Know these key points of the APC system

The final rule on ambulatory payment classifications (APCs) from the Baltimore-based Health Care Financing Administration (HCFA) incorporates the following changes in hospital outpatient payments:

• The APC payment rate established for each group applies to all services within the group. Although national payment rates are established for each group, payments will be wage-adjusted to reflect geographic differences. Under the final rule, HCFA has developed separate APCs to pay for blood, other blood products, and anti-hemophilic factors.

• In addition, HCFA modified the proposed regulation to allow a smoother transition to the new fee system for providers. The APC groups were refined based on comments. The changes included requiring the use of HCFA common procedural classification system codes only for purposes of computing payments for medical visits to clinics and EDs.

• The regulation excludes ambulance services because a new fee schedule is being developed. Physical, occupational, and speech therapies, orthotic and prosthetic devices, durable medical equipment, and clinical laboratory services are excluded because they are paid under existing fee schedules.

Medicare will make additional payments for certain new medical devices and drugs for up to three years.

During a transition period until 2004, Medicare will pay hospitals a portion of any losses they otherwise would incur from smaller payments than under prior law. For rural hospitals with 100 or fewer beds, those losses will be replaced fully.

• Medicare will make an outlier payment for high-cost cases, with payments projected not to exceed 2.5% of total payments to hospital outpatient departments in 2000-2003. When the cost exceeds the APC payment by more than 2.5 times, HCFA will pay 75% of the cost above the 2.5 threshold.

• HCFA will review the APC groups, wages, and other adjustments annually. As part of that review, HCFA will consult with an expert panel composed of provider representatives.

Source: Health Care Financing Administration, Baltimore.