HCFA’s final rule on APCs is out: ED managers can breathe sighs of relief

The long-awaited final rule will have minimal impact on reimbursement

If you were expecting a major decline in reimbursement due to the switch to ambulatory payment classifications (APCs), you can relax. Dire predictions of a 15% decrease in payment for outpatient services won’t come to pass, according to experts interviewed by ED Management.

The Health Care Financing Administration (HCFA) in Baltimore now projects that minimal decreases and, in some cases, increases, in the level of payment will occur as a result of APC implementation, says Mason Smith, MD, FACEP, president and CEO of Lynx Medical Systems, a Bellevue, WA-based consulting firm specializing in coding and reimbursement for emergency medicine.

The major negative effect of the regulations will be on outpatient services, says Jeffrey Bettinger, MD, FACEP, member of the Dallas-based American College of Emergency Physicians’ (ACEP) reimbursement committee and co-chair of the Florida College of Emergency Physicians’ medical economics committee. Instead of receiving a separate APC, values for observation services are bundled into the other outpatient APCs, which means that no extra payment will be given, he explains. (For more on how that will affect ED observation services, see p. 54.)

From a financial perspective, the final rule is very positive for EDs, Smith reports. "Simply put, HCFA put a lot more money on the table," he says. "They accomplished this primarily by removing those provisions from the proposed rule that were designed to prevent any possibility of the outpatient prospective payment system resulting in increased Medicare payments."

HCFA made those changes as the result of a congressional mandate to eliminate the planned reduction in total payments and add a four-year transitional protection of hospital costs, he explains.

Under the revised rules, the average hospital has little financial risk related to emergency services, Smith says. "Better yet, there is a definite opportunity for hospitals to generate greater payment under the new rules than they currently receive under the cost-based reimbursement."

After several delays, the regulations for HCFA’s outpatient prospective payment system were published in the April 7, 2000, Federal Register, and there will be a July 1, 2000, implementation. (For details on how to access the regulations, see p. 51. For more on APCs, see ED Management, August 1999, p. 85, January 2000, p. 9, and February 2000, p. 17.)

The final rule is nearly 1,000 pages long and replaces the proposed rule published on Sept. 8, 1998. "Many of the concepts presented in the proposed rule have undergone major revision as a result of comments submitted and additional analysis by HCFA staff," notes Smith. (See stories on key deadlines, p. 51, how to cope with APCs, p. 55, and key points from the final rule, p. 57.)

Use current charge structure

Here is an outline of the regulations:

1. Hospitals can continue to use their current charge structures. In a major surprise to most experts, HCFA has stated that hospitals can simply "map" their present levels of service to the appropriate CPT visit level, 99281 through 99285, he says. "HCFA is permitting hospitals to continue their present charge structure."

However, it is unclear what documentation standards will be applied to the hospitals to support the level of service code (99281 through 99285) hospitals choose to apply, Smith says. "It is clear that HCFA will hold hospitals to CPT criteria for critical care."

2. HCFA has eliminated the "hybrid" approach to designating APCs for emergency visits. Three APC payment levels have been assigned for the ED, and a fourth APC payment level will be used for critical care, says Bettinger. "Elimination of the hybrid approach of combination of CPT and ICD-9 codes should make for more accurate assignment of APCs with less possibility to game’ the system. The potential was great to have undue pressure placed on the emergency physician to assign a diagnosis geared to reimbursement."

At the beginning of the inpatient prospective payment system implementation of diagnosis-related groups (DRGs), there were a multitude of courses that taught hospitals how to code for the highest level of reimbursement depending on which diagnostic category to place the patient in, Bettinger explains. "A lot of this was very subjective, especially in patients with multiple diagnoses. There was abuse which took many years to straighten out."

By eliminating the diagnostic component, there should be less "flexibility" in the system, he says. "Emergency physicians had some concerns that they may have been placed in uncomfortable positions if the diagnosis they applied for medical reasons was not the optimal for reimbursement purposes." (See story on physician documentation and hospital coding, p. 53.)

Because most visits to EDs are symptom-driven, it isn’t unusual for the final diagnosis to be less acute than the presenting symptom, Bettinger says.

