CCS Prep

An Outpatient Prospective Payment System Overview: Ambulatory Payment Classifications

As was mentioned in part one of this article published on July 18, candidates sitting for the certified coding specialist (CCS) exam are expected to understand the regulatory guidelines and reporting requirements for hospital-based outpatient services. Part one of this article provided an overview of ambulatory payment classifications (APCs) including status indicators, bundling and modifiers. This article will delve into the outpatient code editor (OCE), outpatient coding and reporting guidelines specific to the outpatient payment system (OPPS) and medical necessity.

Medicare's OCE

There are currently 73 different edit categories in the OCE. This number changes on a quarterly basis. Therefore, it is important to review the Centers for Medicare and Medicaid Services' (CMS) transmittals related to the OCE. These transmittals may be accessed on CMS' Web site at

The OCE is the center of Medicare outpatient claims processing system. In addition to editing claims for errors, the OCE tells fiscal intermediaries (FIs) what action to take with problem claims, assigns APCs and status indicators, and pre-processes data for pricing. In part one of this article, four OCE edits related to the Correct Coding Initiative (CCI) were discussed. Other OCE edits related specifically to coding include:

ICD-9-CM diagnosis and HCPCS code validity

Diagnosis/procedure and age or sex conflicts

Conditions not payable under OPPS

Non-covered or questionable service

HCPCS Level II codes instead of CPT

Modifier requirements: evaluation and management (E/M), bilateral, terminated, separate service, repeat procedure

Observation services

Each of the 73 OCE edits has an associated disposition or action.

Claim Denialno payment to hospital

Claim Rejectionno payment, hospital can resubmit

Claim SuspensionFI reviews claim before payment is made. The FI may require further information or documentation

Claim Return to Providerno payment, hospital can resubmit after correction

Line Item Denialclaim processed but line item denied

Line Item Rejectionclaim processed, line item rejected (can be corrected and resubmitted)

There are a number of other OPPS issues that HIM coding professionals should be aware of. Specifically, questions related to E/M coding, observation services and modifiers may be included in the CCS exam.

Facility E/M Assignment

Under OPPS, hospitals are required to report visits for emergency department (ED), clinic and critical care services using the same E/M CPT codes as physicians for professional billing. As instructed by CMS, hospitals are required to develop their own internal guidelines or criteria for identifying different levels of E/M services and map these levels to existing physician-based CPT codes. These criteria are based on different methodologies such as time, interventions, patient complexity or severity.

As a result of the variable criteria, E/M levels reported to CMS reflect different hospital resource utilization. This lack of consistency has made it difficult for CMS to analyze ED, clinic and critical care services; refine ED and clinic APC definitions; and calculate future APC reimbursements.

In 2003 the Hospital E/M Coding Panel, established by the American Health Information Management Association (AHIMA) and the American Hospital Association (AHA), submitted recommendations to CMS for a new facility-based E/M coding model. The E/M Coding Panel's model addresses the issues identified above and provides objective and consistent criteria for the coding of ED, clinic and critical care services. The model, which is based upon an intervention-based model incorporating attributes of many point systems, is available on the AHIMA Web site, This report should be reviewed by HIM coding professionals who plan to sit for the CCS exam. This review will familiarize coders with a point-based E/M model.

Modifier Assignment

A modifier provides a means to indicate that a service or procedure was altered by specific circumstances, without changing the definition of the code. Under OPPS, two modifiers may be appended to each CPT or HCPCS code. It is important to list first the modifier that will affect reimbursement. The CPT modifiers currently approved for hospital reporting are: 25, 27, 50, 52, 58, 59, 73, 74, 76, 77, 78, 79 and 91. The HCPCS modifiers that are currently approved for hospital reporting are: CA, E1 through E4, FA through F9, BL, GA, GG, GH, GY, GZ, LC, LD, RC, LT, RT, QM, QN, and TA through T9. Modifiers 25, 59, LT and RT were addressed in part one of this article.

Modifier 50 is used to report bilateral procedures performed during the same operative session. Modifier 50 is used only if the same procedure is performed on both paired body parts. For example, use modifier 50 with CPT code 64721 when a patient undergoes bilateral open carpal tunnel releases. If the CPT code description includes the word "bilateral," do not use modifier 50.

Modifier 52 is used to identify reduced services when the intended procedure is partially reduced or not performed. Modifier 52 is used with procedures that do not require anesthesia. It is important to note that CMS recently indicated that conscious sedation is considered anesthesia. An example of an appropriate use of modifier 52 is when a patient is scheduled to have an upper GI series performed but could not tolerate the barium. Code 74240 with modifier 52 is assigned in this instance.

Modifiers 73 and 74 are used to report discontinued procedures when the physician cancels a surgical or diagnostic procedure subsequent to the surgery. Modifier 73 identifies procedures discontinued prior to the administration of anesthesia. Modifier 74 identifies procedures discontinued after the administration of anesthesia.

Modifier 76 is used to report repeat procedures by the same physician.

Modifier 77 is used to report repeat procedures by a different physician. For example, use modifier 76 or 77 to report repeat EKGs.

Modifier 91 is appended to repeat clinical diagnostic laboratory tests performed on the same date. Modifier 91 is not to be used for procedures repeated to verify results or due to equipment failure or specimen inadequacy. If the same test was performed on different sites, use modifier 59 instead.

For additional guidance on reporting modifiers under OPPS, refer to the CCS Prep! article titled "Assigning CPT and HCPCS Modifiers For Hospital-Based Outpatient Service" (

Observation Services

Observation may be used to determine if a patient needs additional monitoring or services to determine whether an inpatient admission is necessary. At times, however, patients are inappropriately placed in observation for reasons not meeting medical necessity, including patient or physician convenience. Routine admissions to observation following surgery are also not appropriate. The only time observation services after surgery is appropriate is if the patient actually needs to be monitored beyond the normal recovery time for that procedure. For example, a patient develops chest pain during recovery and needs to be placed in observation.

