The development of outpatient prospective payment systems and the use of ambulatory patient groups by private insurers

Private insurers will likely move to APGs rapidly because of the key advantages that APGs provide. Not only is it necessary to have an outpatient classification system to make utilization review, quality assurance, and customer reporting more meaningful, outpatient prospective payment provides a foundation for the controls on outpatient payments that insurers have been seeking. Because of outpatient volume increases and constraints on inpatient payments that have led hospitals to increase outpatient charges more rapidly, most insurers believe that outpatient payment levels are currently beyond their control. Introduction of an outpatient prospective payment system will shift control over outpatient payment increases from providers to insurers, as has been the case for many insurers who have adopted DRG payment for inpatient services. Once APGs are in place, annual increases in payment amounts will be determined through insurer-provider negotiation or through contractual approaches that limit payment increases to changes in a price index.