1. Adjudicated Payment per Episode of Care (APEC) Overview and Early Experience
Steve Sauter
Director, Acute Hospital Program
MassHealth Office of Providers and Plans
MAPAM meeting Feb. 16, 2017
Draft-for discussion purposes only

2. Impetus for Replacing PAPE* with APEC
Better link at hospital’s episode level between resources required (i.e., case weight, service types, cost) and payment
EAPGs (with weights) determined for specific episode - not 1 single, average weight and PAPE per hospital per episode for entire year
EAPG weights can be updated more frequently
Outlier add-on calculated (> or = $0) using episode’s costs
Increased transparency to providers
Improved ability to track costs for comparisons, efficiency improvements, etc.
The refinements above can facilitate movement to ACOs, total of cost care, etc.
*Payment Amount per Episode of Care
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3. APEC Development Milestones
Buy-in from leadership to replace PAPE
Engaged consultant to assist with data development, MMIS preparation, importing experience from other states
Decision to finish inpatient (SPAD ->APAD 10/1/14) before outpatient, not simultaneously
A bridge year (Rate Year 2016) in which PAPE included a base rate and used cost reports, not just prior PAPE payments
Weights based on MassHealth paid claims, with refinements using national data (e.g., for low volume EAPGs)
Planning sessions and specifications developed with MMIS; consultation with 3M
Pilot testing with six hospitals and/or hospital systems
Trading partner testing with all in-state and any interested out-of-state acute hospitals; dialogue with hospital associations
Intensive Q+A, troubleshooting, phone consults with individual hospitals and with hospital associations
10/1/16 -> 12/1/16 -> 12/30/16 go-live (12/30/16, not 1/1/17)
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4. The Basics
MassHealth’s 3M EAPG grouper is a classification system that groups outpatient services with similar resource use in order to determine an episode’s relative resource intensity, which impacts payment (i.e., APEC; previously PAPE)
APEC and EAPG are applicable to all hospital outpatient settings, including amb surg, ED, clinics, diagnostic centers; i.e., MassHealth Provider Types 80 (Acute Outpatient Hospital) and 81 (Hospital Licensed Health Center).
Not applicable to freestanding, non-hospital, separately contracted Amb Surg (PT 84), diagnostic testing facility (PT 45), dialysis centers (PT 25), Community Health Centers (PT 20), etc.
Applicable to services paid via fee-for-service (primarily PCC Plan members); excludes PCC Plan’s Behavioral Health vendor services and MassHealth MCOs’ contracts, for example.
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5. The Basics (cont’d)
Approximately $600M in annual payment to 63 in-state contracted acute hospitals
Uses HCPCS Level 1 (CPT) and Level 2 procedure codes and (primarily for medical visits) ICD-10- CM diagnosis codes
Each EAPG is assigned to one EAPG Type – Per Diem, Significant Procedure, Medical Visit, Ancillary, Incidental, Drug, DME, or Unassigned
EAPG recognizes and encourages efficiencies within a visit via logic for consolidation, discounting, and packaging
MassHealth’s accepted modifiers are part of claims processing
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6. The Basics (cont’d)
APEC = episode-specific, all-inclusive facility payment
Excludes physician/professional bill, labs* – these are paid via fee schedules (no change from PAPE era)
Each EAPG has a MassHealth relative weight
EAPG payment at claim detail line, based on “adjusted” EAPG weight. (Note: Payment of $0 does not mean “not covered”)
Adjustment is due to 3M EAPG grouper’s “bundling” –i.e., discounting, consolidation, or packaging within an episode:
Discounting (e.g., multiple unrelated significant procedure EAPGs, terminated procedure)
Consolidation (e.g., multiple identical or related significant procedures)
Packaging (e.g., ancillary services present with medical visit EAPG or significant procedure EAPG)
Total EAPG payment (pre-outlier) = sum of payments from the detail lines of the episode
*Except certain Surgical Pathology codes
Draft-for discussion purposes only

