Gone is the coding system based on ASC groupers that categorized CPT codes into nine straightforward and easy-to-understand payment groups. Coders are now faced with the challenge of learning a new system based on ambulatory payment classifications (APCs).

How they compare
For years, ASC industry leaders fought for better rates and the expansion of allowable procedures. Much like the former payment system, Medicare designed the new system with the intention to pay the ASC a facility fee that covers the cost of the procedure. Instead of the previous nine ASC payment groups, ASCs will be paid using APCs, Medicare's payment system for hospital outpatient surgeries.

Each procedure approved for ASCs is now assigned an APC that corresponds to a payment rate. The new system will be implemented over four years. By 2011, ASCs will be paid 65 percent of what a hospital's outpatient facility would be paid for the same procedure. For example, an upper GI endoscopic biopsy service would be valued at $360 in an ASC, but at $552 in a hospital outpatient facility.

Before the revaluing of ASC procedures, the upper GI endoscopic biopsy service was valued at $446, so the change represents a nearly 20 percent reduction in payment. As the new system is implemented, payments will be scaled from the 2007 rates to the new rates at a 25 percent change each year. This means that in 2008, 75 percent of the payment will be based on the 2007 rate and 25 percent will be based on the 2008 rate.

We've heard about the many changes in store for outpatient surgical centers and we've tried to prepare ourselves for the financial impact of the new ASC payment system. Let's look at ASC specialties and the impact the new payment system will have on them. The new system hasn't been kind to some single-specialty ASCs. Pain management and GI centers are faced with decreased revenue for the procedures commonly done in their settings. Orthopedic ASCs, on the other hand, will see an increase in revenue under the new system — especially for arthroscopic procedures.

While orthopedic procedures may seem to be the big winner, they must watch for hidden costs associated with the APC payment rate. Under new ASC rules, the implants for many procedures are bundled into the procedure's reimbursement and not separately payable. In orthopedic surgery, an implant can have a higher value than the procedure. Nerve destruction and pain pump procedures have been added to the approved list for pain management. Just as with orthopedics, the implant is included in the reimbursement.

Generally, multi-specialty ASCs will be looking for balance, performing more of the higher-paying cases to compensate for lower-paid services. This doesn't mean single-specialty centers are doomed; it simply suggests that, since the procedural reimbursement may be lowered, you should pay attention to coding accuracy while decreasing supply and staffing costs.

Prep for success
To be certain your facility performs well under the guidelines of the new payment structure, analyze the impact of the ASC payment changes. List the top 20 procedures done in your facility. Verify that your business office is capturing everything that is billable, including allowable implants and drugs, and evaluate the impact of the new payment schedule your top procedure's CPT codes.

Create a spreadsheet showing past and present payment rates. Extrapolating historic frequency rates against individual payment changes will give you a high-level view of the potential impact. For example, how many endoscopic biopsies does your facility host each week? Each procedure represents a reduction in payments compared to last year, while other procedures may see an increase in payment. Remember to consider the mix of 2007 and 2008 rates (a 75-25 split in your 2008 calculations). What's the net gain or loss when you review your most frequently performed surgeries from year to year? Utilization is key to your financial success. Become familiar with the procedures that have seen significant degradation of reimbursement in 2008, and make sure your physicians know which procedures are undercut in ASCs.

Also be sure to capture all drugs, biologicals, pass-through devices, brachytherapy sources and certain radiology procedures that are separately payable. Exclude CLIA-waived lab tests, implants not granted pass-through status and other supplies not payable under the new system. The new payment system may make some previously payable items exempt, but may increase payment for other implantable devices or supplies.

Review operating room utilization per specialty and concentrate on the 800-plus procedures that are now billable by ASCs. Nearly half of these new procedures are poorly reimbursed under the Medicare Physician Fee Schedule (MPFS). That's important because the reimbursement for more than 200 CPT codes is capped at the physician office payment amount under the new plan. CMS's motivation is to discourage ASCs from performing office procedures.

Be sure you and your staff know which procedures are not reimbursed under the MPFS. Some of the office-based procedures that are low-paying may be worked into your schedule to accommodate a physician performing a larger case at your center the same day. That's a nice service for your surgeons and may also develop revenue opportunities for a procedure room that would otherwise have remained empty.

Up for the challenge
If you think you've got the payment system implemented effectively in your business office, remember that changes will continue, year after year, until the full implementation of the system in 2011. In its final rule, CMS established the four-year transition to provide ASCs with a period to adjust to the new rates and regulations. Now is the time to carefully review your case mix, specialty focus and top procedures to see if adjustments are necessary to ensure your ASC survives the change. This is not just an issue for administrators. Ask both clinical and business staff members for ways to reduce costs and how to operate more efficiently during this phase-in period.

With code and reimbursement changes upon us, a certified coder might be your facility's best investment. The knowledge they possess will be instrumental in capturing the reimbursements due your facility. The payment system may have changed, but professional coders will welcome the challenge.