Medicare rejection or Audit for incorrect POS

Common Working File (CWF) Informational Unsolicited Response (IUR) or Reject for Place of Service Billed by Physician Office and either Ambulatory Surgical Center or Inpatient Hospital 

The Medicare physician fee schedule includes two payment amounts depending on whether a service is performed in a facility setting, such as an outpatient hospital department or ambulatory surgical center, or in a non-facility setting, such as a physician’s office. The payments to physicians are higher when the services are performed in non-facility settings. The higher payments are designed to compensate physicians for the additional costs incurred to provide the service at an office location as opposed to a facility location.

The Office of Inspector General identified incorrect place of service billing by physicians as a payment error in an audit report (see A-01-11-00508).  This report stated, “Physicians are required to identify the place of service on the health insurance claim forms that they submit to Medicare contractors. The correct place-of-service code ensures that Medicare does not reimburse a physician incorrectly for the overhead portion of the payment if the service was performed in a facility setting.”  This report also states that several Medicare contractors overpaid physicians who did not correctly identify the place of service on their claims.

To ensure proper payment, CWF will create an IUR for all claims where the dates of service, the beneficiary information, and procedure, are all the same and billed with a physician place of service code 11 - office, and a facility code for inpatient hospital – 21, and ambulatory surgical center (ASC) – 24, that is posted due to an update from CMS.   An IUR is a message from CWF to a MAC, carrier or fiscal intermediary, as applicable, to review claims for accuracy.

The issue listed below has been identified by the recovery auditors as significant improper payments and requires the development of an edit to correct these improper payments.  The edit for this issue will include claims that have physician place of service code and either ambulatory surgical center (ASC) code or inpatient hospital code.  This edit will act as a tool to protect the Medicare Trust Fund by preventing improper billing practices.

Background:   

1)  An audit in October 2004 by the Office of the Inspector General (OIG) identified place of service billing by physicians as a payment error.  This report stated, “Medicare overpaid physicians due to incorrect place of service coding. Seventy-nine of 100 sampled physician services, selected from a population of services identified as having a high potential for error, were performed in a facility but were billed by the physicians using the “office” place of service code. As a result of the incorrect coding, Medicare paid the physicians a higher amount for these services.”  Because these claims cannot be denied prior to payment, CMS is implementing an IUR for all claim types to recover these payments.

CWF will create an Informational Unsolicited Response (IUR) for all claims where the dates of service, the beneficiary information, and procedure, are all the same and billed with a physician place of service code 11 - office, and a facility code for inpatient hospital – 21, and ambulatory surgical center (ASC) – 24, that is posted due to an update from CMS.

Medicare ASC covered services

Examples of covered ASC facility services include:

Nursing Services, Services of Technical Personnel, and Other Related Services
These include all services in connection with covered procedures furnished by nurses and technical personnel who are employees of the ASC. In addition to the nursing staff, this category includes orderlies, technical personnel, and others involved in patient care;

Use by the Patient of the ASC’s Facilities
This category includes operating and recovery rooms, patient preparation areas, waiting rooms, and other areas used by the patient or offered for use by the patient’s relatives in connection with surgical services; and
Drugs, Biologicals, Surgical Dressings, Supplies, Splints, Casts, Appliances, and Equipment

This category includes all supplies and equipment commonly furnished by the ASC in connection with surgical procedures. See below for certain exceptions. Drugs and biologicals are limited to those that cannot be self-administered.

Coverage policy for surgical dressings is similar to that followed under Part B. Under Part B, coverage for surgical dressings is limited to primary dressings; i.e., therapeutic and protective coverings applied directly to lesions on the skin or on openings to the skin required as the result of surgical procedures. (Items such as Ace bandages, elastic stockings and support hose, Spence boots and other foot coverings, leotards, knee supports, surgical leggings, gauntlets, and pressure garments for the arms and hands are generally used as secondary coverings and therefore are not covered as surgical dressings.) Surgical dressings usually are applied first by a physician and are covered as “incident to” a physician’s service in a physician’s office setting. In the ASC setting, such dressings are included in the facility’s services.

