Sweeping new Medicare regulations that take effect in January will replace the nine ASC payment groups with hundreds of Ambulatory Payment Classification groups. In addition to the new APC groups, the Medicare reimbursement policies - such as covered procedures, multiple procedure discounting and implant reimbursement - will also change. You may have to undergo a significant transformation in the way you operate if you expect to operate successfully under the APC system. This article, the first in a three-part series, will analyze the impact APCs will have on your surgery center.

APC group logic
CMS will define each outpatient service under the new ASC payment system by a CPT or HCPCS Level II code and classify the code into either an APC group for which a payment rate is established or into a nonpayment category of services that is excluded from the ASC payment system. A relative weight - denoting resource intensity - will also be assigned to each APC group.

Here's an example. In 2007, for hospital outpatient departments, the APC group 0011, Level II Destruction of Lesions, contains the CPT codes (with abbreviated descriptions) listed above.

For 2007, Medicare assigned a national payment rate of $157.76 to APC 0011. This national payment rate is adjusted for each hospital's specific geographic location.

Per the proposed rule published in August 2006, CMS plans to release the final APC regulations for ASCs sometime this spring. Those final regulations will contain the APC group data, payment rates and payment policies that CMS will then apply to ASCs, effective Jan. 1.

ASC data generation
Most billing system software packages let you generate reports displaying the data that has been entered into the billing system. In order to assess the potential impact that APCs will have on your operations and finances, you should generate reports displaying the modifier, diagnosis and procedure codes reported for Medicare patients. These reports will help you identify, for example, the high-frequency procedures for Medicare patients. You can then use this data to project the payments your facility will receive from Medicare under the new payment system.

You can generate code-specific case data reports to give you frequency data about the diagnosis and procedure codes that have been assigned to the Medicare cases. Above are examples of what these frequency reports might look like.

Further, you can generate patient-specific case data reports to give you detailed data about each Medicare case. See "Patient-specific ASC Case Data Report" on page 26.

Analyzing the data
After you've generated the reports, review them as follows:

• Document the actual costs for performing each of the high volume procedures listed on the reports. Is there any way to decrease some of the costs by changing vendors, supplies or brands, for example?
• Are there "companion" procedures that you can start performing along with your high-volume procedures? For example, if you perform carpal tunnel release, why not also perform carpal tunnel injections (which may bring in a new population of patients)?
• Document the actual costs for performing the low volume procedures listed on the reports. Should you encourage your physicians to bring more of these cases into the center, or should certain procedure "product lines" be eliminated?

Of course there are a number of ways for you to use their data to prepare for the APC system. The key is to do just that: Compile and analyze the data.

Remember to compare your facility's report data to the final 2008 APC group payment rates that will be published this spring. In the interim, you may want to consult the proposed regulations in the Aug. 23, 2006, Federal Register for detailed data analyses.