMS - Significantly Increased Bundling
 More detail on the bundling approach
• From page 283 – Examination Copy CMS-1404-FC 2008
 We use the term “dependent service” to refer to the HCPCS
codes that represent services that are typically ancillary and
supportive to a primary diagnostic or therapeutic modality. We
use the term “independent service” to refer to the HCPCS
codes that represent the primary therapeutic or diagnostic
modality into which we package payment for the dependent
service. We note that, in future years as we consider the
development of larger payment groups that more broadly
reflect services provided in an encounter or episode-of-care, it
is possible that we might propose to bundle payment for a
service that we now refer to as “independent.”
 Exercise: Compare and contrast the above concept with the APG
(Ambulatory Patient Group) ‘significant procedure consolidation’.
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 15
APCs: Issues & Answers
Increased Bundling
 CMS Proposed Significantly Increased Bundling
 CMS want to increase bundling to have APCs be more of a Prospective
Payment System (PPS)
• Look more like DRGs?
• Look less than RBRVS?
 Comment: For those familiar with APGs, Ambulatory Patient
Groups, CMS purposefully moved APCs away from all the
bundling in APGs. Now CMS is moving back toward the
bundling in APGs. Why the change? (Hint: Think money!)
o See APG concept of significant procedure consolidation.
 For the past several years, new interventional radiology codes have
bundled the radiological component into the surgical component even
at the CPT level.
 This is a major change. The discussions in the current APC Federal
Register appear to be only the beginning. Also, movement from SI=“S”
to SI=“T”. Why?
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 16
APCs: Issues & Answers
APC Category Changes
 New Composite APCs
 8004 – Ultrasound Composite
 8005 – CT and CTA w/o Contrast Composite
 8006 – CT and CTA w Contrast Composite
 8007 – MRI and MRA w/o Contrast Composite
 8008 – MRI and MRA w Contrast Composite
• See Imaging Families from 2006 for MPFS
• CMS has now brought this packaging to the hospital outpatient
setting as well as to physicians and IDTFS.
• Financial Impact?
 0034 – Mental Health Services Composite  See Also PHPs
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 17
APCs: Issues & Answers
APC Category Changes
 New APCs
 Closed Fracture Treatment  Long-Term Problem Area
• 0129 – Level I Closed Tx Fx Finger/Toe/Trunk  $105.54
• 0138 – Level II Closed Tx Fx Finger/Toe/Trunk  $406.12
• 0139 – Level III Closed Tx Fx Finger/Toe/Trunk  $1,312.75
 CMS has finally addressed the closed fracture treatment
 Strangely, CMS did not change the wording of the APCs to
reflect coverage of more than fingers, toes, ribs, etc.
 Emergency Department
• 0609-0615 – Type A ED Levels 1-4
• 0616 – ED Level 5  Common for Type A or Type B
• 0626-0629 – Type B ED Levels 1-4
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 18
APCs: Issues & Answers
APC Category Changes
 Injections and Infusions (CPT Codes Have Changed Also)
 6 APC Categories to 5 APC Categories For Drug Administration
CY2008
CY2009
APC 0436 – Level I
$ 16.21
$ 24.89
APC 0437 – Level II
$ 25.13
$ 36.13
APC 0438 – Level III
$ 51.22
$ 73.67
APC 0439 – Level IV
$ 105.38
$ 128.62
APC 0440 – Level V
$ 114.64
$ 187.96
APC 0441 – Level VI
$ 149.34
Deleted
 OK, what does this mean?
 Did all the mappings change?
 Six Hour Infusion–96365+5*96366–CY2008  $114.64+$150.78=$265.42
CY2009$128.62+$124.45=$253.07
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 19
APCs: Issues & Answers
Status Indicator Codes
 Status Indicators (SIs) Have Become Increasingly Complex
 Increased use in APC logic for packaging including conditional
packaging.
 “Q1” - STVX-Packaged Codes Paid under OPPS;
 Addendum B displays APC assignments when services are separately
payable.
• (1) Packaged APC payment if billed on the same date of service as a
HCPCS code assigned status indicator “S,” “T,” “V,” or “X.”
• (2) In all other circumstances, payment is made through a separate
APC payment.
 “Q2” - T-Packaged Codes Paid under OPPS;
 Addendum B displays APC assignments when services are separately
payable.
