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Principles of Healthcare
Reimbursement
Third Edition
Chapter 7
Medicare-Medicaid Prospective Payment Systems for
Nonhospitalized Patients:
Ambulatory Surgical Center Prospective Payment System
© 2011
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
© 2011
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
© 2011
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
© 2011
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
© 2011
Legislation
• Omnibus Budget Reconciliation Act of
1980
– Amended the SSA to create ASC PPS
– ASC List of Covered Procedures
• ASC List
• Implemented in 1982
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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 lifethreatening in nature
• Excludes procedures that are regularly and safely provided in the
physician office setting
© 2011
Site of Service
• 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
© 2011
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
© 2011
Legislative History
• BBA 1997
– 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
© 2011
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)
© 2011
Legislative History (cont.)
• MMA
– Required the implementation of a new PPS for
ASCs
– Implementation between 1/1/06 and 1/1/08
© 2011
Revised ASC PPS
Effective 1/1/2008
© 2011
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
© 2011
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
© 2011
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
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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)
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Adjustment
• Adjustment
– Wage index adjust labor portion of payment
– Based on MSA
– 50% of payment is wage index adjusted
© 2011
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
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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
© 2011
Payment Steps
1. Report service with HCPCS code
2. APC is assigned
3. Multiple/bilateral provision is applied if
applicable
4. Wage index adjusted
5. Payment is made to facility
© 2011
Principles of Healthcare
Reimbursement
Third Edition
Chapter 7
Resource-Based Relative Value Scale for
Physician Payments
© 2011
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
© 2011
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
© 2011
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.
© 2011
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
© 2011
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
© 2011
History of RBRVS (cont.)
• Jan. 1, 1992 RBRVS
Effective (Phase-In
Through 1996)
• Controlled Fee-forService 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
© 2011
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)
© 2011
Structure of RVUs (cont.)
• WORK
– Covers Physician’s Salary
• Time
• Intensity
–
–
–
–
Mental Effort & Judgment
Technical Skill
Physical Effort
Psychological Stress
© 2011
Structure of RVUs (cont.)
• PE
• MP
– Overhead Costs of
Practice
• Office Rent
• Wages of Nonphysician
Personnel
• Supplies & Equipment
– Cost of Premiums for
Professional Liability
(Malpractice) Insurance
– Two Rates
• Facility (Hospital, etc.)
Lower
• Nonfacility (Physician
Office) Higher
© 2011
Payment Structure: GPCIs
• Geographic Practice Cost Index (GPCI)
– Adjustment for Geographic Differences in Costs
– Each Element of RVU Has Unique GPCI
• WORK
• PE
• MP
© 2011
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
© 2011
RBRVS Formula
• [(WORK RVU) (WORK GPCI) + (PE RVU)
(PE GPCI) + (MP RVU) (MP GPCI)] = (SUM)
X CF = Medicare Physician Fee Schedule
(MPFS) Amount
© 2011
Generic Example: RBRVS (99202)
WORK
PE
MP
RVU
X CF
RVU X
.88
.79
.05
GPCI
1.00
0.925
0.64
=
.88
.73075
.032
1.64275
$37.8975
$62.26
© 2011
Payment Structure
• Actual Payment
– 80% of National Allowance
– Medicare Beneficiaries Responsibility
• Part B Deductible
• 20% Coinsurance
© 2011
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
© 2011
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
© 2011
Future Issues
• Adoption of Electronic Health Record
• Correction of Overrides of Sustained Growth
Rate
© 2011
Summary
• Payment System Specific to Physician Services
across the Continuum of Care
• Accurate Coding Necessary for Appropriate
Reimbursement
© 2011
Principles of Healthcare
Reimbursement
Third Edition
Chapter 7
Medicare-Medicaid Prospective Payment Systems for
Nonhospitalized Patients: Ambulance Fee Schedule
© 2011
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
© 2011
History
Two types of ambulance service entities
1. 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)
2. Suppliers: Not associated with a medical
facility
– Reasonable charge payment mechanism
– Fours ways to report ambulance services
© 2011
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
© 2011
Legislation
• BBA of 1997
– 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
© 2011
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
© 2011
Legislation (cont.)
• BBA (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
© 2011
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 phasein provision for suppliers
© 2011
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
© 2011
Levels of Service Chart:
© 2011
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.
© 2011
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
© 2011
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
© 2011
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.
© 2011
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
© 2011
Modifiers
• 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)
© 2011
Payment Steps
• Six step process
– Takes into consideration
•
•
•
•
•
Patient service level
Modifiers
Zip codes
Miles
Add-on payments
© 2011
Payment Steps (cont.)
1.
Identify the level of service code
for the transportation provided
•
2.
Determine the number of patients
transported
•
3.
Does the case meet emergency
response criteria?
If yes, append modifier and
reduce payment
4.
Apply the regional variation
adjustment
•
5.
6.
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
Determine if the Medicare
beneficiary was pronounced dead
•
If yes, append modifier and adjust
payment
© 2011
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
© 2011
Compliance
• OIG recommendations:
– Prepayment edits
– Post-payment review guidelines
– Education, education, education
© 2011
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
© 2011