New composite 'obs' APCs welcomed by ED experts

Reduced RVUs could offset gains for observation

The initial reaction to the creation of two new composite APCs (8002, 8003) in the final Outpatient Prospective Payment System (OPPS) for 2008 was greeted with surprise and welcome by ED experts who had been pushing for just such a move. However, at least one observer says if you drill down to the actual relative value unit (RVU) payments, the result actually could be a loss of revenue for observation services.

"They created two composite APCs, which basically serve the purpose of what we wanted," says Barbara Marone, federal affairs director for the American College of Emergency Physicians in Washington, DC. "For year, we have been wanting to extend observation payment for more than the three diagnoses [chest pain, asthma, and congestive heart failure] to which it had been limited." The final rule includes all diagnoses.

Of the three possible scenarios, this outcome was the best one, says Michael A. Ross, MD, FACEP, director of observation medicine in the Department of Emergency Medicine at Emory University School of Medicine in Atlanta and a member of the APC Advisory Panel for the Centers for Medicare & Medicaid Services (CMS). "In its last proposal, CMS said it would do away with an ED package, which we thought was a bad idea," Ross says. The second option was to play it safe, leave things as they were, and review the available data, which was what most observers expected, he says.

"The third option, proposed by the [APC] panel, was to create a composite where ED and observation services were paid as one visit, and that's the best of the three possibilities," says Ross.

How it works

Under the new arrangement, Marone explains, the relevant new composite is 8003, which is referred to as "extended assessment and management." "What that will do is combine a Level 4 or 5 ED visit with observation of more than eight hours," she says.

This change will accomplish two positive outcomes, she says. "It will continue to allow separate payment for this type of treatment, and you don't limit the diagnoses to the historical three," Marone says. In addition, she says, the payment would be about $628, which is certainly higher than it would have been under the originally proposed "bundling" arrangement.

Ross says this is "absolutely great news for hospitals that provide observation services." He considers the increased payment rate "not a big breadwinner, but a fair starting point."

Not so fast …

One of the ongoing frustrations of these CMS rules, note observers, is that because of government admonitions to keep such proposals budget-neutral, there is almost always an offsetting expense or revenue reduction when apparent new benefits are announced. This reduction appears to be the case here, in terms of reduced RVUs for many types of ED care, warns Michael J. Williams, MPH, HSA, president of The Abaris Group, a Walnut Creek, CA-based health care consulting firm specializing in emergency services,

"The drop in payments [RVUs)] for levels 4, 5, and trauma is problematic and does not reflect the increased packaging promised by CMS and the [stated] overall 3.2% in positive net impact for EDs," Williams says. He points out, for example, that for a Level 4 ED visit, the 2008 payment would be $212.59 compared with $209.99 in 2007, or a modest increase of 1.24%. For a Level 5 visit, a $325.26 payment in 2007 becomes a payment of $315.51 in 2008, or a 3% decrease. For critical care, there is a 15.06% increase, from $405.04 to $466.02. However, for trauma activation, the payment plummets a whopping 33.21%, from $494.54 to $330.28.

"I estimate that 80% of all ED charges are going to be Levels 4 or 5," Williams says. "By my calculations, the new 8003 composite payment of $628.15 is lower than the $758 you would have received last year for a Level 5 ED visit plus observation if all the rules were correctly used." Williams arrives at that calculation by adding last year's now discontinued RVU for observation care (7.2039) to last year's RVU of 5.29 for a Level 5 emergency visit. The total RVU of 12.4954 is higher than this year's 10.02 RVU for the new 8003 composite APC.

"With the exception of critical care, the paltry increases in the other level visits seem to be a disincentive [for observation services]," he argues. "We need more 'obs' medicine units in our country to help solve our capacity problems, but hospitals will look at this new composite system as a take-away and a disincentive."

Marone does not dispute Williams' calculations, but says, "If CMS had bundled, it would have been such a disincentive for those with separate obs units to keep going. It is still better than what was originally proposed, and we are pleased that observation has been recognized as a service that needs to be treated separately."

The new rule will be implemented in January 2008.


For more information on the final payment rule for 2008, contact:

  • Barbara Marone, Federal Affairs Director, American College of Emergency Physicians, 2121 K St. N.W., Suite 325, Washington, DC 20037-1801. Phone: (202) 728-0610, ext. 3017.
  • Michael A. Ross, MD, FACEP, Director of Observation Medicine, Department of Emergency Medicine, Emory University School of Medicine, Atlanta.