• (1) Packaged APC payment if billed on the same date of service as a
HCPCS code assigned status indicator “T.”
• (2) In all other circumstances, payment is made through a separate
APC payment.
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 20
APCs: Issues & Answers
Status Indicator Codes
 “Q3” - Codes That May Be Paid Through a Composite APC Paid under
OPPS;
 Addendum B displays APC assignments when services are separately
payable. Addendum M displays composite APC assignments when
codes are paid through a composite APC.
• (1) Composite APC payment based on OPPS composite-specific
payment criteria. Payment is packaged into a single payment for
specific combinations of service.
• (2) In all other circumstances, payment is made through a separate
APC payment or packaged into payment for other services.
 “R” – Blood and Blood Products – Paid Under OPPS, Separate Payment
 “U” – Brachytherapy Sources – Paid Under OPPS, Separate Payment
 Actually a Mini-APC System
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 21
APCs: Issues & Answers
APC Policy Issues
 Blood and Blood Products
 Blood and Blood Products – An on-going problem area
 Coding for Blood and Transfusion Medicine
 Hospitals have been, and continue to be underpaid for blood and blood
products.
• Problems with cost reporting and CCRs
• CMS is using a somewhat adjusted formula
 Here is an interesting and confusing statement from CMS:
• “We continue to believe that using blood-specific CCRs applied to
hospital claims data results in payments that appropriately reflect
hospitals’ relative costs of providing blood and blood products as
reported to us by hospitals. We do not believe it is necessary or
appropriate to incorporate external survey data into our rate setting
process for blood and blood products because, in a relative weight
system, it is the relativity of the costs to one another, rather than
absolute cost, that is most important for setting payment rates.”
Page 168 CMS-1404-FC
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 22
APCs: Issues & Answers
APC Policy Issues
 The 2-Times Rule
 APC=0060 - Manipulation Therapy
 APC=0080 - Diagnostic Cardiac Catheterization
 APC=0093 - Vascular Reconstruction/Fistula Repair without Device
 APC=0105 - Repair/Revision/Removal of Pacemakers, AICDs, or VDs
 APC=0141 - Level I Upper GI Procedures
 APC=0245 - Level I Cataract Procedures without IOL Insert
 APC=0303 - Treatment Device Construction
 APC=0330 - Dental Procedures
 APC=0341 - Skin Tests
 APC=0367 - Level I Pulmonary Test
 APC=0409 - Red Blood Cell Tests
 APC=0426 - Level II Strapping and Cast Application
 APC=0432 - Health and Behavior Services
 APC=0604 - Level 1 Hospital Clinic Visits
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 23
APCs: Issues & Answers
APC Policy Issues
 Home Sleep Testing
 G0398, G0399, G0400  APC=0213  $153.05
 Is it possible for anyone to send personnel, conduct the tests and not
exceed costs of $153.05??
 Variations and Changes in APCs Payment from Year-to-Year
 Ever since APCs were implemented there have been rather wild
variations in payments from year-to-year, sometimes as much as a
60%-70% move up or down.
 CMS is aware of these variations, but CMS is adamant about using their
approach of rate setting based on costs as reported by hospitals
through the charges on claims and then converting the charges to
costs via cost report information.
 The bottom-line answer from CMS is, “That’s just the way it turns out!”
