Health Information Management

Two-times rule defined

APCs Insider, May 13, 2004

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QUESTION: What does it mean when the Federal Register states that something violates the "two-times rule"?

ANSWER: The two-times rule refers to the guideline that the highest calculated cost of an individual procedure categorized to any given APC cannot exceed two times the calculated cost of the lowest-costing procedure categorized to that same APC.

For example, let's examine the 2004 Final Rule, Appendix C, looking at APC 0146, Level I Sigmoidoscopy (CPTs: 45300, 45303, 45305, 45307, 45330, 45331, and 45332). Within this group of  procedures, no individual procedure represented by a CPT code may be more than two times the associated cost of the lowest-cost procedure in the APC. If one of the CPT codes assigned to APC 0146 had an associated cost greater than two times the lowest-cost procedure, the APC would be in violation of the two-times rule. As part of its annual adjustment to the OPPS, CMS uses this rule as a guideline when assigning new procedures or reassigning existing procedures into an APC category for payment.

CMS can exempt any APC from the two-times rule for any of the following reasons:

  • Resource homogeneity
  • Clinical homogeneity
  • Hospital concentration
  • Frequency of service (volume)
  • Opportunity for upcoding
  • Code fragmentation

For a detailed discussion of these criteria, refer to the April 7, 2000, CMS Final Rule (65 FR 18457).

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