4.3 Reimbursement Basics

Chapter 4.3
Additional Resources

Understanding reimbursement in the U.S. and around the world can be challenging, particularly for those innovators new to the medical field.  However, the information in Chapter 4.3 can be used to help the innovator effectively come up to speed and prepare a reimbursement analysis for the concepts under consideration.  The steps below have been excerpted from the chapter and are presented with active web links to assist innovators in getting started.


Confirm Location of Procedure
  1. What to Cover – Determine the setting in which the procedure will be performed.
  2. Where to Look – Based on what is known about the innovation, determine the most appropriate setting for the procedure. Use the following sources to benchmark the settings used for similar or related procedures and to justify the determination:
    • PubMed – A database of the U.S. National Library of Medicine that includes more than 16 million citations from MEDLINE and other life science journals back to the 1950s.
    • Up-To-Date – A database of evidence-based clinical information. [login required, Stanford students have access]

Research Coverage Decisions and CPT/APC/MS-DRG Codes
  1. What to Cover – For the most similar and relevant existing procedures, research the coverage decisions made by Medicare and private insurance, as well as any technology assessment decisions. Determine when, how, and why they received reimbursement and any technology assessment recommendations. Identify the assigned CPT codes for each procedure, as well as any related MS-DRG, APC codes, and technology add-ons. Typically, it is easiest to identify the CPT code and then map that to MS-DRG/APC codes and technology add-ons using the information obtained in this step, or in steps 3 and 4 below. (Note: Keep in mind that there may be multiple relevant CPT codes. Conversely, some devices may not be assigned a CPT code(s) and/or may not have been awarded reimbursement coverage. If an appropriate CPT code cannot be identified in this step, proceed to the next step.)
  2. Where to Look
    • Private Insurance Medical Policy Websites – Such as Regence, Wellmark, or Aetna.
    • Medicare Site – Be sure to search for both local and national coverage decisions.
    • Technology Assessment Sites – Be sure to identify all technology assessment reports generated by the Blue Cross/Blue Shield Technology Evaluation Center, NICE in the U.K., and other related technology assessment groups.
    • Ingenix CPT Expert (Thomson Delmar Learning, 2005) – This book is the recognized standard for hospital coding. It contains all CPT codes categorized by organ systems. Since many codes could potentially be used for one procedure, it is helpful to review the filtered list of codes with someone familiar with the codes being assessed, such as a clinician or office practice manager. (link works for Stanford students and others with subscriptions)
    • Treatment Research – 2.2. Treatment Options may include technology assessment data for the different treatment options.

Investigate Reimbursement Information for Non-Covered Devices
  1. What to Cover – If no coverage decision information or CPT codes are available, look for reimbursement-related information on manufacturer websites. Often, manufacturers will provide status updates on their progress toward receiving reimbursement to educate potential customers and keep them interested in their devices. They also might include information detailing the CPT codes they are pursuing for reimbursement, the time frame within which they expect to receive reimbursement, the process for appealing coverage decisions, and/or the number of appeals that have been won if reimbursement has been granted on an exception basis. (Note: If candidate CPT codes are identified in step 3 but not in step 2, go back to step 2 and research those codes and their relevant coverage decisions.)
  2. Where to Look
    • Device Manufacturer Websites – Companies such as Medtronic offer general reimbursement assistance on their website for certain practice areas (e.g., for cardiac rhythm management). Similar information can be found by searching other sites for major manufacturers. Guidelines are often provided by product or treatment area to help physicians choose the most appropriate code(s) for maximizing their reimbursement.
    • Federal Register.
    • HCPCS Physician Fee Schedule – Download the fee schedule from Medicare’s website.

Identify Reimbursement Rates
  1. What to Cover – Find the Medicare reimbursement rates for the relevant CPT code that has been identified. Be sure to account for physician and facility reimbursement using the resources listed below.
  2. Where to Look
    • HCPCS Physician Fee Schedule Look Up – Multiply the RVU for the appropriate CPT code by the conversion factor to get the Medicare payment to the physician. If the procedure is performed in a facility setting, use the RVU listed under the fully implemented facility total. Otherwise, use the fully implemented non-facility total or use the resource below.
    • Medicare Hospital Outpatient Prospective Payment System (OPPS) – Available online on the Medicare website. Search for the HCPCS code in the document, find its corresponding APC code, and then obtain the facility payment. [as of Apr 09 this is a Limited Data Set]
    • Cost of Procedures Covered by APC and Number of Procedures Performed – This Excel file is available online. It displays median costs, by APC group, for services payable under the OPPS in calendar year 2007. The data are based on claims for hospital outpatient services provided January 1, 2005 through December 31, 2005.
    • Ambulatory Surgical Center File – If the payment cannot be located in one of the outpatient files, then try the Ambulatory Surgical Center File and search by HCPCS code.
    • Hospital DRG File – If reimbursement rate information still cannot be located, try these Hospital DRG files. Be sure to download the final version of the list of all DRGs. Using this file, identify the DRG and its “relative weight.” Next, this will need to be multiplied by a base payment rate that consists of a labor and nonlabor component. Access these files from the Medicare website under Acute Inpatient – Files for Download.

Identify Number of Procedures
  1. What to Cover – Identify the number of procedures performed per year, reimbursement per procedure, and payer mix.
  2. Where to Look
    • HCUPnet – A free, online query system based on data from the Healthcare Cost and Utilization Project (HCUP). It provides access to health statistics and information on hospital stays (inpatient encounters) at the national, regional, and state levels.
    • Medicare Part B Physician/Supplier Extract Summary File – This file summarizes the number of procedures, total submitted charges, and total payments by HCPCS code. The file can be ordered from the Center of Medicare and Medicaid Services.
    • Other Databases – Verispan (now SDI) and National Patient Profile are subscription services that provide procedural data before HCUP releases it.
      • National Patient Profile – A desktop-enabled database (i.e., on a CD) provided by Verispan. It is searchable by diagnosis or procedure codes (ICD-9 only) and includes information similar to that on HCUPnet, except that it is often more up-to-date and has an interesting feature to show the frequency of different ICD-9 diagnoses for each procedure.
      • Verispan – A subscription service that provides access to data on the frequency of procedures carried out for patients who are diagnosed with specific conditions. The data is provided in such a way that in-depth customization and analysis can be performed.

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