Starting Jan. 1, 2016, hospitals will need to alter the way in which they bill for both professional and facility component claims for off-campus, hospital-based (or, more accurately, provider-based) clinics.  The Centers for Medicare & Medicaid Services (CMS) has decided to start collecting data relative to these clinics, and presumably, other off-campus provider-based operations as well.

CMS is collecting this data in order to determine whether the increased payment for provider-based clinics is justified because of increased costs. Both the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) and MedPAC have recommended that provider-based clinics be paid the same as freestanding clinics. For the OIG, this recommendation is for all services, while for MedPAC the recommendation was for the E/M (evaluation and management) levels.

For the CMS-1450 (UB-04) claim form, the required change is the use of the –PO modifier.

-PO: Services, procedures and/or surgeries provided at off-campus, provider-based outpatient departments

This modifier became available starting in 2015 but will now be required. If you are not already using this modifier, then plan to start using it as of Jan. 1.

On the physician, professional side, for the CMS-1500 there is a new place of service (POS) that will be used: this is POS 19, which has been coordinated with POS 22.

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.

While POS 19 is new, POS 22 has revised language. It appears that both of these indicators will invoke the site-of-service (SOS) differential in RBRVS (Resource Based Relative Value Scale) that will cause the reduction in the physician professional payment.

Many questions are being raised relative to this change in billing and claims filing. First, everyone should be vigilant in following these new requirements. While it is not known if there will be any special compliance issues other than the normal false claims, care should be taken to avoid any such issues. For some hospitals, these new requirements may necessitate a change in their billing system(s). For example, a hospital may have several clinics, some of which are on-campus, while others are off-campus. Somehow the billing system will need the ability to differentiate which location is being billed and make the appropriate use of the –PO modifier and the proper place-of-service indicators.

Second, hospitals should anticipate that there may be a reduction in overall payment for provider-based clinics in the future. In general, hospitals have gone to great lengths in establish provider-based clinics.  While there can be different reasons for doing so, one of the reasons is that potentially significant increased reimbursement can be achieved. While it will take several years for CMS to gather the appropriate data and then analyze the data, at some point in the coming years there may be a decrease in overall payments.

Third, we all will have to be watchful to see how CMS analyzes the data collected. Why CMS has focused the data collection to off-campus, provider-based operations is not clear. Hospitals often have provider-based clinics on the campus or even inside the hospital itself. One of the main reasons given by CMS to justify the increased payment for provider-based clinics is that hospitals incur greater costs relative to freestanding clinics. If charge data is collected, then this data must be converted to costs. This normally would be accomplished through applying a cost-to-charge ratio (CCR) to the charges. But will there be new cost reporting requirements relative to capturing the associated costs for these off-campus, provider-based clinics?

Fourth, hospitals use different organizational structuring for their provider-based clinics. A hospital may have three provider-based clinics, one on-campus and two off-campus. These three clinics may comprise one organizational structure relative to tax identification numbers (TINs) and enrollment with the Medicare program (i.e., CMS-855 forms). Another hospital also may have three provider-based clinics, but each of the clinics is separately enrolled. The question then becomes, how will CMS address this variability in organizational structuring when they analyze the data?

Fifth, in terms of reimbursement generation, the bread and butter for clinics are the E/M levels. For physicians, there are 10 different E/M levels: five for new patients (CPT 99201-99205) and five for established patients (CPT 99211-99215). On the hospital/facility side, CMS has collapsed these 10 levels into a single G-code, G0463, which pays about $95 under APCs (Ambulatory Payment Classifications). Depending upon the hospital, there may still be 10 different charges for the outpatient clinic visits based upon the 10 E/M levels. This means that there are different charges associated with the single G-code. Other hospitals may have elected to have a single charge for the G0463. The question then becomes: how is CMS going to accommodate this variability in charge structures?

The bottom line is this: if your hospital has off-campus, provider-based clinics and/or other off-campus, provider-based operations, then make the necessary adjustments in claims filing to meet the new requirements. While several years of data gathering will be necessary for CMS to make any sort of analysis, anticipate changes in payment for provider-based clinics in the coming years. Also, we all need to be watchful to assess just how CMS analyzes the data being collected. We all will have to watch the OIG and the RACs to see if they will establish any compliance issues associated with these new billing requirements.

About the Author

Duane C. Abbey, Ph.D., CFP, is an educator, author and management consultant working in the healthcare field. He is president of Abbey & Abbey Consultants, Inc., which specializes in healthcare consulting and related areas. His firm is based in Ames, Iowa. Dr. Abbey earned his graduate degrees at the University of Notre Dame and Iowa State University.

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