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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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)

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

13. Revised ASC PPS
Effective 1/1/2008

14. 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

15. 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

16. 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

17. 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)

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

19. 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

20. 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

21. 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

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

23. 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

24. 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

25. 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.

26. 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

27. 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

28. 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

29. 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)

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

31. 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

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

33. 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

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

35. Generic Example: RBRVS (99202)

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

37. 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

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

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

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

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

42. 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

43. 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

44. 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 and 93041
Various other Level II codes

45. 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

46. 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

47. 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

48. 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

49. 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

50. Levels of Service Chart:

51. 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.

52. 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

53. 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

54. 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.

55. 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

56. 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)

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

58. 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

59. 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

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

61. 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