Principles of Healthcare Reimbursement Third Edition Chapter 7 Medicare-Medicaid Prospective Payment Systems for Nonhospitalized Patients: Ambulatory Surgical Center Prospective Payment System

Objectives Describe the Ambulatory Surgical Center Prospective Payment System Identify the components, adjustments, and provisions of the ASC PPS Recall the payment determination steps for ASC payment

Ambulatory Surgical Centers Ambulatory surgical centers (ASCs) Provide designated surgical services to Medicare beneficiaries Under Medicare supplementary medical insurance program (Part B) Facility must be Medicare certified

Ambulatory Surgical Centers Medicare-certified criteria Separate entity Have own national identifier or supplier number Maintain own licensure, accreditation, governance, professional supervision, administrative functions, clinical services, record keeping, and financial accounting systems Sole purpose of delivering services in connection with surgical procedures not requiring inpatient admission Meet all requirement of applicable sections of SSA

Ambulatory Surgical Centers Medicare-certified Accept assignment: Medicare payment as payment in full Medicare = 80% total payment Beneficiary = 20% total payment Payment designed to reimburse for facility resources (cost) Professional payment is excluded Physicians reimbursed under Medicare physician fee schedule

Omnibus Budget Reconciliation Act of 1980 Legislation Omnibus Budget Reconciliation Act of 1980 Amended the SSA to create ASC PPS ASC List of Covered Procedures ASC List Implemented in 1982

Criteria for ASC Procedures Procedures or services commonly performed in the inpatient setting, but can be safely performed in an ASC Limited to procedures requiring a dedicated operating room or suite and generally require post-operative care Limited to procedures that have an operating room time and local, regional, or general anesthesia duration no greater than 90 minutes and recovery room time no greater than 4 hours Includes procedures not otherwise excluded from Medicare Excludes procedures that generally result in extensive blood loss, require major or prolonged invasion of body cavities, that directly involve major blood vessels, or that are generally emergency or life-threatening in nature Excludes procedures that are regularly and safely provided in the physician office setting

With the ASC List Medicare is able to influence site of service Create a motivation for migration from more expensive inpatient setting to less expensive outpatient surgery setting Without creating a motivation for shifting from less expensive physician office setting to more expensive outpatient surgery setting

How did they create this motivation? Site of Service (cont.) How did they create this motivation? Quantitative criteria (beginning in 1987) Adds and deletions Excluded from list Procedure performed in the inpatient setting 20% or less of the time Procedure performed in the physician office setting 50% or more of the time First major revision in 1987 Next major revision in 1995 Final major revision in 2004 Fully revised PPS 2008

Legislative History BBA 1997 BBRA BIPA NO CHANGE OCCURRED Proposed APCs for HOPPS Also proposed APCs in ASC setting BBRA 3 year phase in period for APCs in ASC setting BIPA Delayed implementation to 1/1/02 or after Changed phase-in period to 4 years NO CHANGE OCCURRED Medicare busy with HOPPS and Y2K

Legislative History (cont.) 2003: Office of the Inspector General released Payments for Procedures in Outpatient Departments and Ambulatory Surgical Centers Need for greater similarity in payment rates between hospital outpatient areas and ASCs Disparity in payments cost Medicare $1.1 billion for cases studied Recommendations Medicare seek authority to update system Conduct cost survey Update ASC List (over 70 procedures that do not meet criteria still on list)

Legislative History (cont.) MMA Required the implementation of a new PPS for ASCs Implementation between 1/1/06 and 1/1/08

Revised ASC PPS Effective 1/1/2008

Utilizes the HCPCS Coding System ASC PPS Utilizes the HCPCS Coding System Yearly update for code changes Scope of services expanded for CY 2008 (over 700 codes) ASC services Office-based procedures

Payment rate is based on APC group relative weight ASC PPS Payment rate is based on APC group relative weight ASC payment is 65% of the OPPS payment CY 2008 the conversion factor is $41.401

ASC PPS Separately payable services (via APCs) Radiology services Brachytherapy sources Drugs and biologicals Implantable devices with OPPS pass-through status Corneal tissue acquisition Integral to surgical service Performed on same day as surgery Not bundled under OPPS

