There are various reimbursement methodologies that involve medical codes. These medical codes include the Current Procedural Terminology (CPT)®, Healthcare Procedural Coding System (HCPCS), and International Classification of Diseases, 10th Revision (ICD-10-CM and ICD-10-PCS) codes.
The Inpatient Prospective Payment System (IPPS) uses ICD-10-CM and ICD-10-PCS. These codes are placed into a computerized grouper that assigns Medicare Severity Diagnosis Related Groups (MS-DRGs). This reimbursement methodology is utilized by Medicare fee-for-service (FFS).
Commercial payers may use this methodology, but it is dependent on the contract with the facility. Other acute-care payers, such as Medicaid, may utilize All Patient Refined Diagnosis Related Groups (APR-DRGs). This proprietary methodology was developed by 3M. The inpatient methodologies run from October through September.
Home health agency (HHA) visits are paid based on 30-day periods of care, which are adjusted for case mix and geographical differences. The Outcome and Assessment Information Set (OASIS) assessment form is utilized to determine the clinical groups. Payment is based on the Patient Driven Groupings Model (PDGM). The diagnosis codes are used in this model. Like DRGs, this methodology also runs from October through September.
The Outpatient Prospective Payment System (OPPS) runs from January to December (calendar year). This methodology predominantly uses CPT and HCPCS codes to determine the Ambulatory Payment Classification (APC). Each CPT/HCPCS code is assigned a status indicator, which provides information on how each line item will be paid. The status indicators are the following:
- A: Services are paid by fee schedule;
- B: Code not recognized by OPPS (may need alternative code);
- C: Inpatient-only procedure;
- E1: Statutorily excluded;
- E2: Pricing information not available;
- F: Corneal tissue acquisition paid at reasonable cost;
- G: Pass-through drugs and biologicals (separate APC payment);
- H: Pass-through device, separate cost-based pass-through payment;
- J1: Comprehensive APC;
- J2: Comprehensive APC;
- K: Non-pass-through drugs and non-implantable biologicals (separate APC payment);
- L: Flu/PPV/COVID-19 vaccine, monoclonal antibody therapy product paid at reasonable cost;
- M: Items and services not billable to fiscal intermediary (FI) or Medicare Administrative Contractor (MAC);
- N: Items or services are packaged into APC rates;
- P: Partial hospitalization service (per diem APC payment);
- Q1: Paid under OPPS, based on Addendum B;
- Q2: T-packaged (paid under OPPS based on Addendum B);
- Q3: Composite APC based on Addendum B or M;
- Q4: Conditionally packaged laboratory tests;
- R: Blood and blood products (separate APC payment);
- S: Procedure or service not subject to discounting;
- T: Procedure or service subject to multiple procedure discounting;
- U: Brachytherapy sources;
- V: Clinic or emergency department visit;
- X: Ancillary services; and
- Y: Non-implantable durable medical equipment (DME).All institutional providers except home health bill DME to the DME MAC.
Multiple APCs can be created in a single hospital visit. The diagnosis codes are used for medical necessity, including the Reason for Visit fields.
Medical coding touches many areas of the hospital, from charging, reimbursement, cancer registry, and marketing to statistics. They are everywhere! It is important to understand how far-reaching medical codes can be.
