Iowa Hospital
Among First to Implement Medicaid Reimbursement System:
Takes
Lead with Automated Coding Software
by Jim Harwood
Supervisor of Medical Records
Mercy Hospital, Council Bluff, Iowa
Mercy Hospital is a pioneer in the use of automated coding technology designed to help manage a new federally-mandated payment system for outpatients. The recently implemented classification system is complex because many unrelated services are often scheduled for a single outpatient visit thus one visit can be assigned to multiple categories. The software easily manages the high volume of data needed to group the amount and type of resources used for outpatient visits and helps the hospital identify the proper payment for outpatient claims. Automation also helped staff members better understand the new methodology -- a critical factor for Mercy Hospital since a large percentage of its patients are under the state's Medicaid program.
Ambulatory Patient Groups (APGs) are a visit-based outpatient classification system designed to explain the amount and type of resources used in the ambulatory setting. Instead of reimbursing providers for outpatient facility costs based on charges or a percentage of charges as is currently done for most outpatient care, a predetermined, fixed reimbursement is made for the rendered outpatient services. In this sense they are similar to DRGs (diagnosis-related groups) which classify inpatient cases based on clinical similarity and resource use. The APG reimbursement covers only the facility cost for outpatient services, not the professional (physician) costs. APGs encompass a wide spectrum of outpatient services including ER, same day surgery unit, hospital clinics and ancillary service departments. The new system covers a diverse patient population from pediatrics to geriatrics.
The State of Iowa's Medicaid program began testing the classification system for outpatient case payment on July 1, 1994. The new methods reflect a shift in health care from inpatient to outpatient services and is designed to help hospitals provide the most necessary outpatient services and procedures. Based on the Iowa test, the Health Care Financing Administration will make recommendations to other states on the use of APGs for Medicaid outpatient services.
Mercy Hospital, a 300 bed facility serving Southwestern Iowa,found that implementing the new methodology was complex. Multiple unrelated services are often scheduled for a single visit for the patient's convenience. Since each distinct service can be classified into a particular APG, a single visit can be assigned to multiple APGs at the same time, some or all of which are paid separately. Each HCPCS/CPT-4 code on an outpatient claim can generate a separate APG. Related procedures which are often performed in conjunction with each other can be consolidated and produce only one APG payment for the entire group of procedures. When multiple unrelated procedures or ancillaries occur in the same visit, the payments for each of the APG's is lowered to reflect that the fixed cost of the visit is now being spread across several APG's.
While the Iowa Medicaid claims processor was not ready to pay each claim on an APG basis when the classification system was first introduced, all Iowa hospitals were expected to submit properly coded Medicaid outpatient claims at the very outset of the new program. At Mercy Hospital, automation was a key to successfully meeting this requirement. Medical records staff utilizes the APG/Calculator PC program from IRP Systems, Inc. Wilmington, Massachusetts. The APG/Calculator analyzes hospital outpatient cases and assigns the most appropriate categories to the case. The process begins when a staff person reviews the patient's medical record and obtains the appropriate ICD-9 or CPT codes from a coding book or an encoder software package already in place at Mercy. The user enters the code numbers, and the grouper evaluates the set of codes and assigns APGs. Patient visits that fall under one of the 297 APGs have similar clinical characteristics and similar resource use and cost. Unlike the inpatient DRG based payment system, it is very likely that more than one APG payment code may be assigned to a patient visit. The APG/Calculator computes up to 13 APGs, displaying titles and weights, for each CPT-4/HCPCS code entered. Staff see how existing cases will be impacted before any Medicare implementation.
As an example of the way Mercy Hospital determines APGs for Medicaid claims, consider a case where a patient receives emergency room treatment for a hand laceration. Medical records staff reviews the procedures performed and codes suturing as CPT-12001. The grouper software examines which APGs are relevant and assigns a relative weight. The assigned relative weight is then multiplied by a blended hospital rate previously derived from an average of the hospital's specific cost-based rate and the statewide APG payment rate. The Iowa APG rate is $112.87. Hospital blended rates vary from $82 to $137. Assuming a laceration APG rate is .4, and if Mercy Hospital's blended rate is $115, Mercy's reimbursement total would be $46.00. Medical records staff have the ability to keep the individual weights for each APG on the claim which is useful since APG weights will change as the new classification system is recalibrated.
Mercy Hospital properly handles multiple clinic visits on the same day for unrelated diagnoses. The visits must each appear on a separate claim form to ensure full APG payment. Otherwise, a discounting policy will take effect and APG payments will be reduced. The capability to submit each separate hospital-based clinic visit on its own claim is a special Iowa Medicaid provision which partially offsets the effects of discounting. The software has been modified to handle this provision.
With the ability to automatically classify outpatient medical codes under appropriate APGs, Mercy is better able to ascertain which APGs are relevant. Coders look at visit necessity by three categories -- a significant procedure or therapy, a medical visit, or an ancillary test or procedure. Payment depends on how the various groups of APGs occur together on the case. According to medical records staff, the hospital is better able to focus on outpatient costs as well as develop clinical protocols. Although Mercy Hospital recently began developing clinical protocols to suggest diagnostic and treatment approaches, APGs already help staff see where protocols could improve care and contain costs.
IRP's APG/Calculator program is fully compatible with the HCFA APG system (as modified for Iowa), and the latest ICD-9-CM and CPT-4 codes. It can be used for staff training and case evaluation by hospitals in any state. It runs on any IBM compatible PC.