Confusion Reigns: Modifiers and Medicare Payment for Off-Campus PBDs

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Multiple health care systems throughout the country have expanded their reach to people with chronic wounds and ulcers by opening off-campus hospital-owned outpatient wound/ulcer management provider-based departments (PBDs), and many other health care systems are doing/considering doing the same. Unfortunately, many of these health care systems have been caught off-guard by changing coding, coverage, and Medicare payment. This month’s column will attempt to reduce the confusion by reviewing the May 2020 status of the Medicare payment system for off-campus PBDs and the appropriate use of payment modifiers by these PBDs.

Years ago, when health care systems began opening off-campus PBDs, those PBDs were paid the same as on-campus PBDs. They used the same procedure codes, product codes, and modifiers as the on-campus PBDs.

Then in 2016 the Centers for Medicare & Medicaid Services (CMS) started to require modifiers that identified whether the work was performed in an on-campus or off-campus PBD. For an overview of how Medicare decides if a PBD is off-campus or on-campus, refer to the Business Briefs column in the July 2016 issue of Today’s Wound Clinic.¹

Effective January 1, 2016 the new place of service (POS) codes were released for physicians and other qualified health care professionals (QHPs) to distinguish, on their CMS 1500 claims, between work performed in on-campus or off-campus PBDs:

POS 19    off-campus outpatient hospital
A portion of an off-campus, hospital provider-based department that provides diagnostic, therapeutic (both surgical and nonsurgical), and rehabilitation services to sick or injured persons who do not require hospitalization or institutionalization.  

POS 22     on-campus outpatient hospital
A portion of a hospital’s main campus that provides diagnostic, therapeutic (both surgical and nonsurgical), and rehabilitation services to sick or injured persons who do not require hospitalization or institutionalization.  

Ever since those POS codes were released, physicians and other QHPs have been required to verify whether the wound/ulcer management department where they provided services was officially on-campus or off-campus.

On January 1, 2015 the CMS released a new modifier (PO off-campus, outpatient, provider-based department of a hospital) that was to be attached to every claim line item submitted by off-campus PBDs and that was used by the CMS for data collection purposes. For dates of service beginning January 1, 2016, the CMS instructed off-campus PBDs to append the PO modifier to every line item on their Medicare claims. Because the PO modifier did not affect coverage or payment, many outpatient wound/ulcer management PBDs chose not to report the PO modifier.

Then effective January 1, 2017 the CMS changed the definition of the PO modifier to identify excepted off-campus PBDs and created a new PN modifier to identify non-excepted PBDs. The 2017 OPPS/ASC Final Rule provided many intricate details about the new off-campus PBD definitions and regulations. However, the major distinguishing factor was that the excepted off-campus PBDs billed for covered PBD services furnished prior to November 2, 2015.

PO     Excepted service provided at an off-campus, outpatient, provider-based department of a hospital

PN    Non-excepted service provided at an off-campus outpatient, provider-based department of a hospital    

The off-campus PBDs that were excepted and that submitted their claims to Medicare with the PO modifier, were paid identically to the on-campus PBDs. The off-campus PBDs that were non-excepted, received a 50% payment reduction (paid 50% of the 2017 OPPS allowable rates). In 2018 the CMS implemented a 60% payment reduction (paid 40% of the OPPS allowable rates) for the non-excepted off-campus PBDs. Because the PO modifier still did not affect coverage or payment in 2017 and 2018 for excepted off-campus PBDs, many excepted outpatient wound/ulcer management PBDs chose not to report the PO modifier on their claims.

Then in 2019 the off-campus reductions began to affect the excepted off-campus PBDs. Per the CY 2019 OPPS/ASC Final Rule, the non-excepted off-campus PBDs continued to receive 40% of the 2019 OPPS payment rates. For the first time, the excepted off-campus PBDs received a 30% payment reduction (paid 70% of the OPPS allowable rate) for only one service: healthcare procedure coding system (HCPCS) code G0463 clinic visits. However, that reduction was challenged in the courts and Medicare was ordered to repay the excepted off-campus PBDs that received the reduced payment in 2019.

