The Ambulatory Payment Classification (APC) system has finally arrived, and hospitals could be in for a real shock, according to the premiere issue of a new monthly publication offering guidance on the newly enacted Medicare payment scheme for outpatient care.

According to the cover story in the August 2000 issue of APC Advisor, official government projections regarding the impact of Medicare's new hospital outpatient prospective payment system may be misleadingly gentle.

The Carolinas HealthCare System in Charlotte, NC, for example, says it was "shocked" at the losses predicted by its own internal readiness assessment for the switch to APCs, which form the cornerstone of the new system that took effect August 1. In that assessment, losses higher than the official predictions from the federal Health Care Financing Administration occurred in almost every clinical setting. In fact, the Carolinas system found that it would lose a whopping 50% of its outpatient reimbursement under APCs, while HCFA has predicted hospitals will actually see a net gain of 5%.

Hospital officials warn that facilities across the country are woefully underprepared for APCs and must take steps immediately to minimize the impact of the complex new payment system. APC Advisor describes in detail the measures taken by the Carolinas system to analyze the system's true impact, as well as the sweeping financial and operational changes it is planning for the transition. "The switch to APCs promises to be at least as far-reaching as the conversion to inpatient prospective payment almost 20 years ago," says APC Advisor publisher David Schwartz. "This report suggests hospitals that don't make changes immediately will fare far worse than HCFA projections estimate.

The winners under APCs will be those who react quickly and learn the incentives built into the new system.

APCs are old hat for some providers and payers. They are the participants in a voluntary Medicaid outpatient reimbursement program similar to the Medicare's new system. A major hospital in Washington state and administrators in Massachusetts' Medicaid program recount how they adjusted to outpatient prospective payment, what worked, what didn't, and the long-term benefits of the transition.