Containing Costs Key To Maintaining Revenue Under APCs

Experts are predicting that hospitals could lose anywhere from 2 to 14 percent of Medicare revenue when the ambulatory payment classifications (APCs) are implemented in August. Hospitals wanting to limit potential losses should take a hard look at their processes. That means hospitals need to keep track of what supplies and materials they use, improve documentation at every stage of the clinical process, and find out whats falling through the cracks.

Caral Edelberg, CPC, CCS-P, president of Medical Resource Management Inc., an emergency department coding consulting firm in Jacksonville, Fla., suggests facilities concentrate on boosting revenue first. Hospitals are running pretty bare these days. Look at how to code accurately, charge appropriately, and make sure youre capturing all the billable services and products. The result: a significant increase in reimbursement without cost cutting. The real benefit comes from realizing the dramatic losses in revenue from poor processes.

Tip: APCs only apply to Medicare payments, so facilities can continue to bill private payers under their existing contracts, she says. But if hospitals can improve their charge capture, they can see an increase in reimbursement from both Medicare and private payers.

Getting Ready

Jack Turner, MD, PHD, FACEP, medical director for documentation compliance at Team Health, an emergency room staffing firm in Knoxville, Tenn., believes that most facilities arent ready for APCs financially. In general, I dont think hospitals really have a good handle on utilization, or the specific costs generated in outpatient care. Traditionally, costs and items such as supplies have been internally tracked for stocking. But I dont believe theyve been tracked from a reimbursement point of view specifically for outpatient departments.

An understanding of resource usage would help hospitals deal with APCs, Edelberg says. The first thing to do, before you start to cut costs, is to make sure that youre collecting all the revenue you can. Why cut costs if you dont know if youre collecting all the revenue?

One hospital she has worked with cut most of its middle management, including those in the medical records department. Most medical records departments are going to have to ramp up to manage APCs. All of a sudden, hospitals are panicking about APCs and then cutting the very people needed to manage the process. What they need to do is use those people to try to improve revenue first, Edelberg maintains.

Who Takes the Hit?

Emergency departments (ED) and outpatient medical and surgical centers are the departments most obviously hit by the outpatient prospective payment system. But APCs also will have a big affect on hospitals traditional revenue centers, according to Turner. The pharmacy and central supply will have to bill outpatient products and services through APCs rather than revenue codes. The pharmacy will change from a revenue [...]

- Published on 2000-07-01