Emergency Department - APC Reimbursement Method

September 15th, 2022 - Christine Woolstenhulme, CPC, CMRS, QCC, QMCS
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CMS pays emergency department visits through a payment method using Ambulatory Payment Classifications (APCs). Most payers also use the APC reimbursement system; however, there may be some differences in payer policies (always review your specific payer policy). APCs are the primary type of payment made under the OPPS, comprising groupings of CPT/HCPCS codes with similar clinical characteristics and costs to help consolidate payments; the reimbursement amount covers each service included in the APC grouping (similar to DRG groupings).   

According to CMS, "Comprehensive APCs provide a single payment for a primary service, and payment for all adjunctive services reported on the same claim is packaged into payment for the primary service. With few exceptions, all other services reported on a hospital outpatient claim in combination with the primary service are considered to be related to the delivery of the primary service and packaged into a single APC payment for the primary service".
(see Table 2 below for payment status indicators.)

Some CPT/HCPCS codes are designed to be paid under a specific APC (payment methodology) with services packaged into the primary APC payment by assigning a Status Indicator (SI) to every CPT/HCPCS code. Therefore, the status indicator reflects the payment method; an example would be the J1 or J2 status indicators; we will explain more in-depth about status indicators later in this article.  

Figure 1. J1 and J2 indicators

Relationship to the Place of Service
The place of service is an integral part of this payment process, as the place of service will trigger reimbursement rules. For detailed information, see Understanding ASCs and APCs: Indicators and Place of Service. Notice (figure 1.) that the J1 and J2 indicators are labeled as "Hosptial Part B," meaning outpatient emergency room visits are processed under Part B of the beneficiary's Medicare insurance.  

NOTE: Do not confuse Urgent care and Emergency room visits with on-campus hospital outpatient clinic. Place of service 22 is used when reporting Outpatient Hospital services diagnostic, therapeutic (surgical and nonsurgical), and rehabilitation services to sick or injured persons who do not require hospitalization or institutionalization. See the Place of service codes for the ED in (figure 2. Types of Emergency Departments).

Two types of Emergency Departments
Payment for Emergency department visits falls under the Hospital Outpatient Prospective Payment System (OPPS). Within this payment system, the OPPS defines two types of emergency departments; type A and type B; both are paid under Part B by Medicare using the OPPS. The type of emergency department determines which HCPCS codes are used to report the location according to CMS OPPS Visit Codes - FAQs.  

Table 1. Types of Emergency Departments

Type of ED Definitions  CPT/HCPCS Codes Used Place of Service 
Type A Licensed by the state and is open 24 hours a day, 7 days a week Report codes 99281-99285  23-Emergency Room Hospital
Type B Generally owned by a group of physicians and publicly owned and provides urgent care without a scheduled appointment, it may not be open 24 hours a day, 7 days a week. Report codes G0380-G0384
Other payers may use 99212-99215
20-Urgent Care Facility

Looking at Emergency Department Visits
ED visits are reported using the Evaluation and Management services for "Emergency department services", using CPT codes 99281-99285. Each code is assigned a status indicator of "J2- Paid under OPPS; all covered part B services on the claim are packaged with the primary." 
Codes Assigned to J2 Indicator

It is interesting to mention there are only 13 codes assigned to the J2 status indicator, which include CPT codes 99281 and G-0379-G0484, and G0463. These are all bundled into Emergency Department visits under APCs 5021- 5025 Level 1-5 (type A ED visits), meaning "Payment for all covered Part B services on the claim is packaged into a single payment." Reporting any of the APC codes 5021-5025 indicates all other services are bundled if they have a status indicator of J2. The J1 status indicator is the outpatient version, similar to the inpatient diagnosis-related groups (DRGs) payment system.

Figure 2. CPT 99281 assigned Status Indicator J2  

Let's look deeper into the methodology; we understand each CPT/HCPCS code is assigned to an APC. However, the APC is also assigned a Status Indicator (SI); for example, APC 5021, Level 1 Type A ED Visits, is assigned a "V" status indicator assigned APC assigned category.

The status "V" indicator represents a clinic or emergency department visit. In addition, the "V" indicator identifies the code as a major OPPS procedure code. CPT code 99281 is assigned a J2 status indicator, stating "Hospital Part B Services That May Be Paid Through a Comprehensive APC". CPT code 99281 is also assigned APC 5021 with a "V" status indicator.

