Understanding Outpatient Department Payments: A Guide

Outpatient care facilities, also known as ambulatory health facilities, provide healthcare services to individuals who do not require hospitalisation. They offer a range of healthcare services, including preventive healthcare, acute illness treatment, dental care, and some types of maternal and family-planning care. These facilities are usually a patient's first contact, and a large portion of total health expenditure goes towards outpatient healthcare services. Payment methods for outpatient care facilities can vary and include global budgets, line-item budgets, capitation, fee-for-service, pay for performance, and mixed payment systems. In the context of hospital outpatient departments, payments are often structured through the Hospital Outpatient Prospective Payment System (OPPS), which groups items and services into Ambulatory Payment Classifications (APCs) based on clinical similarity and resource use. This system also includes provisions for transitional pass-through payments for new devices, drugs, and biologicals, as well as outlier payments for high-cost and complex procedures.

CMS's Hospital Outpatient Prospective Payment System (OPPS)

CMS generally makes payments for hospital outpatient department services through the Hospital Outpatient Prospective Payment System (OPPS). Under the OPPS, all items and services are assigned to payment groups called Ambulatory Payment Classifications (APCs). These APCs group together items and services that are similar clinically and in terms of resource use.

The OPPS system also provides for outlier payments to hospitals to help mitigate the financial risk associated with high-cost and complex procedures. Outlier payments are provided when the cost of a service exceeds the APC payment amount multiplier threshold (the APC payment amount multiplied by a certain amount) and the APC payment amount plus a fixed-dollar amount threshold (the APC payment plus a certain dollar amount).

Transitional pass-through payments are also provided for certain new drugs, devices, and biologicals that meet eligibility criteria for a period of at least two years but not more than three years. These payments are intended to help facilitate patient access to technologies that are too new to be well represented in the data that CMS uses to set OPPS payment rates.

The OPPS system also includes a comprehensive APC (C-APC) policy, under which CMS makes payment for certain costly primary services and all other items and services reported on the hospital outpatient department claim. These are considered integral, ancillary, supportive, dependent, and adjunctive to the primary service and represent components of a complete comprehensive service.

Outpatient care facilities' payment methods

Outpatient care facilities, also known as ambulatory health facilities, provide healthcare services to individuals who do not require hospitalisation or institutionalisation. They offer a range of healthcare services, including preventive healthcare, acute illness treatment, dental care, and some types of maternal and family planning care. These facilities are usually a patient's first contact, and a large portion of total health expenditure goes to outpatient healthcare services.

Payment methods for outpatient care facilities can vary and are an important incentive to guide the performance of these providers. Some common payment methods include global budgets, line-item budgets, capitation, fee-for-service (both fixed and unconstrained), pay-for-performance, and mixed payment systems. The specific payment method can influence the performance of the outpatient care facility and patient outcomes.

In the United States, the Center for Medicare and Medicaid Services (CMS) uses the Hospital Outpatient Prospective Payment System (OPPS) to reimburse hospital outpatient departments. Under OPPS, services are assigned to Ambulatory Payment Classifications (APCs), grouping clinically similar items and services. CMS also provides transitional pass-through payments for new drugs, devices, and biologicals that meet certain cost and eligibility criteria. Additionally, outlier payments are made to hospitals to mitigate financial risks associated with high-cost and complex procedures.

The billing requirements for hospital outpatient departments include using modifiers like "PO" for off-campus outpatient services and "PN" for services under the Medicare physician fee schedule. There have been legislative discussions around unique health identifiers for off-campus departments, but these have faced opposition due to the potential administrative burden.

Transitional pass-through payments

The Hospital Outpatient Prospective Payment System (OPPS) is the standard method for CMS to make payments for hospital outpatient department services. Under OPPS, all items and services are assigned to Ambulatory Payment Classifications (APCs) based on clinical similarity and resource use.

Under OPPS, transitional pass-through payments are temporary additional payments for certain new drugs, devices, and biologicals that meet eligibility criteria. These payments are provided for a period of at least two years but not more than three years while CMS collects data on the cost of these items. The purpose of these payments is to improve patient access to new technologies that are not yet adequately represented in the data used to set OPPS payment rates.

Outpatient billing requirements

The Hospital Outpatient Prospective Payment System (OPPS) is the standard payment system for hospital outpatient department services. Under OPPS, all items and services are assigned to Ambulatory Payment Classifications (APCs) based on clinical similarity and resource use similarity. APC payments are made for items and services provided by hospital outpatient departments. CMS also makes payments for certain costly primary services and other items and services considered integral to the primary service under its comprehensive APC (C-APC) policy.

Additionally, transitional pass-through payments are provided for new devices, drugs, and biologicals that meet eligibility criteria for a period of at least two years. These payments facilitate patient access to new technologies while CMS gathers data to set OPPS payment rates. Outlier payments are also provided to hospitals to mitigate financial risk associated with high-cost and complex procedures, where the cost of a service exceeds the APC payment amount multiplier and fixed-dollar amount thresholds.

In terms of billing requirements, the National Provider Identifier (NPI) is a unique identification number for healthcare providers to facilitate quick and effective electronic information transfer. Off-campus hospital outpatient departments (HOPDs) must be assigned a unique NPI as a condition of payment. Bills for off-campus services must also include the correct modifiers, with "PO" appended to items and services paid under OPPS and rendered in an off-campus HOPD, "PN" appended to items and services paid under the Medicare physician fee schedule, and "ER" appended for services in an off-campus emergency department.

HIPAA-mandated institutional claims require the claim to include the name and service location of the provider submitting the claim. Medicare regulations also require beneficiaries treated at an off-campus HOPD to be notified of their expected financial obligations if they will be receiving bills from both the individual provider and the hospital.

Different payment systems for outpatient facilities

Outpatient care facilities provide basic healthcare services to individuals who do not require hospitalisation. They are usually the patient's first contact and contribute to large gains in health status. Payment methods are one of the most important incentive methods applied by purchasers to guide the performance of outpatient care providers.

There are several different payment systems for outpatient facilities. These include:

• Budget systems: Outpatient facilities are given a fixed amount of money in advance to cover expenses for a fixed period.
• Capitation payment systems: The facility is paid a fixed amount of money in advance to provide specific services to each enrolled patient for a fixed period.
• Fee-for-service systems: Payment is based on the specific services that the healthcare facility provides.
• Pay-for-performance systems: Payment is partly based on the performance of the facility's healthcare providers.
• Mixed payment systems: A combination of different payment systems, such as global budgets, line-item budgets, capitation, fee-for-service (fixed and unconstrained), and pay for performance.

In the United States, the Hospital Outpatient Prospective Payment System (OPPS) is used to make payments for hospital outpatient department services. Under OPPS, items and services are assigned to Ambulatory Payment Classifications (APCs), which group together items and services that are similar clinically and in terms of resource use. Outlier payments are also provided to hospitals to help mitigate the financial risk associated with high-cost and complex procedures.

Additionally, transitional pass-through payments are provided for certain new drugs, devices, and biologicals that meet eligibility criteria. These payments facilitate patient access to new technologies that may not be well represented in the data used to set OPPS payment rates.

Frequently asked questions