Databases are an essential first step to APG success
Databases are an essential first step to APG success
Understanding APGs should begin with your data
[Editor’s note: Hospitals are struggling to understand ambulatory patient groups (APGs). One reason is that few providers know where the learning process begins, says financial analyst William Kelly, executive vice president, CHPS Consulting in Albany, NY. Most facilities have a wealth of outpatient information locked in their computers. Their task should be to unlock these secrets to enhance success with APGs. Kelly has done some groundbreaking work in this field. He shares some thoughts with Outpatient Reimbursement Management on the subject below.]
ORM: Most providers are in the dark regarding APGs. Why?
Kelly: Tracking outpatient encounters in the form of activity codes is a relatively new phenomenon for hospitals. In the past, as long as the bill was paid, financial personnel didn’t much care what information was included on the outpatient claim. Nobody cared about ambulatory claims anyway. Today, the stakes are much higher. The ability to use APGs to determine the nature of your ambulatory business is a phenomenal opportunity.
APGs not just a coding issue
There’s also a perception regarding APGs that isn’t correct. Most people think APGs is strictly a coding issue. It’s not. It’s a business activity that involves a broad range of facility concerns. The answer isn’t hiring a basement full of coders but establishing information systems that will allow administrators to track outpatient activity and study it for future use.
ORM: Do you mean reorganizing the facility’s information process?
Kelly: Not necessarily. You can begin by simply using superbills and encounter forms that are tailored to collecting APG-related information such as ICD-9-CM and revenue codes. Last year, we completed a benchmarking study called the "Sample Ambulatory Patient Group Impact Analysis" for hospitals in northern New York. One of the problems we immediately encountered was a lack of consistency in the data submitted by the hospitals.
We identified several areas in which relevant APG-related data was either omitted or not properly presented on claims. Among them were:
• the use of ICD-9 codes instead of the required CPT-4 for determining significant procedure APGs;
• missing department revenue codes, which give a full picture of the patient encounter and supports the CPT coding with charge information;
• missing diagnosis codes, which are essential in deriving medical APGs;
• narrow scope of data. The data was limited to certain specialties, such as ambulatory surgery and omitted medical or ancillary services.
Providers can’t afford to retrospectively code and collect this information. There is simply too much to collect, and the patient encounters are too fleeting to make the exercise cost-effective.
ORM: How did you get involved in the study?
Kelly: We began discussions with the Iroquois Healthcare Alliance in Albany, NY, about a needs-assessment project. The 14 hospitals in the alliance got interested when the government announced its timetable for launching the Medicare outpatient prospective payment system in 1999.
The goal was to develop a benchmarking database that would help the hospitals understand the market for ambulatory services and give each facility a practical knowledge of APGs. We saw it as a useful database that would grow over time.
ORM: What were some of the conclusions drawn from the study?
Kelly: What came out was that the ratios between charges and actual payments were quite different for different procedures. This meant that in some cases charges were much higher relative to a payment standard. The conclusion we drew was that the introduction of prospective payment will have a higher financial impact on certain services such as excision and biopsies than for psychotherapy. (For a comparison of of charges and payments, see the charts, inserted in this issue.)
ORM: How extensive was the study?
Kelly: We compared peer group cases, or hospitals of similar size, to individual facilities. For example, for cataract procedures, the average APG payment was $1,701.17 for a specific hospital compared with $1,663.60, which was the peer group average. This breakdown allowed a comparison of charges and payments between individual situations and comparable peer groups. This information is important because hospitals know their costs or charges in relation to previous years. But they have no idea of how their results compare with other facilities.
The results for each hospital were slightly different. But in general, the ratio for the ancillaries compared with medical and the significant procedures at the aggregate level tended to be consistent across the spectrum of providers. Therefore, we concluded that the findings weren’t just artifacts but were genuine trend.
ORM: What were some of the shortcomings of the study?
Kelly: In our model, we didn’t have the actual payment weights and final rules on bundling and discounting. Therefore, we made certain assumptions on the effects of certain variables. To simplify matters, we used an APG rate of $95 for Medicare and Medicaid claims and $115 for all other payers.
We also applied a discounting factor of 100%, 50%, and 25% based on the number of APGs to anticipate the actual Medicare discounting formula based on the number of APGs in a certain claim. These were our working assumptions. It was less important for these variable scenarios to be correct than for the applications to be consistent across all hospitals.
ORM: How valuable are these findings?
Kelly: If you’re a hospital, you can compare what your charges to payment will be for cataracts in relation to other procedures such as hernia repair. It’s an important first step but only a first step. It’s a useful model to help providers, especially those in a network environment, to begin looking at their coding and billing and cleaning up inconsistencies between facilities. It’s the first part of a long process.
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