RSSRecent Articles

Note from the instructor: OIG Testifies on Observation Services-Again

This week’s note from the instructor is written by Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro.  

A report from the Office of Inspector General (OIG) caught my eye and I thought it may be another window into the world of what CMS may be conjuring up for the coming fiscal year.

On July 30, the OIG testified before the United States Senate Special Committee on Aging regarding observation services and the impact on Medicare beneficiaries.  The transcript of the hearing is titled “Admitted or Not? The Impact of Medicare Observation Status on Seniors”.

Last year, just before the release of the FY 2014 IPPS final rule and CMS’s announcement of the two-midnight hospital policy, the OIG published a similar report called Hospitals’ Use of Observation Stays and Short Inpatient Stays for Medicare Beneficiaries. Over the past year, there has been a lot of confusion, to say the least, and continued education of both Medicare Administrative Contractors (MACs) and providers regarding this regulation.

Although this memorandum appears to be related to a request for full funding of the OIG’s FY 2015 budget to allow them to focus on hospital payment policy, there are some interesting statements that makes me wonder just what might be in the soon to be published IPPS final rule.

Here are the three key points as cited by the OIG:

  • 3-day acute care qualifying stay for a covered skilled nursing facility (SNF) stay: “It is important to ensure that beneficiaries with similar post-hospital care needs have the same access to and cost-sharing for SNF services. Allowing nights spent as an outpatient to count toward the three nights needed to qualify for SNF services may require additional statutory authority.”
  • Alternative to the 2-midnight rule:  “CMS expects this policy to reduce the numbers of short inpatient stays and of observation stays lasting two nights or longer. The policy has not been evaluated to ensure that it is working effectively. This policy will affect hospitals’ use of observation stays and short inpatient stays, which in turn will affect Medicare and beneficiary payments to hospitals. The new policy may also affect beneficiaries’ access to SNF services. Because providers have been vocal in their opposition to the 2-midnight policy and because CMS and Congress are considering alternatives, a careful evaluation of the 2-midnight policy and possible alternatives is essential.”
  • Short stay payment structure: “A number of factors must be carefully considered, including clear guidelines for hospitals and contractors; similar payments for similar care; and the overall impact on Medicare payments, hospitals, and beneficiaries. This will continue to require a concerted effort by a number of key players, including CMS, CMS’s contractors, providers, OIG, and Congress.”

For years, providers have been asking CMS to consider time spent in observation to be counted towards the beneficiary’s three-day qualifying stay for a covered SNF stay. Maybe CMS has finally heard our pleas. In regards to an alternative to the 2-midnight rule, we need to be careful what we ask for, as any changes or clarifications to the current regulation are sometimes less palatable than the current one.  As far as the short stay payment structure, this would be much easier to implement for a hospital paid under the prospective payment system (PPS) than a hospital paid under cost such as a critical access hospital (CAH) but in the world of Medicare, anything is possible. Stay tuned for breaking news from HCPro on the release of the FY 2015 IPPS final rule.

Note from the instructor: Reimbursement for outpatient services provided to critical access hospital (CAH) patients

This week’s note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.  

Several weeks ago, we began a review of the complex rules surrounding reimbursement to CAHs. CAHs are a special category of small rural hospitals that provide both inpatient and outpatient services in what would otherwise be medically underserved parts of the country. To assure their ability to continue to do so, CAHs generally receive reimbursement for the facility component of both their inpatient and outpatient hospital services based on 101% of reasonable costs. In this week’s note we will conclude our review of CAH reimbursement issues, focusing on special billing and payment issues relating to both inpatient and outpatient services performed by certified registered nurse anesthetists (CRNAs).  Beginning with dates of service on and after January 1, 2013, these special billing and payment rules may apply not only to CRNA anesthesia services, but to other services that the CRNA is legally authorized to perform in the state in which the services are furnished.

Payment for inpatient facility and professional services

As noted in our prior discussion, CAHs bill for the facility/technical component of covered Part A inpatient services to the A/B Medicare Administrative Contractor (A/BMAC) on the UB-04 (Type of Bill [TOB] 011X), and are reimbursed on the basis of 101% of reasonable costs, less the applicable Part A deductible and coinsurance amounts. Most professional services provided to CAH inpatients are billed separately to the A/BMAC on the CMS 1500, with the place of service reported as hospital inpatient. With the exception of payment for certain CRNA services, payment is made under Part B, based on a fee schedule (e.g., Medicare Physician Fee Schedule [MPFS]), charge or other fee basis, less the applicable Part B deductible and coinsurance amounts.