7. The Basics (cont’d) APEC = Total EAPG payment + Outlier Component
“APEC outlier component” equals marginal cost factor (currently 80%) x [episode specific case cost* less episode-specific outlier threshold**]
*Payable charges x hospital’s outpatient cost-to-charge ratio
**Total EAPG payment (previous slide) + fixed outpatient outlier threshold (currently $2,100)
APEC = Total EAPG payment + Outlier Component
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8. PAPE vs. APEC PAPE APEC Based on EAPG coding Based on EAPG coding
Episode = typically calendar day of related services, except that ED (Rev Code 45x) and Observation/Trtmnt Rm (Rev Code 76x) can cross midnight.
One claim can convey multiple episodes (useful for PT/OT/SLP)
Statewide standard from base year cost report. Includes efficiency standard and outlier set-aside
EAPGs determined for each episode
Outlier is episode-specific; based on pre-outlier payment vs. cost ( cost = charges x outpatient CCR)
Episode APEC is based on statewide standard, episode’s EAPGs, and episode’s outlier (if any)
Coding matters immediately
Breaks in coverage – recognized and handled via DOS on claim line
Late charges: TOB 135 pays $0
Based on EAPG coding
Episode = calendar day of services
Separate claims for separate episodes
In FY2016 RFA: Statewide standard from base year cost report. Includes efficiency standard and outlier set- aside
Hospital has average weight per episode, based on 1 full, prior year (base year, 2 years old) of paid claims
Hospital’s PAPE for current year is based on statewide standard, average weight per episode, and fixed hospital-specific outlier amount
Coding does matter (eventually)
Breaks in coverage – not applicable
Late charges – minimally applicable
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13. Early Experience No complaints
Anecdotal compliments (hospitals are getting paid smoothly and as expected)
MassHealth setting up monitoring tools and processes
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14. Future Issues Address annual 3M version updates and version control
FY2017 APEC claims are processed with Version 3.10
Users have confused what MassHealth is using vs. 3M’s “MassHealth” products in their product suite
Process for tracking updates to ICD-10 and HCPCS
Codify billing tips and various educational materials
Further clarify RFA language where necessary due to APEC claims processing that replaced PAPE
Monitor/audit for correct coding, use of modifiers, etc.
Monitor/audit how visits are (or are not) combined into single episodes; clarify and/or refine definition as necessary
Monitor/audit/refine policy and methodology for new, high cost pharmaceuticals
Consider additional adjustments (e.g., Modifier JW for unused drugs
Monitor/audit impact of “midnight crossing” of services (currently defined simply as the 45x and 76x revenue codes)
Update EAPG weights
Draft-for discussion purposes only

15. Useful Sources of Information Acute Hospital RFA and Contract Sent to all MA acute hospital CEOs and CFOs Includes definitions, descriptions, examples
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16. Useful Sources of Information (cont’d)
Acute Hospital RFA (previously noted) – for in-state acute hospitals only, not out-of-state
Hospital regulations and other components of Acute Outpatient Hospital Manual on state website (mass.gov)
Administrative and Billing Instructions
Service Codes (“Subchapter 6”)
Includes 105 CMR “Rates of Payment to Out-of-State Providers”, which generally follows in-state Acute Hospital RFA
Bulletins for interim policies, announcements, and descriptions; Transmittal Letters for changes to regulations
APEC “Billing Tips”
Informal guidelines, instructions, in-service materials (e.g., 3M’s description of Observation Services, 3M’s overview of EAPG, Trading Partner Testing Questions and Resolutions
Notices of Preliminary/Final Agency Action (to comply with CMS)
MassHealth’s Customer Service Center (CSC)
non-member-specific questions only. This is not secure. DO NOT SEND US PERSONAL INFORMATION.) Phone:
Draft-for discussion purposes only

17. Questions, Comments? Thank you! Steve Sauter
Director, Acute Hospital Program
MassHealth Office of Providers and Plans
Quincy, MA
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