Coming: prospective payment system for outpatient care - Ambulatory Visit Groups - editorial

Medical Laboratory Observer, Oct, 1989 by Robert J. Fitzgibbon

Coming: Prospective payment system for outpatient care

The next important acronym in health care may be AVGs (Ambulatory Visit Groups), a prospective payment system for outpatient care. AVGs would embrace all hospital outpatient care under Medicare, just as DRGs (Diagnosis Related Groups) now regulate inpatient care.

The Health Care Financing Administration (HCFA) recently awarded a two-year contract to Health Systems International (HSI) of New Haven, Conn., to design and develop an AVG patient classification system, building on groundwork laid at Yale University in 1978. HSI also developed the DRG system for Medicare.

In announcing the contract, Richard F. Averill, vice chairman of HSI, explained: "The purpose of the AVGs is to define the product of health care in the ambulatory setting. In developing the AVGs, Health Systems International has formulated a system to describe many types of outpatient encounters between patients and physicians. These encounters were classified into groups--Ambulatory Visit Groups--denoting the consumption of similar types and amounts of resources. Each AVG identifies the various types of patients who can be considered different products of the ambulatory health care system."

Congress directed HCFA to develop a complementary prospective payment system for all outpatient care following the successful--from the Federal viewpoint--implementation of the DRG-based prospective payment system for inpatient care, begun in 1984.

On this point, HSI's Averill said: "A satisfactory outpatient payment system must provide equitable payments to hospitals for necessary services, offer the possibility of a feasible administrative mechanism at a reasonable cost, and avoid incentives that would tend to encourage abuses or compromise quality of care." * Rationale of AVG project. Here is HSI's analysis: "While Medicare's prospective payment system based on DRGs has reduced acute care hospital costs and payments, the ambulatory care sector has not been similarly affected. Mounting evidence suggests that care delivered in outpatient settings has expanded at a disproportionate rate since the introduction of prospective payment. This expansion has occured during a period of nearly explosive interest in all forms of health care delivery outside the acute care hospital.

"Given the relative effectiveness of prospective payment in the hospital inpatient sector and the positive incentives it introduces, it would seem appropriate to consider the application of prospective payment to ambulatory care.

"Under DRG-based prospective payment, payers are much better able to understand and control the acute care portion of the health care bill, but the ambulatory portion remains largely uncontrolled and much less well understood. By extending a prospective payment system to ambulatory care, payers would be better able to predict and control their outpatient expenditures."

How soon will the AVG system be implemented? HCFA must report to Congress on a prospective payment system for outpatient services by Jan. 1, 1991. The new system could therefore be effected that year, though 1992 is probably more likely. But come it will.

And although the AVG system, like the DRG system, would apply only to Medicare patients, it's wise to remember that other third-party payers tend to follow the Medicare lead on reimbursement.