Medicare Coverage & Payment of Outpatient Wound Care Supplies

Editor’s Note: Kathleen D. Schaum, MS, author of Business Briefs, will be on extended vacation prior to the 2017 holiday season. While she’s away, we will feature guest authors in this column space. Ms. Schaum will return to her column beginning with the February 2018 edition.

Information regarding coding, coverage, and payment is provided as a service to our readers. Every effort has been made to ensure information accuracy. However, HMP Communications and the author do not represent, guarantee, or warranty that coding, coverage, and payment information is error-free and/or that payment will be received. The ultimate responsibility for verifying information accuracy lies with the reader.

Program directors and administrators in wound care outpatient hospital provider-based departments (PBDs) are often confused regarding Medicare coverage and payment of wound care supplies. Therefore, this Business Briefs article will address the most frequently asked questions (FAQs) voiced by those in this industry. First, let’s review some Medicare coverage regulations and definitions.  

A) The definitions applicable to wound care PBDs are found in 42 Code of Federal Regulations (CFR) 413.65. The Centers for Medicare & Medicaid Services (CMS) defines hospital outpatients and outpatient encounters at 42 CFR 410.2: “A hospital outpatient is a patient [who] has not been admitted to the hospital as an inpatient, but is registered as a hospital outpatient and receives services, rather than supplies alone, directly from the hospital [PBD].” This definition specifically speaks to the situation of a hospital merely dispensing supplies and no provision of services. In this case, the hospital would be acting as the supplier, similar to a durable medical equipment (DME) supplier, and is unable to bill supplies alone as a hospital provider.  

B) An encounter is defined as “direct personal contact between a patient and a clinician authorized by state licensure and hospital staff bylaws (eg, privileges) to order or furnish services for diagnosis or treatment of the patient.”

Next, we should review the definition (ie, requirements) for supplies that can be separately reported as covered charges, but are not considered “routine” supplies. The cost of “routine” supplies that are not patient-specific, often referred to as “floor stock,” are generally included or packaged into the visit or procedure charge and are not separately itemized on a patient account or bill. Some examples of “routine” supplies are: exam table paper, cotton swabs, and wipes. Even though Medicare payment to the wound care PBD for its services and procedures includes payment for the “non-routine” patient-specific supplies (eg, specific sterile surgical dressings, enzymatic debriding agents), each of the “non-routine” supplies should be reported as a separate charge under appropriate revenue codes in the “covered” column of the claim. This will ensure the “non-routine” charges are reported to Medicare or the other insurer while not being billed directly to patients. Because CMS does not publish a list of “non-routine” supplies for PBDs, the best guidance that advisors have followed, and that has become a de facto guide, is from the Provider Reimbursement Manual and relates to cost reporting for skilled nursing facilities (SNFs). Because many of the cost-reporting requirements for SNFs match or are very similar to hospital cost-reporting requirements, there is logic behind the application of Section 2203.2 criteria (found in Part 1 of the manual) to supplies separately charged by PBDs. The criteria address separate charges for supplies as ancillary services (ie, they are not included in the room rate): “Direct identifiable services to individual patients, and not generally furnished to most patients, and one of the following: 

1. Not reusable (eg, artificial limbs and organs, braces, intravenous fluids or solutions, oxygen [including medications], disposable catheters; 
2. Represent a cost for each preparation (eg, catheters and related equipment, colostomy bags, drainage equipment, trays and tubing.”

If the item or supply is identifiable to an individual patient, typically via either an order for the item or supply or documentation regarding the direct application of the specific item or supply to the patient, and that item or supply is not reusable (eg, single-use, disposable, or represents a cost for each preparation, as with the sterilization of surgical instruments), it is separately chargeable on patient accounts. Therefore, most patient-specific wound care supplies, if properly ordered and documented in the medical record, meet the requirements for separate charges on patient accounts. NOTE: The charge for the use of surgical instruments (eg, debridement tools) should represent the cost of sterilizing and packaging the instruments; it should not represent the actual cost of the reusable surgical instruments because they are considered to be depreciable equipment.  