However, others may reapply surgical dressings later, including the patient or a member of the patient’s family. When the patient on a physician’s order obtains surgical dressings from a supplier, e.g., a drugstore, the surgical dressing is covered under Part B. The same policy applies in the case of dressings obtained by the patient on a physician’s order following surgery in an ASC; the dressings are covered and paid as a Part B service by the local Part B contractor, included in the definition of facility services.
Similarly, “other supplies, splints, and casts” include only those furnished by the ASC at the time of the surgery. Additional covered supplies and materials furnished later are generally furnished as “incident to” a physician’s service, not as an ASC facility service. The term “supplies” includes those required for both the patient and ASC personnel, e.g., gowns, masks, drapes, hoses, and scalpels, whether disposable or reusable.

Diagnostic or Therapeutic Items and Services
These are items and services furnished by ASC staff in connection with covered surgical procedures. With respect to diagnostic tests, many ASCs perform simple tests just before surgery, primarily urinalysis and blood hemoglobin or hematocrit, which are generally included in their facility charges. To the extent that such simple tests are included in the ASC’s facility charges, they are considered facility services. However, under the Medicare program, diagnostic tests are not covered in laboratories independent of a physician’s office, rural health clinic, or hospital unless the laboratories meet the regulatory requirements for the conditions for coverage of services of independent laboratories. (See 42CFR416.49.) Therefore, diagnostic tests performed by the ASC other than those generally included in the facility’s charge are not covered under Part B as such and are not billed to the carrier as diagnostic tests. If the ASC has its laboratory certified as meeting the regulatory conditions, then the laboratory itself bills the contractor (or the beneficiary) for the tests performed.

The ASC may make arrangements with an independent laboratory or other laboratory, such as a hospital laboratory, to perform diagnostic tests it requires prior to surgery. In general, however, the necessary laboratory tests are done outside the ASC prior to scheduling of surgery, since the test results often determine whether the beneficiary should even have the surgery done on an outpatient basis in the first place.
Administrative, Recordkeeping, and Housekeeping Items and Services

These include the general administrative functions necessary to run the facility e.g., scheduling, cleaning, utilities, and rent.

Blood, Blood Plasma, Platelets, etc., Except Those to Which Blood Deductible Applies
While covered procedures are limited to those not expected to result in extensive loss of blood, in some cases, blood or blood products are required. Usually the blood deductible results in no expenses for blood or blood products being included under this provision. However, where there is a need for blood or blood products beyond the deductible, they are considered ASC facility services and no separate charge is permitted to the beneficiary or the program.

Definition of Ambulatory Surgical Center (ASC)

An ASC for purposes of this benefit is a distinct entity that operates exclusively for the purpose of furnishing outpatient surgical services to patients. It enters into an agreement with CMS to do so. An ASC is either independent (i.e., not a part of a provider of services or any other facility), or operated by a hospital (i.e., under the common ownership, licensure, or control of a hospital). To be covered as an ASC operated by a hospital, a facility elects to do so, and continues to be so covered unless CMS determines there is good cause to do otherwise. This provision is intended to prohibit such an entity from switching from one payment method to another to maximize its revenues . For other general conditions and requirements,  If the hospital based surgery center is certified as an ASC it is considered an ASC and is subject to rules for ASCs. Related survey requirements are published in the State Operations Manual, Pub. 100-07, Appendix L. Claims processing and payment requirements for ASCs are published in Pub. 100-04, the Medicare Claims Processing Manual, chapter 14.

If a hospital based surgery center is not certified as an ASC it continues under the program as part of the hospital. In that case the applicable hospital outpatient payment rules apply. This is the outpatient prospective payment system (OPPS), for most hospitals, or may be provisions for hospitals excluded from OPPS. See Pub.100-04, the Medicare Claims Processing Manual, chapter 4, for billing and payment requirements for hospital outpatient services.

Indian Health Service (IHS) hospital outpatient departments are not certified as separate ASC entities. The ASC indication merely means that CMS approved them to bill for ASC services and be paid based on the ASC rates for services on the ASC list. In order to bill for ASC services, the hospital outpatient department must meet the conditions of participation for hospitals defined at 42 CFR, Part 482.