Does APG coding frequency translate to more income?
Question: Do rankings of CPT codes suggest that certain procedures will generate higher revenue under APGs?
Answer: High volume CPT codes do not necessarily translate into high revenue. Many high-volume ancillary tests have relatively low unit charges. Other moderate-volume procedures such as heart imaging and computerized axial tomography (CAT) scans have relatively high unit charges. These codes can result in higher revenue than many of the high-volume ancillary tests.
Under APGs, CPT codes represent only the first step in the reimbursement process. There are additional adjustments that are made to a claim that determine the actual payment.
These adjustments were originally developed by Murray, UT-based 3M Health Information Systems for the proposed Medicare outpatient prospective payment system (PPS). However, they have not been approved for use by the Health Care Financing Administration (HCFA) in Baltimore for the Medicare PPS.
They include the packaging of the CPT-4 codes (mentioned above), the consolidation of multiple significant procedures when they occur under related circumstances, and discounting, which reduces the standard payment rate for multiple procedures. In addition, each APG will be weighted by HCFA based on national charge data adjusted to cost.
Total payments under an APG-based system will depend on the weight that is accorded for each APG and the facility’s designated payment rate. The number of occurrences of the procedure at a facility also influences the total payment. Therefore, the frequencies of the CPT-4 codes alone are not sufficient predictors of a facility’s financial performance.
Cost management essential under APGs
APGs that are likely to represent a significant portion of APG-based payments include:
• cataract procedures (significant procedure);
• arthroscopy (significant procedure);
• CAT scans (ancillary test);
• radiation therapy (significant procedure);
• magnetic resonance imaging (ancillary test).
What is important is how well your facility manages the costs associated with delivering each outpatient service that is assigned an APG. The most frequently performed ancillary services, such as chest X-rays, often end up packaged with the significant procedure and may get reimbursed at a level below actual cost.
Here are a few suggestions in forecasting your payment performance:
• Begin by thinking in terms of APGs, not CPT-4 codes. The APGs ultimately determine the payment rate. Although CPT-4 codes are important, they chiefly serve as the underlying basis for selecting the APG that will pay the claim.
• Look at your top-revenue APGs. These will vary based on the array of services provided by your facility. Determine whether these APGs will be packaged or consolidated. If your resource utilization is higher than the national average for a given APG, then you may receive a reduced payment under APGs.
• Ask yourself, is there a particular set of CPT-4 codes in the packaging (or consolidation) process that tends to drive the significant procedure or medical visit APG? Or is it a hodgepodge of services? Knowing this will help you determine whether you can effectively reduce your costs and where these cuts can occur in the services mix.
• Keep in mind that your actual payment will likely reflect a set of national averages and may not correspond to your facility’s own pricing level or cost structure.
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