Payment for the facility services is made to the CAH, and payment for the professional services is generally made to the respective practitioners.

Payment for outpatient facility and professional services under Method I and Method II

With respect to outpatient services, CAHs may bill using either Method I or Method II. Under Method I, reimbursement for both the facility and professional services provided to CAH outpatients is similar to reimbursement for the facility and professional services provided to CAH inpatients. Facility services are billed on the UB-04 (TOB 085X), but payment is made to the CAH under Part B, rather than Part A. With the exception of payment for certain CRNA services, professional services are billed on the CMS 1500, with the place of service reported as hospital outpatient, and payment is generally made to the respective practitioners under Part B.

Under Method II, CAHs may elect to receive reimbursement for both the facility and professional services provided to their outpatients by practitioners who have assigned their right to payment to the CAH for that cost report period (CRP). Under Method II, with respect to those outpatient services whose professional component is provided by a practioner who has elected Method II reimbursement:

  • The CAH bills for both the respective facility and professional services to the A/BMAC on the same UB-04 (TOB 085X), reporting appropriate revenue and HCPCS codes for all services
    • Payment for the CAH facility services will be 101% of the reasonable cost for those services, less the applicable Part B deductible and coinsurance amounts
    • Payment for professional services will be paid at 115% of whatever amount the A/BMAC would pay under the MPFS, etc.
  • Payment for both the facility and professional services is made to the CAH under Part B.

With respect to those outpatient services whose professional component is provided by a practioner who has not assigned his/her right to payment to the CAH, reimbursement for both the facility and professional services follows Method I.

Special reimbursement for CRNA services under the pass-through exemption

Since 1989, a CAH that meets certain requirements has been able to receive a pass-through exemption for anesthesia services provided by a qualified non-physician anesthetist (CRNA) who is either employed by the CAH or who provides those services under arrangements with the CAH. For services provided on and after January 1, 2013, CMS has extended the pass-through exemption to other services that a CRNA is legally authorized to perform in the state in which the services are furnished. A CAH may qualify for the pass-through exemption so long as:

  • The CAH is located in a rural area or has been reclassified as rural;
  • The CAH employs or contracts with at least one full-time CRNA. (The CAH may employ or contract with more than one CRNA, but the total number of hours furnished by all CRNAs may not exceed 2080 hours per year); and,
  • The CAH’s total volume of surgical procedures requiring anesthesia (including both inpatients and outpatients) does not exceed 800 procedures during the calendar year. (To maintain its qualification for the pass-through exemption, a CAH must demonstrate prior to January 1 of each respective year that its volume of surgical procedures requiring anesthesia during the prior year did not exceed this limitation).

Under the pass-through exemption, a CAH may be reimbursed for CRNA professional services at 101% of reasonable costs (less the applicable deductible and coinsurance amounts), rather than the otherwise applicable MPFS amount. This exemption applies to both inpatient and outpatient CRNA professional services. Since CAHs also receive 101% of the reasonable costs of related CRNA inpatient and outpatient facility services, CAHs that qualify for and elect the CRNA pass-through exemption receive 101% of the reasonable costs for both inpatient and outpatient facility and professional CRNA services, less the applicable deductible and coinsurance amounts.

A CAH that qualifies for the pass-through exemption for CRNA services may elect Method II payment for all outpatient professional services except CRNA professional services. In that case, the CAH may retain pass-through payment for the CRNA professional services (both inpatient and outpatient) and receive payment under Method II for all other outpatient professional services performed by practitioners who have assigned their right to payment to the CAH.

When billing for CRNA services subject to the pass-through exemption, a CAH should include both facility and professional services on a single UB-04 claim form, with TOB 011X (inpatient) or TOB 085X (outpatient), as appropriate. CRNA facility services for anesthesia should be billed with revenue code 037X, and non-anesthesia facility services which the CRNA is authorized to perform under state law should be billed with a more appropriate revenue code. In both instances, the services should be reported with a HCPCS code that identifies the services performed. CRNA professional services should be billed with revenue code 0964, along with the relevant HCPCS code.

