Calculating Pass-Through and Outlier Payments under APCs

Healthcare Financial Management, July, 2001 by Martin Gold, Susan Snodgrass

(2) The markup on the surgical procedure is 125 percent.

(3) The outpatient CCR is 32 percent.

(4) Facility costs for the procedure are $1,625.

(5) The implantable device cost is $9,000.

(6) The procedure (CPT/HCPCS code 99999) falls within APC 9999.

(7) The implantable device does not appear on the passthrough list and is not eligible for pass-through payment.

(8) An automatic outlier calculation is applied to the claim.

(9) Initially, the claims system would sum all payments on the claim, including APCs and pass-through payments, and determine the outlier payment threshold. The threshold would be equal to 2.5 times the total amount of the initial payment.

(10) The claims system then would calculate the "reasonable costs" of the services submitted on the claim by multiplying the hospital's charges by the CCR.

(11) Payment then would be equal to 75 percent of the dollar amount above the threshold.

(12) The total payment amount then would be equal to the APC payment plus the outlier payment.

Conclusion

Successfully calculating payments for pass-through and outlier devices requires that financial managers have a thorough knowledge of the medical devices, drugs, and biologicals being used in their outpatient surgery departments. Financial managers should work closely with their facility's surgical services manager and members of the purchasing department to ensure that these items are properly identified and their payment status determined.

Once the payment status of the item has been determined, it is possible to appropriately structure the CDM to ensure that the acquisition cost of the item is covered. Financial managers should keep in mind that the markup applied to the item can affect the payment provisions and member coinsurance requirements of non-Medicare third-party payers. These insurance complications can be dealt with in a variety of ways: for example, contractually through the use of a carve-out for the pass-through items (payer will pay the provider its acquisition cost, plus a handling fee) or through the use of case rates for specific procedures using pass-through items. Alternatively, the issue may be dealt with through the implementation of new collection policies and procedures.

The APC system will continue to develop over the next several years. Hospitals have an opportunity to influence the development of the new system through the use of accurate billing, coding, and record-keeping to ensure that the true cost of care is correctly reflected in the payment rates.

ABOUT THE AUTHORS

Martin Gold, MBA, is therapy access consultant, Medtronic, Monsey, New York, and a member of HFMA's Hudson Valley chapter.

Susan Snodgrass, MBA, is therapy access consultant, Medtronic, King of Prussia, Pennsylvania, and a member of HFMA's Metropolitan Philadephia chapter.

(a.) HCFA, Transmitral No. A-01-4l, March 22, 2001 (http://www.hcfa.gov/pubforms/transmit/memos/comm_date_dsc.htm).

(b.) HCFA, Transmittal No. A-00-36, June 2000 (http://www.hcfa.gov/pubforms/transniit/2000/memos/camm_date_dsc.htm) .