Toward a prospective payment system for ambulatory surgery

Health Care Financing Review, Spring, 1990 by Joanna Lion, James Vertrees, Alan Malbon, Ann Collard, Peter Mowschenson

The lack of relationship of resource use in the same DRG when the surgery is performed on an inpatient as opposed to an outpatient basis greatly lessens the appeal of using DRGs to reimburse for ambulatory surgery. This lack of enthusiasm is heightened by the fact that the lack of relationship of resource use has now been demonstrated in both Medicare and younger populations. Another powerful deterrent is the substantial minority of borderline surgical procedures that do not fall into a surgical DRG in the first place.

Arguments against diagnosis-related

groups

There are, of course, significant political and technical arguments against the DRG approach as well. These include:

* In the DRG approach, ICD-9-CM procedure coding is used for the formation of all surgical groups. The Part A hospital outpatient department reimbursement formerly used ICD-9-CM just as inpatient reporting did. Beginning in 1987, however, CPT-4 coding has been mandated for the fiscal intermediaries for all hospital outpatient department care. Moving ambulatory surgical procedures back to the old ICD-9-CM system in order to accommodate DRGs could be seen as a step backward.

* CPT-4 is generally acknowledged by both clinicians and researchers to be a far superior coding system to ICD-9-CM procedure codes, especially for outpatient procedures.

* The freestanding surgery centers have always used CPT-4 for both their facility and physician component reimbursement.

* About one-fifth of all charges for ambulatory surgery are for visits that fall in a medical rather than in a surgical DRG. Except for lens procedures, visits for the most common medical DRGs, as shown in Table 2, were for digestive disorders and skin disorders. These visits were for procedures that were not performed on an inpatient basis as they were 10 years ago when DRGs were first developed. The problem is more pervasive than it might first appear because visits for these procedures tend to be inexpensive and, thus, more numerous. In fact, although only 21 percent of all ambulatory surgery charges fell into a medical DRG, 39 percent of all visits with an ICD-9-CM defined surgical procedure fell into medical DRGs.

* Even if most ambulatory surgical procedures could be accommodated by the DRG system, the DRGs were never designed for nonprocedure-oriented ambulatory care. Thus, DRGs cannot accommodate charges for over 80 percent of all hospital OPD visits.

Beyond diagnosis-related groups

If there were no readily available alternative, DRGs might still be used as a stopgap measure for a prospective payment system for ambulatory surgery. This is, however, not the case. An outpatient case-mix classification system, ambulatory visit groups (AVGs), has been developed by Yale University and is now in its third generation.

AVGs use CPT-4 coding, cover ambulatory surgical procedures as well as all other ambulatory care, and are designed to be used in any ambulatory setting. Although other case-mix-based systems exist, the AVGs most closely resemble DRGs, and their construction requires the fewest data elements. AVGs are also the most widely tested and are currently being used by the Department of Defense in constructing a prospective budgeting system.