Billing for outpatient facility and professional CRNA services under Method II

If a CAH fails to qualify for the pass-through exemption or elects to receive payment for outpatient CRNA services under Method II, the exemption is withdrawn for both outpatient and inpatient CRNA professional services. Under Method II, the CAH will bill for outpatient CRNA facility and professional services on a single UB-04 (TOB 085X), reporting the facility and professional services with an appropriate revenue code (e.g., 037X for facility CRNA anesthesia services and 0964 for all professional CRNA services).  Reimbursement will follow applicable Method II reimbursement, as set out below:

  • Payment for the CRNA facility services will be 101% of the reasonable cost for those services, less the applicable Part B deductible and coinsurance amounts
  • Payment for the CRNA professional services will be paid at 115% of whatever amount the A/BMAC would pay for those services under the MPFS, etc. For example, CRNA professional anesthesia services will be paid, as follows:
    • 115% of the MPFS amount for not medically directed anesthesia, when designated by the “QZ” modifier; or
    • 115% of the reduced amount (0.50) of the MPFS amount for medically directed anesthesia, when designated by the “QY” modifier.
  • Payment for both the facility and professional services is made to the CAH under Part B.

As noted above, when the pass-through exemption for CRNA services does not apply, a CAH will submit the inpatient facility CRNA services on the UB-04, TOB 011X, and will be reimbursed for those services on the basis of 101% of reasonable costs, less the applicable Part A deductible and coinsurance amounts. The professional CRNA inpatient services will be submitted separately to the A/BMAC on the CMS 1500, with the place of service reported as hospital inpatient. Payment will be made under Part B, based on the MPFS, less the applicable Part B deductible and coinsurance amounts.

Related resources

For additional information on this week’s discussion, please see the following source authorities:

42 CFR 412.113(c)

Medicare Claims Processing Manual, Chapter 4, Section 250.3.3

Medicare One Time Notification Transmittal 1379

Note from the instructor: Reimbursement for outpatient services provided to critical access hospital (CAH) patients

Several weeks ago, we began a review of the complex rules surrounding reimbursement to CAHs. CAHs are a special category of small rural hospitals that provide both inpatient and outpatient services in what would otherwise be medically underserved parts of the country. To assure their ability to continue to do so, CAHs generally receive reimbursement for the facility component of both their inpatient and outpatient hospital services based on 101% of reasonable costs. In this note we will continue our discussion, focusing on specific rules that relate to anesthesia services (both inpatient and outpatient) and the expansion of coverage for certain services performed by anesthesiologists.

Payment for inpatient facility and professional services

As noted in our prior discussion, CAHs bill for the facility/technical component of covered Part A inpatient services to the A/B Medicare Administrative Contractor (A/BMAC) on the UB-04 (Type of Bill [TOB] 011X), and are reimbursed on the basis of 101% of reasonable costs, less the applicable Part A deductible and coinsurance amounts. Most professional services provided to CAH inpatients are billed separately to the A/BMAC on the CMS 1500, with the place of service reported as hospital inpatient. With the exception of payment for certain anesthesia services, payment is made under Part B, based on a fee schedule (e.g., Medicare Physician Fee Schedule [MPFS]), charge or other fee basis, less the applicable Part B deductible and coinsurance amounts.

Payment for the facility services is made to the CAH, and payment for the professional services is generally made to the respective practitioners.

Payment for outpatient facility and professional services under Method I and Method II

With respect to outpatient services, CAHs may bill using either Method I or Method II. Under Method I, reimbursement for both the facility and professional services provided to CAH outpatients is similar to reimbursement for the facility and professional services provided to CAH inpatients. Facility services are billed on the UB-04 (TOB 085X), but payment is made to the CAH under Part B, rather than Part A. Professional services are billed on the CMS 1500, with the place of service reported as hospital outpatient, and payment is generally made to the respective practitioners under Part B.

Under Method II, CAHs may elect to receive reimbursement for both the facility and professional services provided to their outpatients. The CAH’s right to receive reimbursement for professional services, however, only applies to the professional services performed by practitioners who have assigned their right to payment to the CAH for services they provide to its outpatients during that cost report period (CRP).

Under Method II, with respect to those outpatient services whose professional component is provided by a practitioner who has assigned his/her right to payment to the CAH for that CRP:

  • The CAH bills for both the respective facility and professional services to the A/BMAC on the same UB-04 (TOB 085X), reporting appropriate revenue and HCPCS codes for all services.
    • Payment for the CAH facility services will be 101% of the reasonable cost for those services, less the applicable Part B deductible and coinsurance amounts.
    • Payment for professional services will be paid at 115% of whatever amount the A/BMAC would pay under the MPFS, etc., based upon the type of service provided and the modifier applied to the HCPCS code.
      • For example, payment for Medicare participating physician services =

MPFS – (deductibles and coinsurance) X 115%.

  • Payment for both the facility and professional services is made to the CAH under Part B.

