In 2008, when the Centers for Medicare & Medicaid Services (CMS) shifted its payment approach in the outpatient surgery industry from the nine-grouper methodology to APC-based reimbursement, many assumed that commercial payors would follow suit. But the majority of insurers continued to base reimbursement to ambulatory surgery centers (ASCs) and hospital outpatient departments (HOPDs) on grouper-based methodologies. Their models remained enhanced or modified versions of the historical CMS ASC model, with a few differences such as mapping of CPT codes and additional groupers. The resistance to adopting an APC-based model was largely due to the high system and operational costs associated with making the switch.
However, the limitations of these grouper-based methodologies have recently driven some payors to make the move to APC reimbursement in the ambulatory space, despite the cost. This is mostly good news – APCs provide a greater number of classifications and a wider range of reimbursement rates, allow for placement of new procedure codes in more revenue-appropriate payment classes, and offer more appropriate reimbursement for implants. But there are also some challenges related to the transition that ASCs and HOPDs should be aware of when they enter into contract negotiations with commercial payors who are looking at a conversion.
It's Not Strictly Apples to Apples
When a commercial payor converts from groupers to APCs, its procedural reimbursement methodology will mirror CMS rates and weights; but that's where the similarities often end. What commercial payors are calling APC reimbursement is something of a misnomer. In practical terms, what's emerging is usually a hybrid of CMS methodology and the payor's historical internal proprietary reimbursement models. Payors are not intentionally being misleading; rather, the hybrid model is a reflection of their struggle to remain current with the intricacies of CMS policy. And this struggle can manifest itself in myriad ways. Some payors are using a prior year's methodology or delaying implementation until a midyear start date, as opposed to using a calendar year update. Others have not implemented CMS GPCI adjustments.
Furthermore, there is inconsistency in how payors handle codes that are not subject to multiple procedure reductions and include devices. It's also challenging for payors to deal with codes that do not have an APC weight, many of which were previously compensated using carve-outs in legacy contracts. Finally, while the APC methodology is a vast improvement over the groupers, it remains imperfect, and there are some codes that incur implant costs or other variables that render the current allowable amount unsatisfactory.
Evaluating the New Payor Contracts
Despite these challenges, the trend of payors converting their outdated ambulatory reimbursement systems to current-generation APC-based methodologies remains far more positive than negative. If outpatient surgery centers ask the right questions, they won't suffer any downstream negative impact in contracting with payors that are in the process of converting.