Business Briefs: Are You Reporting the Correct Outpatient Site of Care?

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Hospitals and qualified healthcare professionals (QHPs; eg, medical doctors, doctors of osteopathic medicine, doctors of podiatric medicine, nurse practitioners, physician assistants, and clinical nurse specialists) have an obligation to correctly report the place in which wound care services/procedures are performed. Because each site of care has a different Medicare payment system, hospitals and QHPs could be overpaid or underpaid if the incorrect site of care is reported. Let’s begin with a few definitions of commonly confused sites of outpatient care:

Provider-Based Hospital Outpatient Department: This outpatient department:

• may be on or off campus; 
• must be an integral part of the hospital, subject to the hospital conditions of participation; and
• is not separately enrolled and certified in Medicare. 

Ambulatory Surgical Center (ASC): An ASC is a distinct entity that operates exclusively for the purpose of furnishing surgical services to patients who do not require hospitalization and in which the expected duration of services does not exceed 24 hours following admission. Additionally, ASC services to Medicare patients are not expected to require active medical monitoring at midnight. ASCs must be certified as meeting the ASC requirements and must enter into an agreement with the Centers for Medicare & Medicaid Services (CMS) to be eligible for Medicare payment. An ASC can be either:

• independent (not part of a provider of services or any other facility); or
• operated by a hospital (under the common ownership, licensure, or control of a hospital). An ASC operated by a hospital must:
  • be a separately identifiable entity separately enrolled in Medicare with a supplier approval that is distinct from the hospital’s Medicare provider agreement;
  • be physically, administratively, and financially independent and distinct from other operations of the hospital;
  • treat costs for the ASC as a non-reimbursable cost center on the hospital’s cost report; 
  • agree to the same assignment, coverage, and payment rules applied to independent ASCs; and
  • comply with the conditions for coverage for ASCs.

Provider-Based Outpatient Surgery Department of a Hospital: This outpatient surgery department:

• may be on or off campus;
• must be an integral part of the hospital, subject to the hospital conditions of participation; and 
• is not separately enrolled and certified in Medicare or subject to ASC conditions for coverage. 

Now, let’s focus on the Medicare payment systems for these three sites of care. Both the provider-based hospital outpatient department and the provider-based outpatient surgery department of a hospital are paid via the same Medicare payment system: the Hospital Outpatient Prospective Payment System (OPPS). The ASC is paid via a different Medicare payment system: the ASC Fee Schedule (ASCFS). See Table 1 or the differences between the national average Medicare allowable OPPS and ASCFS rates for subcutaneous debridement (11042), application of a “low cost” cellular and/or tissue-based product (CTP) for skin wounds on the foot (C5275), and application of a “high cost” CTP to the foot (15275). 

Medicare can easily tell the difference between these outpatient providers because they should submit different types of claims. The ASCs should use the ASC X12 837 professional claim format to bill Medicare contractors. The provider-based departments of the hospital should use the ANSI X12N 837 I to bill the Medicare contractors. In addition, the provider-based departments of the hospital should indicate their facility type in FL4 Type of Bill on their claims. For example, provider-based hospital outpatient departments, such as hospital-owned outpatient wound care departments, should use bill type code 013X on their claims. Provider-based outpatient surgery departments of a hospital should use bill type code 083X on their claims. 

Before we leave the topic of provider-based outpatient departments of a hospital, remember that off-campus, provider-based hospital departments have new coding rules for all dates of service beginning Jan. 1, 2016. CMS now requires off-campus, provider-based hospital departments to attach the modifier “PO” to each Healthcare Common Procedure Coding System (HCPCS) code on their claims for all outpatient hospital items and services paid by OPPS. 

Now, let’s turn our attention to the QHPs’ responsibility for reporting the correct place of service (POS) on their Medicare claims. QHPs are paid for services according to the Medicare Physician Fee Schedule (MPFS). This schedule is based on a payment system that includes three major categories, which drive the reimbursement for physician services:

1. practice expense (reflects overhead costs involved in providing service(s), purchasing supplies, etc.);
2. physician work; and
3. malpractice insurance.

To account for the increased practice expense QHPs incur when performing services in their offices, Medicare reimburses physicians more money for services performed in their offices (POS code 11) than in an outpatient hospital (POS codes 19, 22, 23) or an ASC (POS code 24). In fact, Medicare lists two different allowable rates on the MPFS: non-facility (office) rates and facility (eg, hospital-based outpatient department [HOPD] and ASC) rates. When QHPs perform the same services/procedures in a facility (eg, HOPD or ASC), the facility incurs the costs for the overhead, supplies, etc. Therefore, QHPs are usually paid at lower rates in those places of service. If QHPs perform work in a facility but report the POS as the office, the result is a Medicare overpayment. See Table 2 for the differences between the office and facility QHP national average Medicare allowable rates for subcutaneous debridement (11042), selective debridement (97597), and application of a CTP for skin wounds to the foot (15275). 

