Know the ABCs of PPS

There’s no doubt that a prospective payment system is headed your way; the question is will you be ready?

To help outpatient program managers prepare, American Health Consultants, publisher of Outpatient Reimbursement Management has compiled a resource book filled with practical, proven tips. Included are tips on positioning your program for success with ambulatory patient groups (APGs), choosing the right APG software, and ways states are incorporating the program into Medicaid programs.

Additional tips provide reimbursement managers with information on reducing confusion and misinformation during the initial stages of implementation. Ordering information for additional APG resources also is included with each chapter.

To order Key Tips for Success: Preparing for APGs in the Ambulatory Setting, call AHC customer service. Telephone: (404) 262-7436. Toll-free: (800) 688-2421. Fax: (404) 262-7837. Or write, AHC Customer Service, P.O. Box 740056, Atlanta, GA 30374. E-mail:

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The official who cited the department policy and asked not to be identified, refused to disclose any early details of the new rates but stated that the entire plan is currently winding its way through an internal "clearance" process. The plan could still undergo significant alterations before it receives final approval.

However, the most surprising point raised by the disclosure is that ASCs are likely to be paid under a drastically new system unlike the present eight-tiered Medicare fee schedule. The new system will bear strong similarities to a plan presently being developed for hospital-based outpatient services using a methodology presently being called ambulatory payment classifications (APCs).

APCs are a derivative of a classification system called ambulatory patient groups (APGs), which HCFA originally had developed to pay hospitals for their outpatient services. However, providers are being advised that the new name for both the hospital and ASC PPS is tentative and could change again in coming weeks. Other terms reportedly being considered are ambulatory patient classification and Medicare outpatient groupings.

According to the HCFA representative, the two plans will be similar in structure. However, the rates for the hospitals and those for the ASCs will be different. The hospital prospective payment system (PPS) is expected to become effective on Jan. 1, 1999. HCFA is expected to issue a notice of proposed rule-making on the hospital PPS this summer and a final rule in November.

If the current ASC plan gets final approval, surgery centers would be paid according to the APCs that will be assigned to a particular surgical procedure. Each APC would be weighted and priced according to area wages and other economic factors. The procedures then could undergo further discounting and other refinements before getting paid.However, at this point there is no certainty that HCFA will ultimately adopt such a plan, and "administrators should not assume anything," according to the agency representative.

Whatever plan ultimately gets implemented, providers are likely to receive extra time to adapt to the new system. HCFA officials were previously reported as saying that administrators will be permitted an indeterminate time to submit claims to their Medicare carriers as usual. (For more details of the outpatient PPS, see Outpatient Reimbursement Management, October 1997, pp. 73-77.)

ASCs have been waiting for months for news of the new payment rates, which were based partly on a sweeping ASC cost survey conducted by HCFA beginning in 1994. The present fee schedule contains a listing of 250 surgical procedures ranked by price in eight payment groupings. The groupings range in dollar amounts from $312 to $900.

Industry officials have long criticized the eight-tiered schedule for being flawed and failing to reflect actual ASC costs. At one point, HCFA was considering a plan to expand the eight-tiered systems to as many as 14. The current plan would replace the tiered system with APC groupings.

However, there are no assurances that facilities will do better under the new plan. "It’s just too soon to tell," the HCFA official told Outpatient Reimbursement Management.

Some industry insiders weren’t surprised by the new developments. "We’ve been through so many frustrating changes in the past five years. To us, Medicare has become just another payer changing the terms of their contracts — that’s all," says Nancy Webb-Kessler, executive director of El Camino Surgery Center in Mountainview, CA.