ASC PPS Device intensive procedures CMS produces a list of device intensive procedures in OPPS 50% or more of median cost is due to device Under ASC PPS payment methodology is modified for these procedures Allows for equal reimbursement for device regardless of setting Divides payment into 2 portions Device portion (not multiplied by CF) Procedure portion (multiplied by CF)

Adjustment Adjustment Wage index adjust labor portion of payment Based on MSA 50% of payment is wage index adjusted

Multiple and bilateral procedures Provision Multiple and bilateral procedures Multiple procedures during same surgical session Highest level Group = 100% payment All remaining Groups = 50% payment Bilateral procedures 150% payment rate for the Group

ASC PPS Transition period Four year transition period for those services that were on the 2007 ASC List Procedures added to the scope of services for 2008 are not included in the transition (full ASC APC rate in 2008) Payment indicators are used to identify procedures that are subject/not subject to the transition

Payment Steps Report service with HCPCS code APC is assigned Multiple/bilateral provision is applied if applicable Wage index adjusted Payment is made to facility

Principles of Healthcare Reimbursement Third Edition Chapter 7 Resource-Based Relative Value Scale for Physician Payments

Objectives Outline the history and development of the Resource-Based Relative Value Scale (RBRVS) for Physician Payments Define key terms Describe the structure of the payment system Calculate a payment under the RBRVS

Resource-Based Relative Value Scale (RBRVS) Federal Payment System for Physicians across Continuum of Care System of Classifying Health Services Based on: Cost of Furnishing Physician Services in Different Settings, Skills and Training Levels Required to Perform the Services, and Time and Risk Involved

History of RBRVS Concept of Relative Value Scale (RVS) Dates from 1940s RVS Represents Worth of Healthcare Services Multiple Views of “Worth” Historical Charges Amt. Patients Will Pay Physicians’ Assessments of Worth Monetized Societal Good Micro-costing from Time & Motion Studies Etc.

History of RBRVS (cont.) Consolidated Omnibus Reconciliation Act (COBRA) of 1985: HHS Directed to Develop RVS Purpose Decrease Medicare Part B Payments Eliminate Inequities in Payments Specialty Type of Procedure Geographic Locality Service Site Carrier Policies

History of RBRVS (cont.) 1985 CMS Awarded Grant to Harvard, William Hsaio RVS Research 4,000 Services (85% of Medicare Payments) Omnibus Budget Reconciliation Act (OBRA) of 1989 CMS to Set Up System of Payment Reform RBRVS Adopted

History of RBRVS (cont.) Jan. 1, 1992 RBRVS Effective (Phase-In Through 1996) Controlled Fee-for-Service System Based on CMS’s Estimation of Value of Physician Services (Not PPS) Services Physician Medical/Surgical Diagnostic Radiologic Physical & Occupational Therapy Physician Assistant Nurse Practitioner Nurse Midwife

Structure of Relative Value Units (RVUs) HCPCS/CPT Codes Assigned Relative Value Units RVUs Permit Comparison of Resources by Assigning Weights to Personnel Time, Level of Skill, and Technology National Averages RVU Elements Time & Intensity of Work (Physician Work, WORK) Cost of Practice (Physician Practice Expense, PE) Risk of Malpractice (MP)

Structure of RVUs (cont.) WORK Covers Physician’s Salary Time Intensity Mental Effort & Judgment Technical Skill Physical Effort Psychological Stress

Structure of RVUs (cont.) PE Overhead Costs of Practice Office Rent Wages of Nonphysician Personnel Supplies & Equipment Two Rates Facility (Hospital, etc.) Lower Nonfacility (Physician Office) Higher MP Cost of Premiums for Professional Liability (Malpractice) Insurance

Payment Structure: GPCIs Geographic Practice Cost Index (GPCI) Adjustment for Geographic Differences in Costs Each Element of RVU Has Unique GPCI WORK PE MP

