PPS system coming to hospitals in 1999
Surgery centers to have system by mid-1998
In the recently passed balanced budget bill, the compromise measure reached between the White House and Congress dictated that the Health Care Financing Administration (HCFA) must implement an outpatient prospective payment system (PPS) for hospital outpatient surgery, radiology, and other diagnostic services by calendar year 1999. The PPS for surgery centers is likely to be kicked off earlier than for hospitals, probably mid-year 1998, and doesn’t need Congressional approval. The PPS is expected to be similar to ambulatory patient groups (APGs), which placed procedures in nearly 300 categories.
In a surprise revelation, a HCFA official says same-day surgery managers are mistaken if they expect HCFA’s system to be a duplicate of the APG systems being implemented by state Medicaid systems and private insurers around the country.
"Every category of provider may have different target payment levels" for hospital same-day surgery programs and ambulatory surgery centers (ASCs), says the official, who under agency policy requested anonymity.
"There are all kinds of bells and whistles you can put on a system," she says. The 72-hour rule is one example. This rule bundles any outpatient services furnished before the patient comes to the hospital into the APG.
In the system being developed at the federal level, there will be less packaging of services (bundling) than originally proposed with APGs. The packaging of services under APGs was one of major concerns raised by the hospital industry.
"We won’t include the costs of laboratory tests and low-level radiology that we had thought we’d include as payment for surgery or the office visit," the HCFA official says."Instead, we’ll pay separately. Someone may come into the hospital and may get two or three group payments for a particular day of services."
Outside of the news about the prospective payment system, the balanced budget bill also dictates the elimination of formula-driven overpayment. (See explanation and chart, p. 126.)
Good news/bad news
Although the news means that hospitals can move from a blended reimbursement rate partially based on a cost to a PPS, reaction to the news has been primarily positive. The current system is too complex, says Deborah Williams, senior associate director for policy develop- ment at the American Hospital Association in Washington, DC.
"It’s a system in which hospitals don’t know what we’re going to get paid, and HCFA doesn’t know what it’s paying us, so the situation is ripe for disaster," Williams says, referring to the fact that hospitals must settle a cost report and all outpatient surgeries are blended.
HCFA is constantly finding errors in payments that have been going on for several years and have resulted in underpayments for ambulatory surgery, says Dana Kelley, policy analyst at the Prospective Payment Assessment Commission in Washington, DC, which advises Congress on health care financing issues.
The upcoming system will be simpler, Kelley maintains. "Hospitals would know in advance what the payment rates would be, which allows for easier planning," she says.
There are still concerns among hospital same-day surgery managers, however. "The greatest concern with a fixed pricing methodology is that it is constructed properly and bears relationship to cost and resource consumption," says Joel Perlman, CPA, senior vice president of finance at Montefiore Medical Center in Bronx, NY. (For survival tips, see story, p. 125.)
Another concern is the possibility that volume thresholds might be developed. This is a particular concern because a significant amount of surgery continues to move to the outpatient setting.
"The imposition of artificial caps that don’t recognize how the industry is moving could be hurtful, especially if used as a budget-cutting mechanism," Perlman says.
What about surgery centers?
No one seems certain about what to expect, particularly since HCFA unofficially is beginning to apply a new name to the PPS: ambulatory patient classification system. The overriding concept is the same as for APGs, however, the HCFA official says. "It’s the same concept, but groups may look a little different."
Although the same classification system is expected to be used for hospitals and surgery centers, federal law and HCFA regulations dictate that the payments won’t necessarily be the same, and surgery centers won’t be able to perform all the outpatient procedures that a hospital performs, she says.
Centers can expect a major revision of their payments, since 1994 ASC cost survey data will be used to rebase the rates. HCFA also is expected to make additions and deletions to the list of procedures it covers, including dropping some procedures that have migrated to physicians’ offices.
HCFA is correcting its tendency to overpay for some services and underpay for others, another HCFA official says. Currently, the ASC list payments range from $312 and $900. "That’s a very narrow range," the official says.
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