The last time this author taught this subject at a wound care symposium some wound care professionals thought its importance was a bit exaggerated. Therefore, for purposes of this column, fellow Today’s Wound Clinic editorial advisory board member Donna Cartwright, MPA, RHIA, CCS, RAC, FAHIMA, was asked to participate in an interview about the importance of QHPs properly reporting the POS on Medicare claims. What follows is the conversation.

Kathleen Schaum (KS): Are you concerned about QHPs reporting the correct POS on Medicare claims?

Donna Cartwright (DC): Yes. CMS and the Medicare Administrative Contractors (MACs) continue to release articles and instructions regarding correctly reporting the POS on Medicare claims. In addition, the appropriate assignment of POS codes, especially by physicians who are performing services in an HOPD or ASC, is paramount to the physicians receiving the correct Medicare payment.

KS: How should QHPs specify their POS on Medicare claims?

DC: CMS maintains a list of POS codes, which are two-digit codes placed on healthcare professional claims to indicate the setting in which a service was provided. (See Table 3 for a partial list of POS codes.) QHPs can find a full list of POS codes online (www.cms.gov/medicare/coding/place-of-service-codes/place_of_service_code_set.html) and in the front of the Current Procedural Terminology Manual. 

QHPs are required to report the POS on all health insurance claims they submit to Medicare Part B contractors. The POS is a required field entered into the 2400 POS code loop (segment SV105) of the 837P electronic claim or item 24B on the CMS-1500 paper claim. Because both the POS and the locality address are components of the MPFS, the name, address, and zip code of where the service(s) were actually performed is required for all POS codes and is entered into item 32 on the CMS-1500 claim form or in the corresponding loop on its electronic equivalent.    If the POS code is missing, invalid, or inconsistent with the procedure code on the claim form, the claim will be returned as “unprocessable.” For example, POS 21 (inpatient hospital) is not compatible with procedure code 99211 (established patient office or other outpatient visit).

KS: Is it true the Office of Inspector General (OIG) is concerned about inappropriate reporting of POS? 

DC: Yes, this has been an issue for quite some time. In fact, the OIG published a POS report July 28, 2010. Following is a quote from the executive summary of that report:  “We found that physicians did not always correctly code non-facility POS on Medicare Part B claims. Based on our sample results, we estimated that Medicare contractors nationwide overpaid physicians $13.8 million for incorrectly coded services provided during calendar year 2007. To account for the increased overhead expense that physicians incur by performing services in non-facility locations, such as physician’s offices, Medicare reimburses physicians at a higher rate for certain services performed in these locations and at a lower rate for services performed in facility settings, such as HOPDs or ASCs. Physicians are required to identify the POS on the health insurance claim forms that they submit to Medicare contractors. However, for 90 of the 100 services in our sample, physicians used non-facility POS codes on their claims for services that were actually performed in HOPDs or ASCs. Medicare Part B pays for services that physicians provide to program beneficiaries. Although physicians routinely perform many of these services in an HOPD or a freestanding ASC, some of these services may also be performed in non-facility settings, such as a physician’s office, an urgent-care center, or an independent clinic. To account for the increased overhead expense that physicians incur by performing services in non-facility locations, Medicare reimburses physicians at a higher rate for certain services performed in these locations. However, when physicians perform these same services in facility settings, such as HOPDs or ASCs, Medicare reimburses the overhead expenses to the facility and the physician receives a lower reimbursement rate.”

KS: Exactly where do the higher non-facility rates apply?

DC: The higher non-facility practice expense relative value units apply to services performed in a QHP’s office; a patient’s home; an ASC (if the physician is performing a procedure not on the ASC approved-procedures list); a nursing facility; or a facility or institution other than a hospital or skilled nursing facility, community mental health center, or ASC performing an ASC-approved procedure.

KS: Is it true Medicare contractors audit claims for incorrect POS codes? 

DC: Yes, Comprehensive Error Rate Testing audits and recovery audits often target POS compliance. These Medicare contractors continue to remind medical professionals to pay closer attention to this portion of their Medicare claims. 

KS: Many wound care-related Medicare local coverage determinations (LCDs) specify coverage for certain services and procedures in specific places of service. Do the MACs use the POS codes to determine if the work is performed in a covered site of care?