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 24
APCs: Issues & Answers
APC Policy Issues
 Stereotactic Radiosurgery (SRS)
 “After consideration of the public comments received, we are finalizing
our CY 2009 proposal, without modification, to continue to recognize
Level II HCPCS codes G0251 and G0340, instead of CPT codes 77372
and 77373, for the reporting of SRS treatment delivery services under
the OPPS in CY 2009. For CY 2009, HCPCS code G0251 is assigned to
APC 0065 with a final APC median cost of approximately $931, and
HCPCS code G0340 is assigned to APC 0066 with a final APC median
cost of approximately $2,522. We also are finalizing our CY 2009
proposal to continue to recognize HCPCS codes G0173 and G0339,
assigned to APC 0067 with a final median cost of approximately $3,718,
for certain SRS services reported in accordance with the codes
descriptors of these two HCPCS G-codes.” Page 493-CMS-14104-FC
 Replacement Codes for 6179361796-61800+63620+634621
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 25
APCs: Issues & Answers
APC Policy Issues
 Negative Pressure Wound Therapy – APC=0013
 CPT=97605 – Negative pressure wound therapy, including topical
application(s), wound assessment, and instruction(s) for ongoing car,
per session; total wound(s) surface area less than 50 sq cm
 CPT=97606 -
; total wound(s) surface area greater than 50 sq cm
• “After consideration of the public comments received, we are
finalizing our CY 2009 proposal, without modification, to assign
CPT codes 97605 and 97606 to APC 0013, with a final CY 2009 APC
median cost of approximately $53.” Page 496 CMS-1404-FC
 APC-0013 - $54.70
 HBOT – Hyperbaric Oxygen Therapy
 See C1300
 Providers have claimed that CMS is underpaying
 CCR and Cost Reporting Problems
 “-CA” Modifier – Patient Expires, Inpatient-Only Procedure
 APC=0375  $5,672.92 (CY2008- $5,006.13) Keeps Going Up – Why?
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 26
APCs: Issues & Answers
APC Policy Issues
 Mental Health Services – APCs 0322, 0323, 0324, 0325
 Partial Hospitalization Codes Versus Outpatient Codes
• PHP – 90816-90829
• Outpatient – 90804-90815
• Outpatient Codes  Status Indicator “Q3” – May be paid through a
composite APC (APC=0034)
 “These codes are conditionally packaged when the sum of the
payment rates for the single code APCs to which they are
assigned exceeds the per diem payment rate for partial
hospitalization.” Pages 507-508 CMS1404-FC
• In other words, the outpatient codes 90804 through 90815 can be
used an recognized, but there is a payment cap based on the
composite APC=0034  $204.78
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 27
APCs: Issues & Answers
APC Policy Issues
 Trauma Response Associated with Critical Care (CPT=99291)
 APC=0617  Critical Care  $485.39
 APC=0618  Trauma Response with Critical Care  $935.12
• “After consideration of the public comments received, we are
finalizing our CY 2009 proposal, without modification, to pay
separately for HCPCS code G0390 when billed with CPT code
99291, and to provide payment for HCPCS code G0390 through APC
0618, with a final CY 2009 APC median cost of approximately $914.
We are also finalizing, without modification, our CY 2009 proposal
to calculate the median cost for HCPCS code G0390 using our
standard methodology that excludes those single claims for critical
care services that are eligible for payment through the Level II
extended assessment and management composite APC 8003.”
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 28
APCs: Issues & Answers
APC Policy Issues
 Drugs, Biologicals and Radiopharmaceuticals
 Packaging drugs with daily cost less than $60.00. Following to be paid.
• J0630 Calcitonin salmon injection
• J1212 Dimethyl sulfoxide 50% 50 ML
• J2513 Pentastarch 10% solution
• J2515 Pentobarbital sodium inj
• J2805 Sincalide injection
• J2940 Somatrem injection
• J2995 Inj streptokinase /250000 IU
• J3350 Urea injection
• J3473 Hyaluronidase recombinant
• Q4102 Oasis wound matrix skin sub
• Q4103 Oasis burn matrix skin sub
• J8650 Nabilone oral
• J9270 Plicamycin (mithramycin) inj
• J9280 Mitomycin 5 MG inj
• J9290 Mitomycin 20 MG inj
• J9291 Mitomycin 40 MG inj
• J9357 Valrubicin injection
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 29
APCs: Issues & Answers
APC Policy Issues
 Drugs, Biologicals and Radiopharmaceuticals
 CMS is very interested in drug overhead costs
 For CY2008 – Consideration of three Drug Overhead Codes
• “…, we did not finalize the proposal to instruct hospitals to
separately report pharmacy overhead charges for CY 2008. Instead,
in the CY 2008 OPPS/ASC final rule with comment period (72 FR
66763), we finalized a policy of providing payment for separately
payable drugs and biologicals and their pharmacy overhead at
ASP+5 percent as a transition from their CY 2007 payment of ASP+6
percent to payment based on the equivalent average ASP-based
payment rate calculated from hospital claims, which was ASP+3
percent for the CY 2008 OPPS/ASC final rule with comment period.
