Medical Billing: Understanding APCs-Ambulatory Payment Classification

Coach Jennifer: We have somebody who comes in with a question that they don’t understand how the APC indicators influence coding.
Q: I don’t understand how the APC indicators influence coding. Of course they influence billing and revenue, but as a coder why do I have to pay attention to them?
Because on one hand, there are a lot of services that are bundled and have a status indicator of ‘N’, on the other hand the course instructs to code them regardless of whether they’re going to get a cost.
I would appreciate any kind of clarification on this!
A: When we’re looking at APCs those are Ambulatory Payment Classifications and those are established by Medicare and their payment rates affiliated with your ASCs, your ambulatory surgical centers. They deal with the OPPS, which is I’ll go into that in a minute or two.
The ASC, they’re not Medicare providers, they’re suppliers of surgical services. But they must accept Medicare and that they have to be participating, they must have their own individual contract with Medicare so they can be separate from a hospital, freestanding facility or they can be affiliated with a hospital. It used to be in the beginning when the ASCs came out, you could not be affiliated with a hospital, but now they do allow hospital affiliation as well.
Then, the next thing they talk about is the OPPS. You’re going to hear... if you do any kind of billing or billing education, you hear a lot about the Prospective Payment Systems. There’s Home Health Care Prospective Payment System. There’s Inpatient. There’s Skilled Nursing. There are all sorts of Prospective Payment Systems out there that Medicare has established. So, OPPS is the Outpatient Prospective Payment System and that’s how Medicare decides how much money a hospital or mental health facility.
Remember we’re talking about outpatient. So, outpatient still billing with Medicare, it can still be at a hospital. We gotta keep that in mind there. A lot of people think hospital is only inpatient while hospitals also have outpatient services. So, that’s how much they’re going to get paid for those Medicare patients, for the outpatient services that they provided. They assign each HCPCS, each CPT code a letter that’s going to signify how it’s going to be reimbursed.
The status indicator is an indicator that helps determine things like their policy rules, like “packaging” or “bundling”. When you hear packaging or bundling, we also think of things that are inclusive, so things that are all provided under cost of one thing. So, they’re all bundled together, remember. And so they’re paid under a single unit. They ask about indicator of N, which means that those items or services are already all packaged into the APC rate. They’re paid under the Outpatient Prospective Payment System but the payment is going to be a single payment, and that way there’s no separate payment for those separate services. If you look up a HCPCS code or CPT code for these particular facilities that deal under the system, then if you see that N, you can say, “Well, it’s not going to be paid. It’s all bundled into the main one.”
Why does a coder have to pay attention to that? Well, the same as in a physician’s office you’re going to look at your NCCI edits. You’re going to look and see, can I bill those two codes together? Are they inclusive? Do they need a modifier? Is there something I need to know about these two? The coders are going to do the same thing in this type of system as well. Those status indicators are going to tell you what can be submitted on that claim form.
Under the OPPS, the surgical procedures that are performed in ASC, they come under facility fee unless it’s deemed not eligible. Why can you not bill something to Medicare at an ASC? Medicare loves their formulas and when you’re dealing on the billing side, you see these formulas all the time – RVU plus the geographic index, plus this, multiple it by that. They do a lot of these formulas. They assign all these things “weight.” It’s actually a percentage of what the hospital would get for those services because it takes into account the administrative fees, the time, the nurses, the equipment, things like that. Same as it does on a facility side. So, these get paid a percentage when they’re dealing with the ambulatory, surgical center, or percentage of that same type of payment system, so they weight it. And then they have conversion factor which goes by your geographic areas sometimes or the type of facility or the type of qualifications they have, and that comes up with their ASC payment rate.