Expect APG bundling to cost you money
(Editor's note: If you've heard anything at all about ambulatory patient groups [APGs], you know that they'll probably reduce net revenues. But have you explored the impacts of bundling on your APG rates?
Bundling can decrease the amount of payment for some services under APGs by taking away some payments for ancillary services that previously were paid under a separate fee schedule.
Outpatient Reimbursement Management asked Lois Yoder, ART, CCS, president of The enVision Group of Naples, FL, to discuss the financial impact of APGs and bundling. The enVision Group is a resource management and consulting firm for outpatient, hospital-based services. Yoder has 15 years experience in the management of health care data and provider operations and has worked with APGs since Iowa implemented them for Medicaid.)
ORM: What is bundling, and what kind of financial impact will bundling have on APGs?
Yoder: For significant surgical procedure categories, certain ancillary services will be bundled into the surgical payment. In the most recent APG version, version 2.0, services like X-ray plane films, anesthesia, simple pathology, chemistry testing, and cardiograms, to name a few, will be bundled into the significant procedure APG payment. That will reduce payments. Facilities now are accustomed to receiving separate fee schedule payments for services like these, when performed in conjunction with a surgical service, and under APGs they will not receive these payments, which will reduce revenues. That will occur on Jan. 1, 1999 for hospitals.
Prior to APG implementation, facilities will want to try and estimate the percentage of ancillary services, including preoperative testing, that may fall into bundling criteria. For example, for radiology, they will need to estimate the percentage of chest X-rays that would be considered preoperative in nature, and then estimate that percentage as a decrease in their outpatient revenues. So if 20% of outpatient chest X-rays a year are preoperative tests, then radiology would estimate that approximately 20% of its outpatient X-rays will not be reimbursed by a separate APG or fee schedule payment.
In another example, the surgeon orders a preoperative calculated blood chemistry, a chemistry profile, and a chest X-ray prior to a bronchoscopy. All of these tests would be bundled into the surgical payment. In addition, if the physician performs a biopsy to acquire lung tissue for analysis during the procedure, then that pathology analysis also will be bundled into the surgical payment.
ORM: Will ambulatory payment classifications [APCs] adopted by the Health Care Financing Administration (HCFA) for Medicare also have a negative impact on freestanding ambulatory surgery center revenues?
Yoder: With both APGs and APCs there are some categories that will pay the ASC less than what it has been realizing in the past. One goal of using these classifications is to pay the provider based on resource consumption. The second goal is pay based on clinical characteristics of the patient. What that means is HCFA will pay, for example, all the pulmonary function tests the same because the service and the cost are essentially the same for patients with clinical diagnoses that describe a respiratory symptom or condition.
APGs and APCs both will impact the bottom line because payments will be based on the APG payment amount rather than a percent of charges that hospitals are now used to receiving. And it could impact general cash flow throughout the year. Some APG payments may equate to only 35% of charges. That means the relative weight for a certain APG may be very low, which may equate to a lower payment. For example, if the charge for a service is $100 and the APG payment equates to 35%, then the payment will be only $35. It's up to each payer to determine what their relative weights will be. In states where certain payers have implemented an APG program, providers are realizing some payments to be as low as 35% to 45% of charges. Now is the time to base charging methodology on cost.
ORM: How will setting up APCs be different from what facilities already have done to prepare for APGs?
Yoder: If a facility is being paid for APGs for commercial accounts, the facility will need to prepare for Medicare APCs by creating a method to identify charges and services by a Medicare financial class. For example, in the Chargemaster, a column should be dedicated to Medicare HCPCS codes. When the Medicare financial class is triggered in the charging process, the correct HCPCS codes will then be pulled from the Chargemaster for billing.
Hospitals and ambulatory centers will also need to prepare to install another grouper. A grouper is a software program that takes all of the charge and code data for a patient encounter and assigns APG groups based on the revenue codes of HCFA's Common Procedural Coding System (HCPCS) and the International Classification of Disease Ninth Revision - Clinical Modification (ICD-9-CM) codes.
ORM: Will this require a lot of expense and staff time?
Yoder: There will be additional expense, but estimates are difficult to make. There will be additional expense in terms of purchasing groupers for various APG plans. The greater expense tends to be related to creating new job descriptions or positions to oversee APG reimbursement. New positions are generally in either the finance or the health information management department. Medicare APCs take effect Jan. 1, 1999, and facilities will need at least six months to prepare for the change.
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