Medicare oupatient hospital services are paid under the Outpatient Prospectivie Payment System (OPPS), under the Ambulatory Patient Classification system. Historically, these had been called Ambulatory Patient Groups (APGs), but before implementation of the OPPS on August 1, 2000, the name changed to APCs.
Medicare created APC pricing to match costs, not charges, with services, and establishes groups of covered services so that the services within each group are clinically similar in terms of resources/costs required. There is a list on the CMS website that identifies the APCs and their descriptors and will determine reimbursement to the hospital. For coding and billing purposes, multiple APCs can be assigned on an outpatient claim.
APCs are assigned based on the HCPCS (Healthcare Common Procedural Coding System), both HCPCS Level I (CPT procedure codes) and HCPCS Level II (supply and other services) codes. APC pricing is based on the APC Fee Schedule, which is also available on the CMS website. APC and HCPCS codes that do not have established fees and are not incidental, price is based on a discount.
Claims that are billed are processed through software called the APC Outpatient Code Editor, or the OCE. The APC OCE applies Correct Coding Initiative (CCI) edits and assigns APCs, Service Indicators and discount factors when multiple procedures are performed.
APC payments include the hospital outpatient clinics and Emergency Departments. If the patient is admitted from a hospital clinic or Emergency Department, then there is no APC payment, and Medicare will pay the hospital under inpatient Diagnostic-related group or DRG methodology inpatient payment system (IPPS).
For more information on APC descriptions and the APC Fee Schedule, visit the CMS website: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html