Healthcare Business News

CMS ready to bundle some outpatient care into 'mini-DRGs'

By Bob Herman
Posted: July 11, 2014 - 12:15 pm ET

In an attempt to better align Medicare's payment systems, the CMS plans to implement new, more inclusive bundled outpatient codes akin to inpatient diagnosis-related groups.

The current basic payment unit in Medicare's outpatient prospective payment system is the ambulatory payment classification, or APC. Hospitals and other providers are paid based on the individual outpatient services they bill, which are assigned to APCs.

Under the CMS' proposed outpatient payment rule, released late last week, the government will begin using “comprehensive APCs” starting Jan. 1, 2015. Some experts have said comprehensive APCs are like “mini-DRGs.” They represent a specific outpatient service, like a hip replacement or pacemaker procedure, and incorporate all other related ancillary services into a lump-sum payment.

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“The big deal here—CMS is creating a much larger bundle with no separate payment for additional items or services,” said Gail Daubert, a partner in the Life Sciences Health Industry Group at Reed Smith.

The CMS originally pitched comprehensive APCs in its 2014 rule, but decided to delay the rollout until it received feedback from providers. Now, the agency is ready to move forward with 28 “device-dependent” comprehensive APCs. These classifications cover procedures that include costly devices, such as implantable cardioverter-defibrillators, stents and orthopedic implants.

Proposed payment rates vary for each bundle. More complex ICD procedures will fetch the largest reimbursement, at more than $32,000. Pacemaker procedures will pay anywhere from $7,000 to $17,000, depending on the level of resources required. Reimbursement for intensive orthopedic surgeries, excluding those on the hands and feet, will pay about $11,000. The two newest comprehensive APCs are intraocular telescope implantation ($21,000) and single-session cranial stereotactic radiosurgery (about $10,000), the CMS said.

“If the (bundled) payment rate is appropriate for all those itemized things sitting on the claim, people will feel OK with the notion of a comprehensive APC,” said Jugna Shah, president and founder of Nimitt Consulting, a firm that works with hospitals and providers on inpatient and outpatient payment issues.

But some of the bundled policies have already raised concerns with provider groups. Pam Kassing, senior economic adviser for the American College of Radiology, said two comprehensive APCs that involve endovascular revascularization—a procedure to clear artery blockages—represent 85% of all imaging services that would be packaged under the new codes.

“There is a lot of imaging involved in those APCs,” she said, and radiologists want to make they aren't getting shortchanged with the bundled prices. The organization plans to meet with the CMS this fall.

As with most rules, there are some exceptions to the comprehensive APC policy. Medicare will still make separate payments for select outpatient claims. These include ambulance services, pass-through drugs and devices, preventive services like cancer screening tests and diabetes tests, and self-administered drugs, among others.

But the push for bundled outpatient services is not likely to relent soon. CMS officials have said as much, writing in the rule: “We may extend comprehensive payments to other procedures in future years as part of a broader packaging initiative.”

As the American Hospital Association, America's Essential Hospitals and other groups analyze and submit comments to the CMS, Shah suggests providers still annotate every outpatient service on their claims—even as bundled payments become part of the normal payment schedule.

“From an operational perspective, if we fast forward and all is finalized, there's not a lot to do other than continue reporting every single service that you've rendered,” Shah said. “The second you stop reporting those line items, they don't exist on the claims anymore. That is the absolute worst thing that providers could do.”

Follow Bob Herman on Twitter: @MHbherman

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