With respect to those outpatient services whose professional component is provided by a practitioner who has not assigned his/her right to payment to the CAH for that CRP, reimbursement for both the facility and professional services follows Method I. That is, facility services are billed on the UB-04 (TOB 085X) by, and payment is made under Part B to the CAH.  On the other hand, professional services are billed on the CMS 1500 by, and payment is generally made under Part B to, the respective practitioners.

Expansion of Method II payment for certain services

In the last few years, the scope of outpatient services subject to Method II reimbursement has been expanded to include the following:

  • Certain otherwise covered services performed by anesthesiologists that are reasonable, medically necessary, or surgical; and
  • Any otherwise covered services performed by certified registered nurse anesthetists (CRNAs) within their scope of practice under applicable state law.

For services provided on and after January 1, 2014, a Method II CAH may be reimbursed for otherwise covered services performed by an anesthesiologist (who has assigned his or her right to payment) that are reasonable, medically necessary, or surgical, when those services are submitted with revenue code 0963 (professional fees for Anesthesiologist [MD]).

Unfortunately, the Medicare claims processing system can currently only process Method II payment for services billed with revenue code 0963 that are within the anesthesiology HCPCS code range of 00100-01999. CMS has indicated that the system will be able to appropriately process claims for non-anesthesia HCPCS codes after October 6, 2014. In the meantime, CAHs should contact their A/BMACs for instructions on how to obtain the appropriate reimbursement under Method II for non-anesthesia services billed with revenue code 0963.

In addition, for services provided on and after January 1, 2013, a Method II CAH may be reimbursed for any services that a CRNA (who has elected Method II reimbursement) is authorized to perform under applicable state law, when submitted with revenue code 0964 (CRNA professional services). Unfortunately, prior to May 2, 2014, the Medicare claims processing system was also unable to process Method II payment for services billed with revenue code 0964 that were outside of the anesthesiology HCPCS code range of 00100-01999. Therefore, CAHs should contact their A/BMACs for guidance on how to re-bill any claims with dates of service on or after January 1, 2013 that were billed with non-anesthesia HCPCS codes.

Ongoing discussion and related resources

We will conclude our review of CAH reimbursement issues, focusing on special billing and payment issues relating to CRNA anesthesia services (both inpatient and outpatient), in next week’s Medicare Insider.  For additional information on this week’s discussion, please see the following source authorities:

42 CFR 413.70

Medicare Claims Processing Manual, Chapter 4, Section 250

Medicare Claims Processing Manual, Chapter 12

Medicare One Time Notification Transmittal R1379OTN.

Note from the instructor: CMS Updates Medically Unlikely Edits (MUE) File

This note from the instructor is written by Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro.  

A few weeks ago, CMS released MLN Matters article SE1422 titled Medically Unlikely Edits and Bilateral Procedures. Upon first glance, this MLN Matters article seems to be focused on certain claims with noncompliant coding for bilateral surgical procedures that may have triggered improper payments. In the past few years, the Office of Inspector General (OIG) has identified inappropriate billing using multiple lines to bypass the MUEs per CMS’ previous guidance in Transmittal 652. CMS states that the purpose of this article is to inform providers that MUE changes may now cause multiple claim lines for bilateral procedures to be “unpayable”. However, this article goes on to announce that as of July 1, 2014, dates of service, CMS is converting most MUEs into per day edits and that the MUE Adjudication Indicator (MAI) indicates the type of and basis for the MUE.

Since 2007, hospitals have been navigating the MUE minefield. The edit occurs when a provider bills more than the maximum units of service for a HCPCS/CPT code than would be reported under most circumstances for a single beneficiary on a single date of service. Not all HCPCS/CPT codes have an MUE and CMS publishes most, but not all, MUE values on its website. Some MUEs have been deemed to be confidential and are only for the eyes of CMS and its contractors. This has been an irritant (to say the least) for providers since the implementation of MUEs but we are making progress in understanding how the files work.

In SE1422 and on the CMS MUE website, they describe two additional fields that have been added to the published MUE file. One field indicates whether each MUE is a claim line or date of service edit and the second field provides the rationale for each MUE.  More information about the rationale of the MUE is available in the National Correct Coding Initiative Policy Manual for Medicare Services, Chapter 1, Section V (Medically Unlikely Edits).