Hospitals continued to include charges for pharmacy overhead
costs in the line-item charges for the associated drugs reported on
claims.” Page 605 CMS-1404-FC
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 30
APCs: Issues & Answers
APC Policy Issues
 Drugs, Biologicals and Radiopharmaceuticals
 For CY2009, continue a transition to claims-based payment
methodology.
• “While payment at ASP+4 percent is slightly higher than the
equivalent average ASP-based payment amount for all hospitals
that we calculated from hospital costs according to the
methodology we have used since CY 2006, we believe that another
transitional payment year appropriately allows for a gradual change
in hospital payment from the CY 2008 drug payment rate to a
refined claims-based payment methodology. This CY 2009
transitional payment should help to ensure continued access to
separately payable drugs and biologicals in the HOPD, while also
providing us with another year to explore the complex issues
surrounding hospital allocation of pharmacy overhead costs to
drug charges and differential hospital drug costs based on hospital
participation in the 340B program, in order to determine if a refined
methodology could improve payment accuracy, while also ensuring
equitable payments.” Page 635 CMS-1404-FC
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 31
APCs: Issues & Answers
APC Policy Issues
 Drugs, Biologicals and Radiopharmaceuticals
 Radiopharmaceuticals
• Continue with statutorily required APC categories
• Look for ASP methodology for 2010.
 Other CPT to APC Grouping Issues
 Many limited issues involving certain areas – routine changes
• Endovenous Ablations – APC=0091 and 0092
• Proton Beam Therapy – APC=0664 and 667
• Intercarpal or Carpometacarpal Arthroplasty – APC=0047
• Surgical Wrist Procedures – APC=0053 and 0054
• Arthroscopic and Other Orthopedic Procedures – APC=0041 and
0042
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 32
APCs: Issues & Answers
APC Policy Issues
 Devices
 On-going problem of Device Dependent APCs
• Hospital must carefully assess charging methodologies to make
certain CMS is receiving correct data. See Charge Compression.
 Example: Drug-Eluting Stents
 Removing Devices from Pass-Through List (i.e., start packaging)
 No Cost/Full Credit and Partial Credit Devices
• See “FG” and “FC” Modifiers
• See Table 21 for APCs and Percentages
• Example – APC=0039, Level I Implantation ofNeurostimulator
 Device Offset No Cost/Full Credit – 84%
 Device Office Partial Credit – 42%
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APCs: Issues & Answers
APC Policy Issues
 Drug Administration Codes  See Update Slides
 Nice synopsis from Page 694, CMS-1404-FC
• During the development of new drug administration codes
implemented by CPT in CY 2006, the AMA, the creators and
maintainers of the Level I HCPCS codes (CPT codes), determined
that the required resources and clinical characteristics of hydration
services and therapeutic, prophylactic, and diagnostic drug
administration services were sufficiently distinct to warrant
different codes for the first hour of infusion and additional hours of
infusion for these two types of services. Further, the AMA
implemented a hierarchy for reporting drug administration services
in the facility setting where chemotherapy services are primary to
therapeutic, prophylactic, and diagnostic services, which are
primary to hydration services. In addition, the hierarchy specifies
that infusions are considered primary to pushes, which are
considered primary to injections.
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
APC Policy Issues
 Drug Administration Codes  See Update Slides
 Nice synopsis from Page 694, CMS-1404-FC - Continued
• Just as the CPT codes are under the authority of the AMA, so are
these instructions that preface the affected CPT codes and, in
general, we adopt CPT instructions for reporting services under the
OPPS. As discussed earlier, although reporting according to the
hierarchy will first be specifically reflected in the CY 2008 OPPS
claims data available for the CY 2010 OPPS update, we believe that
the hierarchy detailed reporting practices that were already
commonly being used by the majority of hospitals. We do not
believe that the hierarchy implemented in CY 2008 for drug
administration services substantially changed hospital billing
practices in most cases, and we believe that our final CY 2009
payment rates for these services is appropriate for drug
administration CPT codes reported in accordance with the specified
hierarchy for CY 2009.
