Medicare outpatient PPS system highlighted - Health Care Financing Administration technical advisor Janet Wellham's discussion on ambulatory payment system; prospective payment system

Healthcare Financial Management, Feb, 1998

During an HFMA audio teleconference, HCFA technical advisor

Janet Wellham discussed ambulatory payment classifications (APCs) for

Medicare's new outpatient prospective payment system (PPS). She stated that

the PPS system will be based on the 3M/HIS ambulatory patient groups. The

300 APCs will be grouped based on procedures, medical visits, and ancillary

services, and the services within each APC will be similar both clinically

and in relative resource use. Unlike the DRGs used to determine payment for

inpatient services, under APCs, payment for multiple APCs will be possible.

PPS-exempt hospitals will not be exempt from outpatient PPS. HCFA is

developing the weights using 1996 claims and the most recent cost reports

to build the database.

Several questions remain about implementing APCs, including whether to pay

for outliers and how to control for volume increases that may occur under a

PPS system. Impact analyses will be completed to determine if adjustments

will be needed to account for differences among hospitals. A proposed rule

is scheduled for publication in spring 1998; publication of the final rule

is targeted for October 1, 1998, to be effective January 1, 1999. Wellham

noted, however, that HCFA could implement APCs for ambulatory surgery

centers before January 1999.

Wellham also said that beginning in January 1999, providers may elect to

forego all but 20 percent of Medicare coinsurance on outpatient services. In

1999, HCFA will begin reducing Medicare coinsurance so that it equals 20

percent of Medicare's APC payment. In the meantime, coinsurance will be

fixed at 20 percent of the 1996 national median charges for each APC,

trended forward to 1999. The coinsurance will be frozen, but the associated

APC payments will be updated annually; as the payments are updated, this

fixed coinsurance amount will become a smaller percentage of Medicare's

payment. Once coinsurance equals 20 percent of the APC allowance, both the

coinsurance and the payments will be updated annually. According to Wellham,

proposed rules should be published in April or May 1998.

Hospitals may elect to reduce coinsurance for some or all services to no

less than 20 percent of the Medicare allowance, and may advertise their

reduced rates. Once a hospital elects a coinsurance amount, it cannot be

changed during the year. Any coinsurance that is foregone cannot be claimed

as bad debt, and deductibles cannot be waived. Currently, beneficiaries pay

20 percent of billed charges, which can amount to 50 percent or more of the

actual payments Medicare makes to providers for some services.