That brings us to 2020. In the CY 2020 OPPS/ASC Final Rule (84 FR 61337), Medicare announced that they 1) are going to continue paying the non-excepted off-campus PBDs 40% of the OPPS allowable rates for all services and 2) that they are going forward with the full phase-in of the 60% payment reduction (paid 40% of the OPPS allowable rate), for only one service: G0463 clinic visits provided in excepted off-campus PBDs.

Therefore, it is essential for the excepted off-campus PBDs to report the PO modifier and for the non-excepted off-campus PBDs to report the PN modifier on every line item of their Medicare claims.

•    If off-campus PBDs do not report the correct modifiers, their claims will be paid at the on-campus OPPS allowable rate.
•    If the excepted off-campus PBDs incorrectly report the PN modifier rather than the PO modifier, they will receive 40% of the OPPS payment for all services.
•    If the non-excepted off-campus PBDs incorrectly report the PO modifier rather than the PN modifier, they will only receive a 40% payment reduction for only one service: G0463.

In any of those cases, Medicare auditors will consider those claims to be false claims. Therefore, wound/ulcer management off-campus PBDs should not assume that your claims are submitted with the correct modifier. Instead, these off-campus PBDs should conduct internal audits to verify that every claim submitted to Medicare is correct.

Table 1 provides a glimpse at the impact of the 2020 Final Rule payment reductions on these excepted and non-excepted off-campus PBDs. Like in all good businesses, the off-campus PBD executives may need to adjust their services to include the ones which they can afford to provide.

As we prepare for 2021, keep in mind that patients and the CMS receive 2 bills when chronic wound/ulcer patients receive care from a physician/QHP in a PBD, but only receive 1 bill when physicians/QHPs provide the same care in their offices. Also, keep in mind that the CMS seems to believe that the off-campus PBDs are more like physician offices and should be paid like physician offices. Therefore, off-campus executives should pay attention to the 2021 OPPS/ASC draft rule that will be released this summer. The CMS is expected to propose equalizing the payments for all services provided in off-campus PBDs. During the comment period of the proposed rule, off-campus PBD executives should comment and provide the CMS with real data that shows the potential impact of the 2021 OPPS/ASC proposed rule.

Summary

Some readers may be wondering how the CMS differentiates between an on-campus and off-campus PBD. Although those guidelines are not within the scope of this article, readers can read the regulations in 42 CFR §413.65. In addition, readers should refer to the Business Briefs column in the July 2016 Today’s Wound Clinic for a detailed explanation of how PBDs should attest to Medicare whether they are on-campus or off-campus.¹

When both on-campus and off-campus PBDs were paid the identical Medicare allowable rate, health care systems tended to place outpatient wound/ulcer management departments in the best locations to serve their patient population. Now that Medicare payment for off-campus PBDs has been significantly reduced and may continue to be reduced in the future, health care systems must carefully weigh the pros and cons of opening off-campus wound/ulcer management PBDs.

On one hand, if the health care system only looks at the Medicare payment for off-campus PBDs, they might not choose to open off-campus wound/ulcer management PBDs. On the other hand, if the health care system weighs how wound/ulcer management PBDs prevent trips to the emergency room and hospital readmissions and how they create many downstream services such as diagnostic tests and surgical procedures, they might choose to open off-campus wound/ulcer management PBDs. In fact, some health care systems have reported that they are also getting ready to provide/providing telehealth, teleconsultations, virtual visits, etc. in their off-campus PBDs.

Kathleen D. Schaum is a founding member of the Today’s Wound Clinic editorial advisory board and oversees a consulting business. She can be reached for consultation and questions by emailing kathleendschaum@bellsouth.net.

 

1. Schaum K. How does Medicare decide if your HOPD is provider-based? Today’s Wound Clinic. 2016; 10(7):6–10.