How to avoid outpatient PPS coding pitfalls

Significant challenges still await hospitals where the outpatient prospective payment system (PPS) is concerned. "The status of this regulation is completely unsatisfactory," warns Dennis Barry, a partner with Vinson and Elkins in Washington, DC. Congress grandfathered existing sites, so the issue will not fully mature until Oct. 1, 2002, he notes. But the manifold problems with this regulation have been on the back burner and are going to become a crisis a year from now, he predicts.

For starters, Barry says the Centers for Medicare and Medicaid Services (CMS) has yet to come out with an application that people can use, and there is significant inconsistency from region to region about the information it wants.

A huge number of questions remain unanswered, Barry says. The primary problem is CMS’s position that traditional outpatient departments such as outpatient surgery should be certified as provider-based even when they are within the four walls of a hospital and are part of a certified and licensed hospital rather than an off-site campus or purchased physician practice.

Also under the new system, hospitals get paid based on an ambulatory patient classification (APC) even though they don’t bill on that basis. "In fact, the APC does not even show up on the bill that gets submitted by the hospital at all," says Timothy Blanchard, a health care attorney with McDermott, Will & Emory in Los Angeles.

Instead, hospitals bill using a HCFA Common Procedure Coding System (HCPCS) code, which is based mostly on the CPT-4 coding rules published by the Chicago-based American Medical Association. That system is used by all payers for physician services in addition to some additional services that are characterized by other HCPCS codes, such as drugs and devices, explains Blanchard.

Hospitals still must bill ICD-9 diagnosis codes. "Diagnosis coding is still important, and medical necessity review is still going to occur," says Blanchard. "In fact, I think it is going to be stepped up as a result of the new system."

Blanchard also warns hospitals about default coding systems in part because the OIG has expressed concerns about automatic coding systems. "The concern is basically that you might put garbage in if you could get automatic payment out," he explains.

He says that makes it important to understand where the inputs to the coding system come from. "It is not that all automation is bad," he explains. "It just seems to be a little suspect at the moment."

Blanchard says there is likely to be a great deal of confusion in this area. Physicians will be furnishing professional services and billing using the same codes that sometimes mean slightly different things. Meanwhile, hospital coders and billers will have to bill using the same codes.