APC (Ambulatory Payment Classification)

An APC is the outpatient cousin of a DRG. When a hospital provides a service that does not involve an overnight admission, such as a same-day surgery, an infusion, an emergency visit or an imaging study, the service is grouped into an Ambulatory Payment Classification and the hospital's facility fee is paid at the rate for that group. Medicare runs this through its Outpatient Prospective Payment System, and commercial contracts often borrow the structure.

The reason a plain-English reader should care is that APCs are where the hospital-versus-surgery-center price gap lives. Medicare pays a hospital outpatient department roughly 1.7 to 2 times what it pays a freestanding surgery center for the same procedure, and commercial rates track the same pattern. A cataract surgery might fall into an APC that pays a hospital about $2,000 for the facility portion while the ASC rate is about $1,000. A cardiac stress test, a colonoscopy, a steroid injection: each has an APC, and each is paid more when the sign on the building says hospital. There is a long-running push in Washington, called site-neutral payment, to close that gap, and it has closed for a few services such as clinic visits, but for most procedures it remains wide open.

The takeaway: if your doctor can do the procedure at a freestanding surgery center or office, the APC gap is money in your pocket and your employer's. Ask where else the doctor operates before you accept the hospital date.