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
APC Policy Issues
 Emergency Department  See Update Slides
 From Page 220, CMS-1404-FC
• “The CY 2008 criteria and payment methodology finalized for
composites APCs 8002 and 8003 will continue, consistent with the
APC Panel’s August 2008 recommendation in support of our CY
2009 proposals for payment of extended assessment and
management composite APCs. As discussed in section IX.B. of this
final rule with comment period, we are also finalizing our proposal
to reassign HCPCS code G0384 from APC 0608 (Level 5 Hospital
Clinic Visits) to APC 0616 (Level 5 Emergency Visits). Moreover, we
are finalizing our CY 2009 proposal, without modification, to include
HCPCS code G0384 in the criteria that determine eligibility for
payment of composite APC 8003, consistent with the APC Panel’s
August 2008 recommendation that we should adopt this proposal.”
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
APC Policy Issues
 Emergency Department  See Update Slides
 From Page 221, CMS-1404-FC
• “Finally, as discussed in section XIII.A.1, of this final rule with
comment period, we are finalizing our CY 2009 proposal to replace
current status indicator “Q” with three new separate status
indicators: “Q1,” “Q2,” and “Q3.” Therefore, each of the direct
admission, clinic, and emergency department visit codes that may
be paid through composite APCs 8002 and 8003 are assigned
status indicator “Q3” (Codes that May be Paid Through a
Composite APC) for CY 2009 in Addendum B to this final rule with
comment period.”
 See also, Status Indicator Slides
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
APC Policy Issues
 Emergency Department  See Update Slides
 From Page 222, CMS-1404-FC
• “In the CY 2009 OPPS/ASC proposed rule (73 FR 41444), we also
proposed that the payment policy for separate payment of HCPCS
code G0379 that was finalized for the CY 2008 OPPS (72 FR 66814
through 66815) would continue to apply for CY 2009 when the
criteria for payment of this service through composite APC 8002 are
not met. The criteria for payment of HCPCS code G0379 under
either composite APC 8002, as part of the extended assessment
and management composite service, or APC 0604, as a separately
payable individual service are: (1) both HCPCS codes G0378 and
G0379 are reported with the same date of service; and (2) no service
with a status indicator of “T” or “V” or Critical Care (APC 0617) is
provided on the same date of service as HCPCS code G0379. If
either of the above criteria is not met, HCPCS code G0379 is
assigned status indicator “N” and its payment is packaged into the
payment for other separately payable services provided in the same
encounter.”
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
APC Policy Issues
 Electrophysiological Studies
 Concern has been expressed about the EP APC Composite 8000
 Continue to use APC 0085 and 0086 using single procedure claims.
 SI=“Q” moved to SI=“Q3”
 From Page 231, CMS-1404-FC
• “We continue to believe that the composite APC for cardiac
electrophysiologic evaluation and ablation services is the most
efficient and effective way to use the claims data for the majority of
these services and best represents the hospital resources
associated with performing the common combinations of these
services that are clinically typical. Furthermore, this approach
creates incentives for efficiency by providing a single payment for a
larger bundle of major procedures when they are performed
together, in contrast to continued separate payment for each of the
individual procedures.”
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
APC Policy Issues
 Mental Health Composite APC 0034  $204.78
 From Page 235, CMS-1404-FC
• “For CY 2009, as discussed further in section X.B. of this final rule
with comment period, we proposed to create two new APCs, 0172
(Level I Partial Hospitalization (3 services)) and 0173 (Level II Partial
Hospitalization (4 or more services)), to replace APC 0033 (Partial
Hospitalization), which we proposed to delete for CY 2009 (73 FR
41446). In summary, when a community mental health center
(CMHC) or hospital provides three units of partial hospitalization
services and meets all other partial hospitalization payment criteria,
the CMHC or hospital would be paid through APC 0172. When the
CMHC or hospital provides four or more units of partial
hospitalization services and meets all other partial hospitalization
payment criteria, the hospital would be paid through APC 0173. In
the CY 2009 OPPS/ASC proposed rule (73 FR 41446 through 41447),
we proposed to set the CY 2009 payment rate for mental health
composite APC 0034 at the same rate as APC 0173, which is the
maximum partial hospitalization per diem payment.”
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
APC Policy Issues
 Mental Health Composite APC 0034  $204.78
 From Pages 239-240, CMS-1404-FC
• “After consideration of the public comments received, we are
finalizing our CY 2009 proposal, without modification, to limit the
aggregate payment for specified less intensive outpatient mental
health services furnished on the same date by a hospital to the
payment for a day of partial hospitalization, specifically APC 0173.
