July 9, 2007

The Effects of TRICARE’s New APC-based OPPS
By Dave Fee, MBA
For The Record
Vol. 19 No. 14 P. 10

During 2007, TRICARE—the U.S. Department of Defense’s health insurance plan for the uniformed services, retirees, and their families—will implement a new ambulatory payment classification (APC)-based outpatient prospective payment system (OPPS) for services
provided to more than 9 million TRICARE beneficiaries. (It was originally slated to take effect June 1.) This news has important ramifications for U.S. hospitals and health systems serving large populations of TRICARE-covered patients. HIM departments will need to understand how TRICARE's OPPS differs from the Centers for Medicare & Medicaid Services’ (CMS) version to ensure accurate coding and appropriate reimbursement.

The CMS introduced and implemented the first OPPS seven years ago with the intent of controlling the growth of outpatient care expenses, as well as reducing the growing burden on Medicare beneficiaries for payment of outpatient services under the then-existing fee-for-service system. The OPPS implemented by CMS in 2000 uses APCs for grouping services.

Today, other organizations (payers and government entities) are beginning to adopt the OPPS framework for determining coverage of hospital outpatient services for their beneficiaries, TRICARE being the most recent.

The TRICARE OPPS is modeled extensively on the CMS OPPS, utilizing the following:

• the same APCs and their descriptions, weights, and rates;

• the same status indicators (SIs) and their descriptions;

• the same outpatient code editor (OCE) editing structure and a majority of the same edits;

• the use of fee schedule payments for items not covered by OPPS;

• an inpatient-only list with most of the same services included;

• most of the same pricing considerations (eg, discounting, outlier payments, device pass-through payments); and

• the same observation payments for patients with congestive heart failure, asthma, and chest pain.

However, TRICARE supports a different population base, providing services not normally covered by Medicare such as maternity observation and preventive care services. Given these differences, the TRICARE OPPS includes TRICARE-specific APCs, new OCE edit dispositions, and variations in the assignment of SIs to specific HCPCS codes.

TRICARE APCs
There are numerous services covered by TRICARE that are not covered by Medicare. To pay for some of these services, TRICARE has created 13 specific APCs (as of April) unique to the TRICARE OPPS.

Unlike the four character APCs used by the CMS, TRICARE’s APCs are five characters. TRICARE APCs beginning with a “T” denote APCs specific to TRICARE, while those beginning with a “0” are unedited CMS APCs.

This has several ramifications for hospital information systems. Storing data using the standard APC definition requires a four-digit field; to accommodate the TRICARE APCs, the field will need to expand to five digits and be modified to accept alpha-numeric data. Truncating the initial “T” is not an option, as it will create duplicate APCs. System functions, including system interfaces, analyzing, forecasting, reporting, and data storing, will need to be modified to support this change.

Maternity Observation
Maternity observation is an additional service covered by TRICARE. The logic for receiving payment is the same as with the CMS OPPS. The variation lies in the following details for each of the steps reviewed for payment:

• Two hundred twenty-nine diagnosis codes cover maternity observation. One of these codes must be listed as a primary or reason-for-visit (as the first reason-for-visit listed) diagnosis code.

• A minimum number of four hours must be reported in the “units” field of the UB billing form or the 837 electronic claim form.

• Observation must be coded as G0398.

• No “T”-type significant procedure is present on the same date of service.

With the minimum number of hours set at four, it is possible to have multiple maternity observation visits for a given date of service. In this scenario, each visit must meet the above criteria, and a condition code G0 or modifier 27 must appear on the claim.

OCE Edit Dispositions
When introducing the OPPS to the OCE editing, the CMS defined six possible dispositions for the outcomes of an OCE edit. TRICARE will use two: claim denial and line item denial.

To address a claim-level denial, coders must correct any inaccurate information, such as an invalid diagnosis code, and then resubmit the claim for payment. A claim with a line item denial will be processed for payment with the denied line left unpaid.

TRICARE has also added two dispositions: medical suspend and validity suspend. These new dispositions are designed to allow manual review of the claim by the fiscal agent processing it. Either or both dispositions may surface on a given claim. These dispositions are driven by the OCE/APC edits. TRICARE will use 51 of the CMS-defined edits—48 as they are and three with special TRICARE logic defined—plus three additional edits created by TRICARE.

SI Assignment to HCPCS Codes
The CMS April 2007 ambulatory patient classifications release contains 14,153 defined HCPCS codes—63% as Level I and 37% as Level II. Each of these is assigned an SI, which designates whether the service will be paid, packaged, or not paid. A comparison of the SI assignment for each HCPCS code between both the TRICARE OPPS and the CMS OPPS reveals 24% of HCPCS codes have a different indicator, meaning that this percentage of HCPCS codes are paid differently under TRICARE than CMS.

Not only does this mean that the final payment will be different, but it also may impact internal hospital processes, from managing denials to proper billing practices for some services. For example, under the CMS OPPS, more than 600 codes are assigned an indicator of Y, which means a hospital must bill these to the Durable Medical Equipment Regional Carrier on a separate claim from other outpatient services billed to the fiscal intermediary. Under the TRICARE OPPS, there are no codes assigned to an SI of Y. This means these services should be billed on the same claim as other outpatient services.

Preparing for Change
The complexities of outpatient prospective payment are such that the impact of a new OPPS on hospitals cannot be fully understood without detailed analysis and investigation. This was true when the CMS first introduced the OPPS in 2000, and it is just as true with the new TRICARE version. Healthcare facilities that contract with TRICARE can expect the changes to impact hospital information systems, HIM department processes, and ultimately, outpatient reimbursement. By understanding and planning for these changes now, hospitals will be well-prepared to succeed under the TRICARE OPPS.

— Dave Fee, MBA, is marketing manager of outpatient products at 3M Health Information Systems.

How have the changes to TRICARE hospitals affected your facility? Talk about it at here.