How are APC payments calculated?
APC payments are determined by multiplying an annually updated “relative weight” for a given service by an annually updated “Conversion Factor”. CMS publishes the annual updates to “relative weights” and the “conversion factor” in the November “Federal Register”. The APC “conversion factor” for 2010 is $67.406 For example, to calculate the APC payment for APC 006 (includes I&D of simple abscess—CPT 10060): Relative Weight for APC 006 = 1.4557 Conversion Factor for 2010= $67.406 1.4557 X $67.406= $98.12 payment for APC 006 for year 2010 (for the “average US hospital)”. There is further modification of the APC payment according to adjustments for “Local Wage Indices”. Medicare determined that 60% of the APC payment is due to employee wage costs. Since different areas of the country have widely divergent local wage scales, 60% of each APC payment is adjusted according to specific geographic locality.