Because CMS recognizes that observation services may be beneficial to patients with chest pain, asthma or congestive heart failure (CHF), a separate observation APC 0339, has been created for these patients. To be assigned to APC 0399, HCPCS Level II code G0244, observation care provided by a facility to a patient with CHF, chest pain or asthma, minimum 8 hours, must be assigned to indicate observation services of 8 hours or more. All criteria must be met to be separately reimbursed for observation services, which include:

HCPCS code G0244 must be assigned with revenue code 762.

Observation services are more than 8 hours; hours are listed in the units field.

One of the required qualifying chest pain, asthma or CHF diagnoses must be present as either the admitting diagnosis/patient's reason for visit or in the first listed/principal diagnosis fields.

A surgical procedure with a status in-dicator of "T" other than 90780, IV infusion, is not billed on the day of, or the day before, observation was initiated.

Accompanying clinic, ED, or critical care E/M code or direct admit code G0263, direct admission of patient with diagnosis of CHF, chest pain or asthma for observation services that meet all criteria, is assigned on the day before or the day of observation.

Modifier 25 must be appended to the E/M code.

HIM coding professionals should have a thorough knowledge of OPPS observation guidelines. In many facilities, HIM coding professionals are required to review all observation cases to determine if criteria for separate payment are met.

Medical Necessity

Medicare will only pay for services that meet specific medical necessity standards. Medicare defines medical necessity as a determination that a service is reasonable and necessary for the diagnosis or treatment of an illness or injury. National Coverage Determination (NCD), Local Coverage Determinations (LCD) and Local Medical Review Policies (LMRP) specify whether certain outpatient services are covered, are reasonable and necessary, and are correctly coded. NCDs are developed by Medicare and include national policies. Separate and distinct sets of LCD/LMRP policies are written by each Medicare contractor. CMS requires that these local policies be consistent with national coverage guidelines, although they may be more detailed or specific. It is important to mention here that by December 2005, Medicare carriers and FIs are required to convert all LMRPs to LCDs. Local coverage decisions vary in number and in content from carrier to carrier and from FI to FI. For example, the FI Empire has 67 active local policies while the FI Administar Federal has 85 active local policies.

In most instances policies focus on whether an ICD-9-CM diagnosis code satisfies the medical necessity for a particular HCPCS code. Policies often include a detailed list of ICD-9-CM codes that will be considered reasonable and necessary for the service being provided. There are often additional requirements such as frequency limits, age and sex requirements. LCD/LMRP policies can be found on each FI and carrier Web site. Both national and local policies can also be found on the CMS Web site at

Claims with procedure codes that fail LCD edits may be denied by the FI or carrier. If an ordered test or service is found to be medically unnecessary based on a policy, the patient must be asked to sign an advanced beneficiary notice (ABN). The ABN informs the patient that if the services are denied, he or she will be responsible for the bill. If an ABN is not completed before the test is performed, the provider may not bill the patient for these services nor can they bill Medicare. Often HIM coding professionals will be asked to assist in the medical necessity process. Therefore it is important that they become familiar with the policies for their carrier or FI.

Take the following quiz to test your understanding of the OPPS information contained in this article.

1. A patient comes to a hospital's ED with chest pain. The physician admits the patient to observation for monitoring to evaluate this patient's chest pain as well as abdominal films to evaluate a potential GI problem. Eight hours later the physician determines that the patient's chest pain is not cardiac in origin but is due to GI problems. The physician discharges the patient from observation to be followed by a GI specialist. This case may be eligible for separate observation services reimbursement:

a. True

b. False

2. Modifier 50 should be assigned in which of the following cases?

a. A patient has bunionectomy procedures performed on both right and left feet. The coder assigns 28292-50

b. Patient undergoes bilateral fallopian tube ligation. Code 58600-50 is assigned

c. A radiological examination of both knees is performed. Code 73565-50 is assigned

d. A bilateral flexible diagnostic bronchoscopy is performed. Code 31622-50 is assigned.

3. A patient is admitted for outpatient hernia repair surgery. Because the patient has hypertension and diabetes, vital signs are taken and are evaluated by an internist before the procedure is performed. Is it appropriate to assign an E/M code in addition to the CPT code for the hernia repair.

a. Yes

b. No

This month's column has been prepared by Cheryl D'Amato, RHIT, CCS, director of HIM, and Melinda Stegman, MBA, CCS, manager of clinical HIM services, HSS Inc. (, which specializes in the development and use of software and e-commerce solutions for managing coding, reimbursement, compliance and denial management in the health care marketplace.

Coding Clinic is published quarterly by the AHA.
CPT is a registered trademark of the AMA.



Answers to CCS PREP!: 1. a. True: The admit diagnosis is chest pain and the patient is in observation at least 8 hours. As long as the hospital assigns the observation code G0244 with revenue code 762, and an ED E/M code with modifier 25, this case meets the requirements for separate observation services APC 0339 and related reimbursement; 2. a. Code 28292 should be assigned with modifier 50. In case b, a bilateral fallopian tubal ligation is coded to 58600 alone. The code description indicates unilateral or bilateral, so modifier 50 is not used when a bilateral procedure is performed. For case c, the description for code 73565 is radiological examination both knees. For case d, per January 2003 CPT Assistant, code 31622, bronchoscopy (rigid or flexible), diagnostic; with or without cell washing (separate procedure), is inherently bilateral, so it would not be appropriate to append modifier 50; 3. b. No: The evaluation is considered part of the procedure. A separate E/M code is not assigned.

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