Figure 3. APC Status Indicator V, clinic or emergency department visit

See (table 2. APC Payment Status Indicators) below for a complete description of the J2 Status indicator from CMS.

Is Everything Bundled in the APC for ED Visits?
There may be other circumstances where payment may be made for services designated to be paid under alternative methods. For example, laboratory fees are paid under the appropriate Medicare fee schedule and, therefore, are not bundled into the APC payment for the ED.  

There are several other exceptions as well that are not bundled in the APC which can be billed and reimbursed in addition; these are assigned with the OPPS status indicator of "F', "G", "H", "L", and "U" see (table 2. APC Payment Status Indicators) for descriptions; ambulance services, diagnostic and screen mammography, rehabilitation therapy services, services assigned to new technology services, services assigned to a new technology APC, self-administered drugs, all preventive services, and certain part B inpatient services.

The SI Determines Payment and Bundling
Only the packaged APC payment will be paid if billed on the same claim as a HCPCS code assigned with the status indicator "J1".  We now understand it is the status indicator that determines where the payment comes from; for example, OPPS pays for ED visits. In addition, the SI tells us how the service is paid, and if it is bundled, or billed in addition.

Which Codes can be Billed Together?
There are a few coding tools that should be used to help prevent inappropriate services from being billed together, the NCCI editor, MS-DRG grouper, and the APC Payment Packager. However, if there is no NCCI edit, refer to the status indicator to see how the claim will be processed.

The APC payment packager will classify CPT/HCPCS codes for you into the appropriate categories using the status indicators. The most important part of this concept is the packaging of services and indicating what is included in the payment as well as other procedures listed in the grouper. Using the APC packager will simplify this process.

What if the patient is admitted as an Inpatient? 
Suppose the patient is admitted to any part of the hospital as an inpatient. In that case, the APC payment is not made, and Medicare pays the hospital under the Inpatient DRG Methodology.  

Does this mean do not report the other procedures?
An extensive list of services and supplies are included in the bundling, such as inexpensive drugs (less than $50), med/surg supplies, recovery room charges, costs to procure donor tissue (except corneal tissue), anesthesia, IV therapy, and many other similar supplies and services. Blue Cross states, "Facilities are still required to bill for these services even though they are bundled but receive zero payment for these lines."

The cost of packaged rates has increased and will continue to rise to reflect the all-inclusive cost of the services provided.

Table 2. APC Payment Status Indicators

 A – Paid on fee schedule [ Fee schedule or other]

 B – Codes not recognized by OPPS [Not paid under OPPS]

 C – Inpatient-only procedure [Not paid under OPPS]

 E1 - Non- Allowed Item or Service [No Pay]

 E2 - Items and Services for which pricing information and claims data are not available [No Pay]

 F – Corneal tissue acquisition; certain CRNA services; Hepatitis B vaccines [Cost]

 G – Pass-through drugs & biologicals [ APC including pass-through amount]

 H – Pass-through device categories [Cost]

 J1 – Hospital Part B Services Paid Through a Comprehensive APC [APC]

 J2 – Hospital Part B Services Paid Through Comprehensive Observation APC [APC]

 K – Non-pass-through drugs and Non- implantable biologicals, including therapeutic radiopharmaceuticals [APC]

 L – Influenza vaccine; Pneumococcal Pneumonia vaccine [Cost]

 M – Items and services not billable to the Fiscal Intermediary [Not paid under OPPS]

 N – Packaged items and services [No Pay]

 Q1 – STV packaged codes [No Pay] or [APC]

 Q3 – Codes may be paid through a composite APC [No Pay] or [APC]

 Q4 - J1, J2, S, T, V, Q1, Q2, Q3 Packaged Lab Codes [No Pay] or [Fee Schedule]

 R – Blood and blood products [APC]

 S – Procedure or Service, not discounted when multiple [APC]

 T – Procedure or service, multiple reduction applies [APC]

 T packaged codes [No Pay] or [APC]

 U – Brachytherapy sources [APC]

 V – Clinic or Emergency Department visit [APC]

 Y – Non- implantable Durable Medical Equipment [Fee]


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