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Coding & Billing
Equipment Economics
Judie English
Publish Date: October 10, 2007   |  Tags:   Financial Management

Judie English Here's an interesting exercise to try when you're thinking of adding a piece of capital equipment: See if you can tie reimbursement opportunities to the purchase. It's perhaps the surest way to weigh the cost of investing in new technologies. Let me walk you through seven questions that might get you thinking along these lines.

Judie English\ Will buying new equipment attract more physicians/specialties/cases?
Look at your local market to investigate whether buying cutting-edge equipment may indeed attract additional physicians or specialties to your outpatient center.

If the answer is yes, evaluate the costs you'll incur if you add specialties and cases. More cases could overburden pre- and post-op areas. It will take more staff time and possibly extra personnel. Do these costs outweigh the new procedures' reimbursements?

Is the equipment the standard of care in the community?
Will the equipment make your facility more competitive? If you're a multi-specialty center still using the phaco machine you bought at startup for your one weekly eye day and you're now losing cases and physicians to other facilities, it may make sense to update your equipment. Evaluate whether you can regain the lost physician time and cases before buying.

Can the equipment be used for more than one specialty?
Determine whether there are applications for more than one specialty - for example, a C-arm, image-guided navigation equipment or scopes. Cost-sharing between specialties can help the board decide whether this purchase is appropriate and cost-effective for your center.

Can you negotiate special coverage by non-Medicare insurers?
Contact your major non-Medicare insurers and request carve-outs for procedures using this new equipment. Explain to them that this state-of-the-art technology will provide better care for their customers. For example, image-guided navigation is rapidly becoming the gold standard for endoscopic sinus surgery. Be persistent; give examples of others in the area using this equipment.

Evaluate the insurer's offered reimbursement before buying. If you do make the purchase, and a surgeon wants to use this equipment for a patient with another insurance carrier, discuss this with the insurance representative and ask for a one-time special reimbursement rate. Get approval in writing before surgery day.

Doing Your Homework

Here's a list of items you'll need to prepare before taking a capital equipment purchase proposal to your board:
? clinical benefits;
? cost of equipment (after shopping around and determining which brand and model are best for your needs, and whether new or refurbished makes more sense)
? realistic projection of cases using the equipment (talk to the physicians and get estimates from them, factor in additional physicians who may be attracted by the equipment)
? cost of procedure with new equipment versus without new equipment;
? budget projections;
? growth projections/needs;
? projected number of cases it will take before ROI;
? outright purchase price versus lease terms; and
? marketing plans centered around equipment acquisition.

- Judie English

How will we bill for procedures using this equipment?
When billing, you'll probably use the same CPT codes. Changing techniques does not necessarily change the CPT code. The challenge is to get managed care to recognize your carve-out for this procedure. You may have to request reviews the first few times you submit claims. Include op notes that adequately describe the use of the special equipment.

How will payers view us?
We all know Medicare doesn't let ASCs use a separate CPT code for equipment or charge for the technical component for using it. But that doesn't wipe away the economic benefits of investing in capital equipment.

Take a Medicare-certified, state-licensed ASC that's not expecting reimbursement from Medicare for procedures performed with the equipment. The procedure still must meet Medicare guidelines for ASCs in terms of procedure and post-op stay lengths, and blood loss (see Federal Register 42 CFR 416.65 ? Covered Surgical Procedures). Meeting Medicare ASC guidelines is key to approval from other payers.

Medicare moves in slow and mysterious ways. CMS (then HCFA) took several years to add laser procedures, phacoemulsification, arthroscopy and laparoscopy to the approved CPT list. Lithotripsy and orthotripsy are still waiting. So even if you could fill a community need for lithotripsy services, if your area has a Medicare-heavy patient base, buying a lithotrip-ter might still not make sense.

How long before the ASC sees a return on investment?
Several factors influence the length of time needed to make back the investment. Look at your case costs, with and without the new equipment. Consider whether you should buy or lease the equipment, and account for depreciation and tax implications. You might need your accountant's input.

Next, verify how many projected cases are replacement cases (cases that would have been done anyway) and how many are new. Determine how long it will take to schedule the projected number of cases.

Be realistic
Whether you're updating or adding technology, be realistic about your needs and the benefits you'll reap. The equipment need not offer great profit potential to be a worthy investment, but it has to help you meet standards of care at costs you can absorb.