Payment Structure: CF Conversion Factor (CF) Converts RVU into Medicare Payment Conversion Factor is Across-the-Board Multiplier (Constant) CMS Determines Annually and Notifies in Federal Register Conversion Factor Most Direct Control on Medicare Payments Raising or Lowering CF Increases or Decreases Medicare Payments to Physicians

RBRVS Formula [(WORK RVU) (WORK GPCI) + (PE RVU) (PE GPCI) + (MP RVU) (MP GPCI)] = (SUM) X CF = Medicare Physician Fee Schedule (MPFS) Amount

Generic Example: RBRVS (99202)

Payment Structure Actual Payment 80% of National Allowance Medicare Beneficiaries Responsibility Part B Deductible 20% Coinsurance

Adjustments: Variation to RBRVS Formula Budget Neutrality (BN) Adjustor Clinician Type Participating v. Nonparticipating Anesthesiologists Nonphysician Providers Special Circumstance Underserved Area Incentive for Quality Technology

Operations: RBRVS & Poor CPT Coding* 43200 Esophagoscopy WORK 1.59 x 1.000 = 1.59 PE 4.13 x 0.925 = 3.82025 MP 0.13 x 0.64 = 0.832 Sum = 5.49345 x CF $37.8975 $208.19 43217 with Removal of Tumor, Polyp, or Lesion…. WORK 2.9, PE 6.95, MP 0.26 (GPCI Stays the Same) Sum = 9.49515 x CF $37.8975 $359.84 Lost $121.65 *Nonfacility, Generic Example

Future Issues Adoption of Electronic Health Record Correction of Overrides of Sustained Growth Rate

Summary Payment System Specific to Physician Services across the Continuum of Care Accurate Coding Necessary for Appropriate Reimbursement

Principles of Healthcare Reimbursement Third Edition Chapter 7 Medicare-Medicaid Prospective Payment Systems for Nonhospitalized Patients: Ambulance Fee Schedule

Medicare Part B provides beneficiary coverage for ambulance services Covered Services Medicare Part B provides beneficiary coverage for ambulance services Will provide transport service, only if other means are inadvisable based on the beneficiary’s medical condition Provided to the nearest facility that is able to provide services for that patient’s condition Transported From one hospital to another To home To an extended care facility

Two types of ambulance service entities History Two types of ambulance service entities Providers: Associated with a medical facility such as a hospital, CAH, SNF, or HHA Retrospective reasonable cost payment Previous year’s cost-to-charge ratio (CCR) Suppliers: Not associated with a medical facility Reasonable charge payment mechanism Fours ways to report ambulance services

Both types used HCPCS Code Set History (cont.) Both types used HCPCS Code Set Providers A0030–A0999, excluding A0888 (ambulance codes) And codes to report type of mileage Suppliers A0030-A0999, excluding A0888 Level I codes 93005 and 93041 Various other Level II codes

BBA of 1997 Legislation Added section 1834(1) to the SSA Required the creation of a fee schedule to establish prospective payment rates for ambulance services Devised through negotiated rulemaking (Negotiated Rulemaking Act of 1990) Negotiated Rulemaking Committee on Medicare Ambulance Services Fee Schedule

The committee was instructed to: Legislation (cont.) The committee was instructed to: Control Medicare expenditures through PPS Establish service definitions to link payment to the type of service Consider regional and operational differences Consider inflation Construct a phase-in period for implementation Require providers and supplier to accept Medicare assignment Reimburse providers and suppliers at the lower of FS or billed charges

BBA (cont.) BBRA of 1999 Legislation (cont.) Established the paramedic intercept service type (discussed under levels of service) BBRA of 1999 Modified the definition of rural for the paramedic intercept service type

Legislation (cont.) BIPA of 2000 Excluded CAH from the fee schedule payment methodology when the CAH is the only supplier or provider of ambulance services within a 35 mile drive. Reasonable cost basis Increased payment rates for rural ambulance mileage Modified inflation factor for 7/1/01 to 12/31/01 Increased 2% Eliminated blended payment rate for mileage phase-in provision for suppliers