3. There will be no screening exam APC in the ED. No additional payment will be made for special ED screening services, says Caral Edelberg, CPC, CCS-P, president of Medical Management Resources, an emergency medicine coding and consulting firm in Jacksonville, FL, specializing in financial reimbursement.

"These screening services will be bundled’ into the APC rate for the level of service," she explains. "If no actual level of service is rendered, screening is to be billed at the lowest ED level of service."

Elimination of the screening exam CPT code could be beneficial, according to Bettinger. "This APC had the potential of being utilized, retrospectively, by HCFA to downcode some ED visits. ACEP has contended that the typical screening exam done in the ED is far more intensive than the quick eyeball exam’ that seems to be [preferred by] some third-party payers." (See guest column on physician and hospital coding for APCs, p. 57.)

4. Critical care (CPT 99291) is recognized as a visit level. Incremental critical care time will not be recognized for facility payment because it is assumed that any patient requiring more than 74 minutes of critical care time will be admitted to the hospital, Smith explains. "If admitted, payment will ultimately be based on a diagnostic-related group and not on outpatient prospective payment."

Critical care presented a challenge to HCFA in attempting to define the service in terms of facility, not physician, input, says Edelberg. "Hospitals are required to use code 99291 in place of, not in addition to, the code for the level of service in the ED."

5. HCFA has not fundamentally changed the proposed rule with respect to bundled services. Pharmacy, central services, and several other departments remain bundled into visit and procedure charges, says Smith. However, splinting and strapping have been recognized as separate procedures, with reimbursement related to the procedure of applying the splint instead of the cost of plaster and materials, he notes.

"Wrapping the ankle will carry a national total value of $72 when the service is reported by the ED with the appropriate CPT code," he says.

6. Visit levels will need to be "unbundled" to list nursing and physician procedures separately as specific line items. APCs are based on the definitions used by physicians to describe and bill for their office services, Smith explains. "Medicare will pay separately for specific services that are currently bundled into ED levels of service." (See story on additional payments under APCs, p. 56.)

Levels of service payments have been reduced to account for the value of the payments that will be made for the unbundled services, says Smith. Here are examples of nursing services that will be reimbursed only if separately identified, he says:

• laceration repairs;

• EKG monitoring;

• joint dislocations;

• burn therapy;

• fracture treatment;

• splinting and strapping.

7. No separate payment will be made for most drugs used in ED visits.

HCFA’s analysis of the cost of drugs commonly associated with each ED level of service has facilitated bundling of the drug component into the associated ED APC level, says Edelberg. "Hospitals will continue to itemize these drugs through their billing, however, and Medicare will bundle the payment accordingly into the ED level of service."

However, additional reimbursement will be made through the APC system for the following drugs and services associated with an ED visit: diagnostic testing, administration of infused drugs, therapeutic procedures including resuscitation, and high-cost "clotbuster" drugs, Edelberg says.

8. There is a broad interpretation of your responsibilities under EMTALA. The final rule affirms HCFA’s previous position that the hospital and ED staff must respond to any request for emergency medical screening, notes Smith. "The scope of the area where response is required includes the entire campus.’ This includes the parking lot, street, and other hospital properties," including urgent care centers.

Sample ED payments under APC

ED visit levels have been grouped into four ambulatory payment classification (APC) levels, including critical care. Hospitals will need to define their charges as related to a visit level, using a CPT evaluation and management (E&M) code, 99281 through 99285, or 99291 if the patient requires critical care. There are a total of six valid E&M codes for the ED. The four APC payment levels correspond to those six visit levels for ED services. For example, 99291 (critical care services) will cross-reference to APC 620 (critical care). (See chart, below.) ED visit levels payments APC 610, 611, and 612 do not include the value of specific services, such as lab tests, X-rays, and computed tomography scans. Those services can be identified separately by HCPCS codes.
APC payment levels and corresponding CPT E&M codes
APC CPT E&M Service Visit Level Medicare Payment* Patient Copay* Total Payment*
610 99281 $65 $21 $86
99282 $65 $21 $86
611 99283 $102 $36 $139
612 99284 $155 $54 $209
99285 $155 $54 $209
620 99291 $417 $153 $570
*Numbers are rounded.
Source: Lynx Medical Systems, Bellevue, WA.