Outpatient procedures may be costing you millions

How to prepare for new APCs

While hospitals wait for the Health Care Finance Administration (HCFA) to finalize its rules on Ambulatory Patient Classifications (APCs), they already could be losing huge dollars for outpatient services that Medicare reimburses at much high rates as inpatient procedures.

Deborah Hale, CCS, president of Administrative Consulting Services in Shawnee, OK, says that audits her company has conducted have found that some hospitals are losing millions of dollars because they’re doing those procedures as outpatient.

How can so many hospitals be missing the boat on this? "Because they don’t know," says Hale. "Many of the Medicaid commercial payers require these procedures be done as outpatient." Hospitals often assume that because the third-party payers are saying that it’s appropriate, that means that Medicare is using the same standard. "And because it’s necessary to read through so much Medicare fine print, the distinction is often lost," Hale says.

Some of the procedures affected include laparoscopic cholecystectomy, pacemakers, including replacements, angioplasties and stent placements. "Those are all on the list that will be paid only as inpatients [under the APC regulations]," says Hale. "And for most hospitals, reimbursement is a lot better if done as an inpatient."

Another startling fact, Hale says, is that when patients have these procedures done in the outpatient setting, such as an angioplasty with stent placement, their out-of-pocket expenses run between $3,000 and $4,000. "If they had done the procedure as an inpatient, it would only have cost the current deductible, which is less than $800. So we’re talking about a huge difference in out-of-pocket expense," she says.

HCFA’s reasoning for the inpatient emphasis is that many of these procedures are done for older patients, some with comorbid conditions, who aren’t able to tolerate the procedures as well as a younger person would.

While providers may agree that some fragile patients need inpatient treatment, some wonder if it’s necessary to provide inpatient care to stronger, healthier patients who would probably tolerate outpatient surgery nicely. "My response to that is that we’re not talking about standard of care in this instance," says Hale. "We’re talking about billing."

"From a quality-of-care and the patient’s standpoint, these procedures should not be outpatient," says Sue Prophet, director of classification and coding for the American Health Information Management Association (AHIMA).

Meanwhile, speculation continues about what the APC regulations will mean procedurally and how hospitals can bring themselves into compliance by the implementation date of July 1.

"There isn’t much time [to prepare]," says Prophet. "But on the other hand, there’s certainly nothing to prevent hospitals from looking at their current procedures for documentation, their chargemasters, and their outpatient coding procedures. They also should be looking at the skills of the people involved in coding."

"A big area where I think most hospitals are going to have an educational curve is interventional radiology, because radiology is paid by APC," says Hale. "So many hospitals don’t know how to code these procedures. They’re incorrect. A part of it comes from the chargemaster, a part of it comes from actually coding the medical record. One thing hospitals can do now is be sure that their chargemasters are correct and they know how to code interventional radiology. Appropriate use of modifiers is also something they can be learning. The modifiers are going to be critical to accurate payment."

"APCs are driven by what is provided — the medical visit, what services are performed and so forth," Prophet explains. "If you’ve miscoded something, it goes into the wrong APC. Everything has to be accurate down the line: The registration has to be accurate, the charges have to be accurate, and the billing has to be accurate.

"It’s going to be a major challenge gearing up. Hospitals will need to look at things like the proposed rules and their own patient mix, which procedures account for the highest volume of patients, and current outpatient coding practices," she says.

Compliance by the expected implementation date of July 1 will be almost impossible, according to both Hale and Prophet. The implementation of a new coding system is just too complex. Hale notes that there already is a shortage of coders, and although training is available, the learning curve is fairly steep. It would take six months to a year to bring a trainee up to speed.

And how will hospitals deal with the billing dilemma? "Actually," says Hale, "The only way hospitals can cope with this is to put in some admissions screening strategies. A case manager or an access nurse can look at this as a procedure is placed on the surgery schedule for Medicare patients; then you should coordinate with the surgeon to determine whether this should be done as inpatient or outpatient. The hospital can’t take that responsibility alone. It has to be a joint effort. Even the [rule in the] Federal Register says that it should be a collaborative effort between surgeon and hospital to determine the appropriate level of care for the patient."

She points out that there are some instances where even a hernia repair that is normally an outpatient procedure will become appropriate for inpatient if the patient has comorbid conditions. If the patient, for instance, had Class III heart failure, for example, outpatient care would be completely inappropriate.

Changes to accommodate the new billing procedures will have to be addressed on an individual basis by hospitals, Hale says. "Whether they have to add FTEs or just rearrange responsibilities will depend on what their current system is. But no one I know is anywhere near ready," she says. "Some hospitals have done more than others, but it’s a huge learning process." Still, HCFA seems committed to it. "So I think it’s here we go, ready or not," says Hale.

[Editor’s note: When HPR went to press, the Health Care Financing Administration’s final rule on APCs had not yet been published. Look for complete coverage of the final rule in upcoming issues of HPR.]