Five year phase-in plan Ambulance FS Implemented April 1, 2002 Five year phase-in plan Reimbursement is based on the level of service provided to the beneficiary Seven levels of service

Levels of Service Chart:

Service Acronym Description Basic Life Support BLS Service level of an Emergency Medical Technician (EMT)-Basic, including the establishment of a peripheral intravenous line. Advanced Life Support, Level 1 ALS1 In emergency cases, an assessment provided by an EMT-Intermediate or Paramedic (ALS crew) to determine patient needs and the furnishing of one or more ALS interventions. An ALS intervention is a procedure beyond the scope of an EMT-Basic. Advanced Life Support, Level 2 ALS2 The administration of at least three different medications or the provision of one or more ALS procedures. Specialty Care Transport SCT For critically injured or ill patient, the level of interhospital service furnished is beyond the scope of a paramedic. Ongoing care must be furnished by one or more health professionals in an appropriate specialty area. Paramedic ALS Intercept PI ALS services furnished by an entity that does not provide the ambulance transport. Fixed Wing Air Ambulance FW Destination is inaccessible by land vehicle or great distances or other obstacles (heavy traffic) and the patient’s condition is not appropriate for BLS or ALS ground transportation. Rotary Wing Air Ambulance RW Helicopter transport. Destination is inaccessible by land vehicle or great distances or other obstacles (heavy traffic) and the patient’s condition is not appropriate for BLS or ALS ground transportation.

Immediate response payment Provisions Immediate response payment Emergency response involves responding immediately at the basic life support or advanced life support level 1 of service to a 911 or 911-type call Immediate response is one in which the ambulance begins as quickly as possible to take the steps necessary to respond to a call Additional payment is provided for the extra overhead expenses incurred to stay prepared at all times for emergency service

Multiple-patient transport Provisions (cont.) Multiple-patient transport Example: traffic accident 2 passengers Each beneficiary is reimbursed at 75% of the base rate for the level of service provided 3 or more passengers Each beneficiary is reimbursed at 60% of the base rate for the level of service provided Single payment is made for the mileage Modifier GM is reported with level of service HCPCS code

Transport of deceased patients Provisions (cont.) Transport of deceased patients Specific rules Patient is pronounced dead prior to the ambulance being called, no payment is made to the ambulance provider/supplier Patient is pronounced dead after the ambulance has been called but prior to its arrival, BLS base rate for group transport or air ambulance base rate payment will be made. Mileage will not be reimbursed. Patient is pronounced dead during transport, payment rules are followed as if the patient were alive. Modifier QL should be reported with the level of service code.

Adjustments Regional variations Based on point of beneficiary pick-up (zip code) Geographic adjustment factor is applied Equal to the practice expense portion of the geographic practice cost index used in the Medicare physician fee schedule Ground transport 70% of payment rate is adjusted Air transport 50% of payment rate is adjusted Mileage is not adjusted

HCPCS Level II modifiers Origin and destination modifier must be reported for each trip Additional modifiers are used Provided under arrangement of a provider of services (QM) Furnished directly by a provider of services (QN)

Six step process Payment Steps Takes into consideration Patient service level Modifiers Zip codes Miles Add-on payments

Payment Steps (cont.) Identify the level of service code for the transportation provided Does the case meet emergency response criteria? Determine the number of patients transported If yes, append modifier and reduce payment Determine if the Medicare beneficiary was pronounced dead If yes, append modifier and adjust payment Apply the regional variation adjustment Identify zip code Identify the mileage code and number of miles Add together the level of service payment and mileage payment to determine total reimbursement

Compliance “Medicare Payments for Ambulance Transports” report 25% of the ambulance transport claims did not meet CMS program requirements deficient claims resulted in $402 million of improper payments

Compliance OIG recommendations: Prepayment edits Post-payment review guidelines Education, education, education

Condition Lists Numerous requests for medical condition lists to aid in determining level of service Do not use ICD-9-CM Broad categories of issues Do not use a HIPAA approved code set CMS implemented a Medical Conditions List February 2007 Condition list Transportation indicators Assist with determining the appropriate level of service