Finally, the Medicare statute provides coverage of medically necessary services, procedures, and supplies for hospital outpatient encounters: The wound care PBD must have arrangements, contractually or via a purchase arrangement, to obtain needed services, procedures, and supplies for its patients. This is specified at 42 CFR 411.15(m) and is sometimes referred to as the “prohibition against unbundling.” The wound care PBD is required to establish charges that consistently relate to the cost of services, procedures, and supplies, and is required to post those charges to all patient accounts (both Medicare and non-Medicare patients). The definition for charges can be found in Part 1 of the Provider Reimbursement Manual, Section 2202.4.¹ Therefore, if the wound care PBD uses wound care supplies during a patient encounter, the PBD should appropriately post the charges for the supplies on the claim and should not collect separate payment for the supplies from patients. For example, if the physician writes orders for PBD wound care nurses to apply a collagen dressing, the PBD should capture the charge for the collagen dressing, along with the charge for the clinic visit or procedure charge for the encounter during which the collagen dressing is applied to the patient. The Medicare payment to the PBD should be for the clinic visit or the procedure, which includes payment for the collagen dressing. The charges for the procedure or clinic visit and collagen dressing are reported on the claim as covered charges. The insurance (Medicare or commercial insurance) company will adjudicate the charges and apply the payment or reimbursement fee schedule, and calculate whether the patient owes any deductible or coinsurance amounts. The patient should only be responsible for the clinic visit/procedure deductible and/or coinsurance amounts.

FREQUENTLY ASKED QUESTIONS

Now, let’s address the FAQs (about posting separate charges for supplies on claims) that this author often receives from staff members in wound care PBDs. 

Question No. 1: When the physician or other qualified healthcare professional (QHP) orders, or the treating clinician documents, the use of a “non-routine” supply in a procedure/treatment note, should a supply charge be separately posted from the service/procedure charge on the wound care PBD claim? 

Answer: Yes, “non-routine” supplies used during the wound care PBD visit should be posted with separate charges on the patient account, even though the Hospital Outpatient Prospective Payment System (OPPS) packages the supplies into their respective procedures and services. This is important, because the different “non-routine” supplies vary by each patient due to the medical necessity and ordered wound care treatment plan. The charges for supplies are typically based on the invoice cost for each unit, plus a markup representing handling and overhead. The charges reported are used by Medicare to set OPPS rates for the services and procedures two years from the year the charges are reported on claims. 

Question No. 2: Should the Healthcare Common Procedure Coding System (HCPCS) code be used to post charges for “non-routine” supplies on the wound care PBD claim?  

Answer: Chapter 4 of the Medicare Claims Processing Manual, Section 20.1,² states that medical and surgical supplies assigned HCPCS codes with OPPS status indicators other than “H” or “N” should not be reported by the HCPCS code on PBD claims. Instead, the charges should be posted on PBD claims with the most appropriate revenue code. For example, because the HCPCS codes for surgical dressings are assigned OPPS status indicator “A,” these supplies should be reported with the most appropriate revenue codes, not HCPCS codes. Therefore, the selection of the revenue codes is very important. The National Uniform Billing Committee (NUBC), which is the standards maintenance organization for the UB-04/837I institutional claims used by hospitals, defines the revenue codes and whether HCPCS codes are required for outpatient claims. All providers and payers are required to follow the standards set by NUBC.  The NUBC directs that, depending on whether the “non-routine” supplies are nonsterile or sterile, the most appropriate revenue codes are either 0270-0271 or 0272, respectively. For example, when the wound care PBD prepares a claim for code 97602 - nonselective debridement - the payment for the “non-routine” supplies (eg, wet-to-moist dressings, enzymatic debriding ointment, abrasive wipes) are packaged into the OPPS Ambulatory Payment Classification payment rate. Therefore, the wound care PBD has two choices for correctly charging for these supplies that are not separately paid from the procedure:

Choice 1: Include the average cost of all supplies and drugs used across all patients who receive the service in the charge for 97602. The claim should report a single charge for 97602 with the applicable revenue code (eg, 0510 or 0761). The claim should not report a separate line item for the supplies used to perform 97602. NOTE: While this option is correct, it is challenging due to the range of patient types, treatment plans, and types of “non-routine” supplies.

Choice 2: Do not include the average cost of the “non-routine” supplies and drugs in the charge for 97602. Instead, separately itemize the “non-routine” supply charges under the appropriate “027x” revenue code and itemize the enzymatic debriding agent under the applicable pharmacy revenue code (eg, 0250 or 0636). The charges for packaged “non-routine” supplies and drugs should be posted in the covered column of the claim in a manner to ensure no additional or separate payment beyond the allowable for 97602. See the example claim and remittance advice in Table 1A and Table 1B.

Irrespective of the selected charging choice, the wound care PBD would not receive a separate Medicare payment for the “non-routine” supplies. It is recommended that wound care PBDs audit their claims to ensure their charges for packaged drugs and “non-routine” supplies are reported with the appropriate revenue codes. 