DC: Yes, the MACs use the reported POS codes to verify services and procedures are performed only in the covered sites of care specified in their LCDs. For example, some LCDs do not cover procedures performed in a physician’s office while other LCDs only cover procedures performed in a hospital setting.

KS: Do you have any recommendations for ensuring compliance with the POS rules?

DC: Yes, QHPs should establish a process for informing their coders and billers exactly where they performed the work for each patient. This is particularly true of wound care QHPs who work in a variety of care settings throughout the day/week. For example, wound care QHPs may perform surgical procedures in ASCs during morning hours, then provide wound care services/procedures for several hours in HOPDs, and then return to their office and provide wound care for several hours at the end of the day. When the QHPs communicate the correct POS, the coders and billers will be able to place the correct POS code and charge on the Medicare claims. QHPs should keep informed about Medicare coverage and billing requirements. For example, billing physician’s office (POS 11) for a minor surgical procedure that was actually performed in an HOPD (POS 22) and collecting a higher payment is inappropriate billing and may be viewed as program abuse. QHPs should: 1) frequently check the national POS code set and instructions that are provided in the CMS Internet-Only Manual 100-04, Chapter 26, Section 10.5; and 2) validate they are coding according to the most current version of the POS code set.  

KS: What can happen if QHPs do not correctly use the POS codes?

DC: Medicare has the right to recoup the overpayment. The amount of the recoupment depends on which Medicare contractor/entity (eg, recovery audit contractors, MACs, the OIG, self-disclosure) identifies the issue. For instance, if found to be overpaid by the OIG, the QHP typically repays triple damages for each incorrect claim. No one wants that!

KS: So, do you think the wound care industry needs continuous education about reporting the correct POS on claims? 

DC: Absolutely! Our wound care professionals provide services to patients throughout the continuum of care. Some QHPs process claims in their offices. Some QHPs hire offsite billing services. In addition, some QHPs incentivize their billers by paying them based on the amount of collections. That incentive might cause the billers to always report the “office” POS code. Therefore, QHPs should audit their own claims to assure they are reported with the correct POS codes. 

KS: At the beginning of this article, we learned CMS requires off-campus, provider-based outpatient departments paid by the OPPS to append the “PO” modifier to all the HCPCS codes on their claims. If a QHP performs work in an off-campus, provider-based outpatient department, must they designate that as a separate POS?

DC: Yes, for dates of service on or after Jan. 1, 2016, QHPs who perform work in off-campus, provider-based outpatient departments must report POS 19 (Off-Campus Outpatient Hospital.) 

SUMMARY 

• When a QHP furnishes services to an outpatient of a hospital, payment is made under the MPFS at the facility rate. QHPs who furnish services to a hospital outpatient, including in an HOPD (including in a provider-based department of that hospital) or under arrangement to a hospital, should, at a minimum, report the outpatient hospital POS code 22 irrespective of the setting in which the patient actually receives the face-to-face encounter. In other words, reporting the outpatient hospital POS code 22 is a minimum requirement for purposes of triggering the facility payment amount under the MPFS when services are provided to a registered outpatient. 
• If the QHP is aware of the exact setting in which the beneficiary is a registered hospital outpatient, the appropriate outpatient facility POS code may be reported (instead of POS 22). 
• QHPs who perform services in an HOPD should use, at a minimum, POS code 22 (outpatient hospital). Code 22 (or other appropriate outpatient department POS codes as described previously) should be used unless the QHP maintains separate office space in the hospital or on the hospital campus and that QHP office space is not considered a provider-based department of the hospital as defined in the U.S. Code of Federal Regulations: 42 CFR 413.65. 
• QHPs should use POS code 11 (office) when services are performed in a separately maintained QHP office space in the hospital or on a hospital campus and that QHP office space is not considered a provider-based department of the hospital as defined in 42 CFR 413.6. Use of POS code 11(office) in the HOPD or on a hospital campus is subject to the physician self-referral provisions set forth in 42. CFR 411.353-411.357. 
• When a QHP furnishes services to a patient in a Medicare-participating ASC, the POS code 24 (ASC) should be used. QHPs are not to use POS code 11 (office) for ASC-based services unless the QHP has an office at the same physical location of the ASC that meets all other requirements for operating as a QHP office at the same physical location as the ASC – including meeting the “distinct entity” criteria defined in the ASC State Operations Manual that precludes the ASC and an adjacent QHP office from being open at the same time and the QHP service was actually performed in the office-suite portion of the facility. That information is in Appendix L of that manual: www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/som107ap_l_ambulatory.pdf.