For CY 2009, we are also finalizing, without modification, our
proposal to change the status indicator from “Q” to “Q3” for those
HCPCS codes that describe the specified mental health services to
which APC 0034 applies. For CY 2009, we also are finalizing the
proposal to change the status indicator for APC 0034 from “P” to
“S.”
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
APC Policy Issues
 Technical Component E/M Coding
 Hospitals should not anticipate any technical component E/M
guidelines in the near future!
• This places hospitals at significant compliance risk.
• Auditors can easily claim that hospital-developed mappings
encourage upcoding and overpayments.
• MAC’s using their own guidelines and not the hospital-developed
guidelines?
• From Page 738 CMS-1404-FC
 “In addition, we note our continued expectation that hospitals’
internal guidelines will comport with the principles listed in the
CY 2008 OPPS/ASC final rule with comment period (72 FR
66805). We encourage hospitals with more specific questions
related to the creation of internal guidelines to contact their
local fiscal intermediary or Medicare Administrative Contractor
(MAC).”
o Get your mapping ‘approved’??
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
APC Policy Issues
 Technical Component E/M Coding
 New versus Established Patient
• This is a surprising long discussion of this topic –
• “Specifically, the meanings of “new” and “established” patients
would pertain to whether or not the patient has been registered as
an inpatient or outpatient of the hospital within the past 3 years.
Under this proposed modification, hospitals would not need to
determine the specific clinic where the patient was previously
treated because the modified definition would not rely upon when
the medical record was initially created but rather, would depend
upon whether the individual has been registered as a hospital
inpatient or outpatient within the previous 3 years.” Page 710 CMS1404-FC.
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
APC Policy Issues
 Inpatient-Only Listing
 Well, virtually every commenter over the last several years has
suggested elimination of the Inpatient-Only list.
• ‘We appreciate the comments and understand the commenters’
reasons for advocating the elimination of the inpatient list.
However, we continue to believe that the inpatient list serves an
important purpose in identifying procedures that cannot be safely
and effectively provided to Medicare beneficiaries in the HOPD. We
are concerned that elimination of the inpatient list could result in
unsafe or uncomfortable care for Medicare beneficiaries. Therefore,
we are not discontinuing our use of the inpatient list at this time. In
addition to the above concerns about differences in physician and
hospital outpatient payment policy, hospitals have expressed
ongoing concerns related to inpatient procedures being performed
inappropriately for beneficiaries who are not inpatients and that, as
a result, beneficiaries may be liable for the charges for the services.
We believe that it is the responsibility of physicians and hospitals
to know which procedures are on the inpatient list.” Page 803 CMS1404-FC.
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
APC Policy Issues
 Quality Reporting – Now and In The Future
 CY2009 Increase – 3.9% Except for those that don’t meet the
requirements of HOP QDRP – 1.9%
• Separately Payable Items (Drugs, Devices, New Technology,
Radiopharmaceutical and Brachytherapy Sources) Not Affected
 New Quality Measures – 2008-2009-2010
• 11 Measures in 2009
• New Imaging Efficiency Measures
• 18 Potential Quality Measures – Cancer Care, ED Throughput,
Screening for Fall Risk, Management of Clinical Conditions
(Depression, Stroke, Osteoporosis, Asthma, Pneumonia)
 Validation of Quality Reporting – Voluntary Hospitals
 Healthcare-Associated Conditions – Analog to IPPS Payment Reduction
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
Ambulatory Surgical Centers
 ASCs  Payment is a combination of APCs and RBRVS
 Payment Rates  Still in a 4-year phase-in process
 Covered Surgical Procedures
 Must know what can be performed:
• In a physician’s office,
• The ASC,
• Only in the hospital.
 ASC Conditions for Coverage (CfCs)
 Not exceed 24 hours
 Physician financial interests
 Governing Body
 Infection Control
 Pre-Surgery Assessment
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
Special Issues
 Charges, Cost-to-Charge Ratios (CCRs) and Cost Reporting
 CMS had RTI conduct studies of the Charge Compression issue.
 Both APC and DRG weight calculations are affected.
 From Page 89 CMS-1404-FC –
• “RTI’s first set of recommendations for accounting changes
addressed improved use of existing cost report and claims data.
