How do APCs work?
Each APC is composed of services which are similar in clinical intensity, resource utilization and cost. All services (identified by submission of CPT codes on the hospital’s UB 04 claim form) which are grouped under a specific APC result in an annually updated Medicare “prospective payment” for that particular APC. Since this payment is a prospective and “fixed” payment to the hospital, the hospital is at risk for potential “profit or loss” with each APC payment it receives. The payments are calculated by multiplying the APCs relative weight by the OPPS conversion factor and then there is a minor adjustment for geographic location. The payment is divided into Medicare’s portion and a patient co-pay. Co-pays vary between 20 and 40% of the APC payment rate. Eventually this percent will be capped at 20% of the payment rate.
