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Adjusted Average Per Capita Cost (AAPCC)

What is the adjusted average per capita cost (AAPCC)?

The adjusted average per capita cost (AAPCC) serves as the basis for payment made by Medicare to Health Maintenance Organizations (HMOs) on behalf of a beneficiary.

The four original factors that contributed to the AAPCC were:

  • gender
  • age
  • welfare status
  • institutional status

Since then, the factors influencing AAPCC have expanded and been modified to include Medicaid eligibility and whether the individual has both Part A and Part B of Medicare, among other factors.

Currently, the AAPCC is calculated as 95% of the average cost of delivering medical care in the fee-for-service sector.

Separate AAPCCs are calculated for Part A and Part B services for those who are older, disabled, or with end-stage renal disease (ESRD).

Why is the adjusted average per capita cost (AAPCC) important to healthcare?

The adjusted average per capita cost (AAPCC) is important to healthcare because it is the amount Medicare compensates physicians and facilities for the services they provide. If the cost of services exceeds this predetermined amount, facilities must take the loss of revenue.

By setting a predetermined payment for Medicare services, physicians are encouraged to follow standardized care and prevent costly and unnecessary additional tests and procedures.