Medicaid Outpatient PPS Pricing Issues

December 11, 2014

To: Hospital CFOs and Finance Personnel at Prospective Payment System Hospitals
From: Andrew Busz, Policy Director, Finance; and Claudia Sanders, Senior Vice President, Policy Development
Staff Contact:, 206-216-2533
Subject: Medicaid Outpatient PPS Pricing Issues
This bulletin provides important information on problems hospitals are experiencing with the Health Care Authority’s (HCA) programming of payments using  Enhanced Ambulatory Payment Groups (EAPGs).The issues, stemming from pricing in HCA’s ProviderOne system, are causing significant numbers of outpatient hospital Medicaid claims to be underpaid or not paid at all.   
Staff at HCA are aware of these issues and working with us and their internal systems to find solutions. Depending on programming and the source of pricing information used, these issues may also affect outpatient hospital payments from the Medicaid managed care plans. Hospitals receiving payment under EAPGs should monitor their outpatient payments from both the HCA and the Medicaid managed care plans to ensure they are being appropriately paid.
This issue applies to prospective payment hospitals paid under EAPGs and applies to both fee-for-service and managed care Medicaid outpatient claims.  HCA adopted the EAPG methodology effective July 1, 2014. 
Identified Issues
Working with WSHA, HCA has identified the following payment programming issues. Depending on the type of services provided, individual hospitals may be experiencing none, some or all of these issues. If you believe you are experiencing underpayments or denials other than the reasons below, please let us know as soon as possible so we can confirm the issue has been communicated to HCA. We will pass on to you any information we receive from HCA regarding the timing and resolution of these issues.
1)         EAPG Version v3.7/3.9 compatibility
HCA intends to use EAPG version 3.7 for payment but installed EAPG version 3.9 into ProviderOne. EAPG version 3.9 has some new EAPG classifications not used under EAPG version 3.7.  Services classified into these new categories are denying in error. HCA will reconfigure the pricing for these classifications to map to the appropriate EAPG 3.7 payment. 
2)         Inpatient-only procedures
There are some procedures under the EAPG pricing that are listed as inpatient only and are currently paying zero. Because there are no EAPG weights for these procedures, HCA intends to allow these services at the facility’s outpatient ratio of cost to charges.
3)         Ancillary-only services (ex: lab)
There are certain lab and other ancillary services that in most instances bundle into the EAPG for another service but should be paid as a stand-alone service if they are billed separately. Currently these are paying zero. HCA will configure the system to allow an appropriate EAPG payment for covered stand-alone services.
4)         Cross-type multiple significant procedure discounting
The system is not always recognizing cross-type multiple significant procedure discounting when there are four or more procedures of two or more different EAPGs types.  This is causing certain procedures to be discounted, even when they should be considered a primary procedure. HCA will reconfigure the pricing to ensure that the highest weighted procedure within each EAPG type is paid 100% and all other paid procedures within each EAPG type are discounted at 50%. 
5)         Evaluation and Management Codes
The system has now been fixed to allow the facility component of Evaluation and Management services provided at provider-based clinics to be billed using either the CPT 99201-99215 range or the HCPCS code G0463. Initially the system would pay only if the hospitals used G0463. Since the EAPG payment is driven from the diagnosis rather than the CPT code, the code used does not affect the payment amount.
6)         Charge cap
The system was incorrectly capping outpatient payments at billed charges. HCA has removed this limit from the system, but has not yet reprocessed the underpaid claims. HCA believes the majority of claims impacted by this issue are the result of the EAPG 3.9/3.7 compatibility issues described above and will address them in conjunction with resolution of that issue.
Next Steps: Fee-For-Service
HCA is in the process of reconfiguring the ProviderOne system to correct these issues. Information regarding specific timing will be provided as it becomes available. Once programming is completed, HCA indicated it will automatically reprocess claims that have been incorrectly paid or denied through a mass adjustment process. We have been advised by HCA that hospitals will not need to resubmit claims for these services.
Next Steps: Medicaid Managed Care Payments
The impact of these issues on payments from managed care plans may vary, depending on how the plan programmed its system and the source of EAPG data they are using. WSHA will continue to work with HCA to ensure HCA notifies plans of these programming corrections. We do not know if and when plans will be updating their software or if they intend to make retroactive corrections.  You should examine the specific payment language in your managed care contract to determine your course of action. We recommend hospitals contact the health plans directly if you believe you are not being paid correctly. 


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