RTI recommended: (1) immediately using text searches of
providers’ line descriptions to identify provider-specific cost
centers and ultimately to more appropriately classify nonstandard
cost centers in current hospital cost report data; (2) changing cost
report preparation software to impose fixed descriptions on
nonstandard cost centers; (3) slightly revising CMS’ cost center
aggregation table to eliminate duplicative or misplaced
nonstandard cost centers and to add nonstandard cost centers for
common services without one; and (4) adopting RTI’s
recommended changes to the revenue code-to-cost center
crosswalk.”
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
Special Issues
 Charges, Cost-to-Charge Ratios (CCRs) and Cost Reporting
 From Page 101, CMS-1404-FC
• “Numerous commenters expressed support for the use of
regression-adjusted CCRs for devices in order to improve shortterm accuracy in the OPPS relative payment weights by addressing
charge compression arising from use of a single CCR for supplies
and devices. These commenters viewed regression-adjusted CCRs
as a suitable temporary adjustment for charge compression until
CCRs for the new Implantable Devices Charged to Patients cost
center, finalized in the FY 2009 IPPS final rule (73 FR 48458 through
48469), become available in CY 2012 or CY 2013. Many commenters
saw regression-adjusted CCRs for devices as a necessary solution
that would be immediately available and appropriate, especially
because they believed that other options, such as provider
education, could not address the issue of highly variable markup
rates compressed by a single CCR during cost estimation.”
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
Special Issues
 Device Dependent APCs – Examples
 0039 - Level I Implantation of Neurostimulator
 0040 - Percutaneous Implantation of Neurostimulator Electrodes
 0061 - Laminectomy, Laparoscopy, or Incision for Implantation of
Neurostimulator Electrodes
 0082 - Coronary or Non Coronary Atherectomy
 0083 - Coronary or Non Coronary Angioplasty and Percutaneous
Valvuloplasty
 0089 - Insertion/Replacement of Permanent Pacemaker and Electrodes
 0090 - Insertion/Replacement of Pacemaker Pulse Generator
 0104 - Transcatheter Placement of Intracoronary Stents
 0106 - Insertion/Replacement of Pacemaker Leads and/or Electrodes
 0107 - Insertion of Cardioverter-Defibrillator
 0108 - Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
Special Issues
 Classifying Claims
 Note: Generally, only singleton claims (i.e., claims that group to only
one APC) can be included in the calculations for APC weights.
 Using the newer Status Indicator codes, CMS can increase the number
of claims going into the calculations.
• Single Major Claims
• Multiple Major Claims
• Single Minor Claims
• Multiple Minor Claims
• Non-OPPS Claims
 Packaged Revenue Codes
 This listing, which is only partially used, hasn’t really changed over
time. For instance, RC=0390 is on the list, but services are not
packaged.
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
Special Issues
 Direct Physician Supervisions – Provider-Based Clinics
 Strangely, the topic of direct physician supervision for provider-based
clinic has become a topic.
 April 7, 2000  CMS (then HCFA) created the Provider-Based Rule
found at 42 CFR §413.65
• For off-campus provider-based clinics, direct physician supervision
was a special obligation
• For in-hospital or on-campus clinics, physician supervision was
assumed (i.e., there would be a qualified practitioner close by in
case of problems).
 Now CMS is maintaining that the direct physician supervision also
applies to on-campus and in-hospital situations.
• CMS is indicating that this is not new!?
• WHAT does this really mean?
© 1999-2009 Abbey & Abbey, Consultants, Inc.
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APCs: Issues & Answers
Summary and Conclusions
 APCs Represent CMS’s Most Complex Prospective Payment System
 We are into the Tenth Year (Depending on how you count) of APCs –
 The variation in payments continues to be a roller coaster
 Significant policy changes continue to be developed, specifically
increased packaging and more composite APCs
 Hospital charging structures and CCRs are now in the limelight both
from the public as well as how they impact APC weight development
 Proper chargemaster construction along with proper coding interfaces
and charge capture are of great importance
 Correct CPT/HCPCS coding along with proper use of modifiers
continues to paramount
 While there continue to be areas of difficulty (e.g., technical component
E/M levels), CMS is whittling away as issues
 Hospitals should anticipate that APCs will continue to change at a rapid
pace during the coming years.
© 1999-2009 Abbey & Abbey, Consultants, Inc.
Slide # 52