Health Information Management

Q/A: How does CMS calculate outlier payments?

APCs Insider, May 27, 2011

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Q: Our business office staff members were discussing outlier payments, particularly the requirements that change annually. What is an outlier, how is it calculated, and how does it affect our hospital?

A: CMS calculates the payment for each Ambulatory Payment Classification (APC) based on past hospital claims data. CMS uses the claims data to establish cost data, which it then uses to set annual APC payments. Because the Outpatient Prospective Payment System (OPPS) is a prospective payment system, the payment is an average payment for the services grouped in a single APC.

Section 201(a) of the Balanced Budget Refinement Act of 1999 (BBRA) amended Section 1833(t) of the Social Security Act to add an outlier adjustment provision. The BBRA requires CMS to make an additional payment when a hospital’s charges, adjusted to cost, exceed certain criteria. The criteria, a percentage and a fixed dollar threshold, must be exceeded to trigger an additional payment. CMS updates the fixed dollar threshold annually.

For CY 2011, CMS will make an outlier payment when the cost of a procedure, test, or service exceeds both 175% of the APC payment amount and a fixed-dollar threshold of $2,025. Payments will equal 50% of the amount by which the cost of a service exceeds the criteria.

Editor’s note: Andrea Clark, RHIA, CCS, CPCH, president of Health Revenue Assurance Associates, Inc., in Plantation, FL, answered this question.

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