Question No. 3: Should the wound care PBD charge for “non-routine” supplies provided to the patient for use at home? 

Answer: The answer to this question has changed over the last 17 years. At the inception of the OPPS in August 2000, Medicare separately paid the wound care PBD for take-home surgical dressings at the applicable rate set forth by the DME, prosthetics, orthotics, and supplies (DMEPOS) fee schedule per HCPCS code for each supply item. The wound care PBD did not need a DME supplier number to report the HCPCS codes for each supply sent home and to receive separate payment. The Medicare Benefit Policy Manual instructed the PBD to report the charge for the take-home surgical dressings on its UB-04 claim. This was further clarified by CMS program memorandum A-01-50,³ which lists all the revenue codes for “non-routine” supplies that are packaged and that should be reported without HCPCS codes. The memorandum excludes the revenue code 0623 that is used to report surgical dressings. That exclusion is important to note, because it signified that take-home surgical dressings were covered under the DMEPOS benefit and, when properly reported with revenue code 0623 and the appropriate HCPCS code on the wound care PBD claim, were paid separately from OPPS payable services via the DMEPOS payment rates. The surgical dressings applied to the patient during the wound care PBD encounter were reported under the appropriate revenue codes “027x” without HCPCS codes because these supplies did not qualify for separate payments.  Therefore, wound care PBDs that supplied take-home surgical dressings established duplicate or paired charges in their charge description masters for each surgical dressing that was both applied in the PBD (charged with appropriate revenue code and no HCPCS code) and provided to the patient for home use (charged with revenue code 0623 and the applicable HCPCS code).  

Effective Jan. 1, 2014, CMS packaged the payment for the take-home surgical dressings (see the final rule issued Dec. 10, 2013, page 74947).⁴ Because charging under revenue code 0623 and the specific HCPCS code no longer generates additional payment to the wound care PBD, these settings do not have to bear the costs of take-home surgical dressings. Instead, the PBD physicians and other QHPs write surgical dressing prescriptions for the patient to obtain the needed supplies from a DME supplier who separately bills and receives payment from Medicare. If the hospital continues to dispense the take-home surgical dressings to its patients, it is choosing to do so and not receiving separate payment when other wound care PBDs may be following the processes of having their clinicians write prescriptions. It is recommended that wound care PBDs examine their processes for take-home surgical dressings.

Question No. 4: Because correctly prescribed surgical dressings are separately payable by Medicare under the DME benefit, can the wound care PBD provide “free” surgical dressings to patients for home use?

Answer: This is a compliance issue. Providing “free” surgical dressings could be considered an inducement for referrals. Furthermore, as CMS tracks the episodic cost of care and attributes those costs to the appropriate physician, providing “free” surgical dressings to some beneficiaries could skew episode costs. Therefore, any practice of providing free supplies (beyond a trial amount or an amount to carry the patient over a weekend or for a short time until the prescription can be filled by a DME supplier) could result in potential audit scrutiny and/or other allegations. 

Whatever decision is made by the wound care PBD, the practice should be followed consistently for all patients (Medicare and non-Medicare), and should be based on patient need and clinical rationale. If this is a concern for any wound care PBD professionals, a prudent course of action is to develop a policy; have that policy approved by compliance officers; and educate PBD staff, physicians, and other QHPs to impeccably follow the compliance-approved policy. 

Valerie A. Rinkle is president of Valorize Consulting LLC, Medford, OR. She may be reached at valerie.rinkle@valorizeconsulting.com.

References

1. Provider Reimbursement Manual. CMS. Accessed online:www.cms.gov/regulations-and-guidance/guidance/manuals/paper-based-manuals-items/cms021929.html

2. Medicare Claims Processing Manual Chapter 4 - Part B Hospital (Including Inpatient Hospital Part B and OPPS). CMS. 2017. Accessed online: www.cms.gov/regulations-and-guidance/guidance/manuals/
downloads/clm104c04.pdf

3. Further Guidance Regarding Billing Under the Outpatient Prospective Payment System (OPPS). CMS. 2001. Accessed online: www.cms.gov/regulations-and-guidance/guidance/transmittals/downloads/A0150.pdf

4. 42 CFR Parts 405, 410, 412, et al. HHS. 2013. Accessed online: www.gpo.gov/fdsys/pkg/FR-2013-12-10/html/2013-28737.htm