New strategies assist billing under APCs

By Caral Edelberg, CPC, CCS-P
Medical Management Resources/Team Health
Jacksonville, FL

[Editor’s note: This is the first part of a two-part series on improving ED reimbursement under ambulatory payment classifications. This month, we cover nursing assessment criteria, ED chargemasters, billing for evaluation and management services (E/M) services, and observation services. Next month, we’ll cover staff physicians, supplies and medications, local medical review policies, and proper use of modifiers. Edelberg can be reached at Medical Management Resources/ TeamHealth, 8001 Belfort Parkway, Suite 200, Jacksonville, FL 32256. Telephone: (904) 725-4889. Fax: (904) 724-1948. E-mail:]

As the complexities of outpatient billing increase under the ambulatory payment classification (APC) payment system, EDs are becoming more and more vulnerable to the pressures of shrinking dollars resulting from financial losses that are preventable.

The list of the critical components of this system grows longer with each Centers for Medicare & Medicaid Services (CMS) memorandum that is published. However, unlike in years past, when the hospital business office had the major responsibility for ensuring payment, ED administrators must be actively involved in coordinating and monitoring this system that has a major affect on ED revenues.

Use these four strategies to effectively improve your billing under APCs:

Review your nursing assessment criteria.

The element of APCs getting the most attention is Medicare’s desire to standardize the criteria that define facility nursing assessment levels for ED and clinic services. EDs are responsible for developing internal definitions and coding guidelines to identify the tiered levels of resource consumption of services provided to ED patients.

As ongoing analysis of hospital billing patterns for ED services continues at the national level, CMS encourages recommendations from hospitals and other interested parties in an effort to develop and implement a national standard for nursing assessment levels by 2004. CMS data currently indicate that hospitals are identifying the majority of nursing assessment levels and ED resources at the low to mid range, and ED physician distribution data indicate a mid- to high-range distribution of resources and acuity.

If CMS seeks to develop national criteria to reflect this low- to mid-level resource consumption, many EDs can expect to see a significant drop in ED revenues for evaluation and management (E/M) services. Managers at each hospital need to review the entire process for developing, coding, and monitoring the E/M coding system to ensure that it accurately reflects the resources of the ED for each patient.

Maintain complete, up-to-date ED chargemaster.

The ED chargemaster is a unique listing of all of the services and products that may be performed or provided to ED patients. ED services are performed by medical staff consultants as well as the ED physicians. The medications and supplies maintained in the ED that are disbursed to ED patents also must be identified for billing purposes.

This menu of services requires that a complex chargemaster be developed and routinely reviewed for accuracy. Generally, more than 450 procedures are performed in the ED by ED staff or other members of the medical staff. These procedures must be coded through the chargemaster in order to migrate over to the UB-92 billing form.

Procedures not listed on the ED chargemaster are not likely to go through the review and fee assignment process in time to be billed. Thus, many procedures and services never make it through the billing process. Some hospitals, due to staffing shortages, feel that maintaining procedures on a chargemaster that may be performed only a limited number of times a year is not a wise use of staff resources.

It takes time to research the codes and descriptions, determine their appropriate fee, assign the internal "charge" code, and enter them into the hospital computer system accurately. However, significant revenue for the hospital is related to those high-end procedures, whether or not they are performed on a frequent basis. Thus, they must be maintained in the chargemaster if they can be performed in the ED.

Bill for E/M services in addition to surgical procedures.

Hospitals are instructed to bill for procedures performed in the ED as well as separately identifiable E/M services also performed in conjunction with the ED visit. The controversy surrounding the billing of both of these services at the same visit centers on how E/M services are differentiated from other cognitive services associated with the preoperative and intraoperative services directly related to the procedure.

In two significant communications outlining billing requirements for E/M and surgical procedures performed at the same visit, CMS provides detailed instructions and clarifications to hospitals.

Both CMS Transmittal A-01-80, dated June 29, 2001, and Program Memorandum Transmittal A-00-40, dated July 21, 2000, include examples for separately identifying these services. (To access the memorandums, go to Under "Program Memoranda," click on the year of publication and scroll down for the correct document.) In addition, in both of these documents CMS outlines the requirement for appending the modifier -25 to the E/M level to designate it as a separately identifiable and payable service, without which the payment for the ED E/M level is denied.

Ensure adequate documentation for observation services.

Rules for billing of observation services continue to undergo revisions by Medicare. Currently, observation services are paid for three conditions, additionally requiring the performance of certain diagnostic tests and listing of allowable ICD-9-CM diagnosis codes.

A new twist to the observation dilemma recently was added when Medicare added codes to identify patients that circumvent the ED work-up and are directly admitted to observation. This class of observation also is restricted to certain clinical conditions, diagnostic tests, and diagnosis codes. All require that specific documentation address certain elements of the observation process, the patient’s condition, and discharge. Without meeting these requirements, observation billing may be vulnerable to audits and recoup of payment. This already has occurred, and it promises to emerge as a future audit risk.