CMS has defined the three MAIs as:

  • 1 = MUE is based on a line edit. Medically appropriate units of service in excess of the MUE may be reported on a separate line with an appropriate modifier and each line will process for payment.
    • Example: 49062, Drainage of extraperitoneal lymphocele to peritoneal cavity, open
  • 2 = MUE is based on a regulation or subregulatory instructions, including the instruction that is inherent in the code descriptor or its applicable anatomy. Providers should consider the initial claim or any denials for this type of edit to be either a clerical error or an error in the interpretation of the instructions. CMS has not identified any exceptions to this type of MUE.
    • Example: 49321, Laparoscopy, surgical, with biopsy
  • 3 = MUE is based on clinical information such as billing patterns, prescribing instructions, or other information, and exceptions beyond the MUE would be rare. Providers should review the initial claim or a denial for a clerical, coding, or billing error.
    • Example: 49082, Abdominal paracentesis without imaging guidance

For all MUE edit denials, and as an alternative to filing an appeal, if the provider identifies a clerical error and the correct value is equal to or less than the MUE, the provider may request a reopening to correct the claim. CMS cautions providers about routinely using this method to correct unintentional errors and that reopening requests do not extend the window for filing appeals.

All providers should review SE1422 for more information on the appropriate billing of bilateral surgical procedures, as well as review the other MUE examples that CMS has provided.

Note from the instructor: CY 2015 OPPS Proposed Rule contains Significant Policies

This week’s note from the instructor is written by Kimberly Anderwood Hoy Baker, JD, CPC, regulatory specialist for HCPro.  

On July 3, CMS posted the display copy of the CY 2015 OPPS Proposed Rule with proposed payment and policy changes for hospital outpatient and ambulatory surgery center services. Notably, the rule contains refinements to the Comprehensive Ambulatory Payment Classification (APC) policy (adopted in the CY 2014 OPPS Final Rule for implementation in CY 2015) and significant increased packaging of ancillary services. The rule also included a very significant proposal on inpatient certification, eliminating the onerous requirement for most hospital inpatient stays.

CMS made several adjustments to the policy for payment of Comprehensive APCs. Most significantly they proposed a “complexity adjustment”. The complexity adjustment applies when a primary procedure assigned to a Comprehensive APC is reported with other specified procedures also assigned to Comprehensive APCs or with a specified packaged add-on code.  When one of these combinations are reported, the payable APC is increased to the next highest APC in the clinical group (i.e., from level II to level III). New Addendum J has details of the code combinations subject to this complexity adjustment and the APC that will be paid when one of the combinations is reported. Also included in Addendum J is the ranking of procedure codes for determining the primary procedure that will control the APC assigned when multiple procedures assigned to Comprehensive APCs are reported.

Another significant refinement to the policy relates to the services excluded from the Comprehensive APC payment. The rule contains new Table 6, listing 10 categories of services not subject to packaging to the Comprehensive APCs. There are two significant changes from the policy articulated in the CY 2014 OPPS Final Rule. Self-administered drugs that are not treated as supplies to the procedure will be excluded from packaging and are still billable to the patient. The prior rule implied these drugs would be packaged to the Comprehensive APC. However, CMS proposes excluding them based on their statutory exclusion from coverage under Part B.

They have also proposed to exclude therapy services that are reported on separate facility claims “for recurring services” from packaging to Comprehensive APCs. CMS refers to them as “recurring” services in the proposed rule, but they are presumably referring to services the Claims Manual defines as “repetitive services”, which are required to be billed on a separate monthly claim. They also proposed to exclude ambulance service; brachytherapy; mammography; preventative services; pass-through drugs, biologicals and devices; and services paid on a reasonable cost basis.

The proposed rule also makes another significant packaging proposal related to ancillary services with costs of $100 or less. CMS is proposing to conditionally package services with a mean cost of $100 or less, eliminating status indicator “X” and reassigning these codes to status indicator “Q1” (STV Packaged). Table 11 has the list of APCs that will be packaged under the new rule, including level I and II x-rays, level I ultrasounds, ECGs, and many other ancillary procedures and diagnostic tests. The proposal would exclude preventative services, certain psychiatry and counseling services, and drug administration services from the new policy. Services that formerly had a status indicator “X” but are not subject to packaging (i.e., they have a cost greater than $100) will be reassigned to status indicator “S”.

One of the most significant proposals in the rule did not relate to outpatient services at all, but rather to the inpatient certification requirement. In the CY 2014 IPPS Final Rule, CMS adopted revised certification requirements for all inpatient admissions. Because all elements of the new certification had to be signed by the physician prior to discharge, this requirement has created a great deal of difficulty for hospitals and arguably required the most extensive change to computerized documentation systems of all the changes in 2014.

The proposal would modify the regulation on certification to only require the certification for outlier cases and long-stays, defined as stays 20 days or longer. The requirements for the new certification are similar to the requirements under the current rule: reason for continued hospitalization or special and unusual circumstances for outliers, estimated time the patient will remain in the hospital, and plans for post-hospital care. CMS is careful to note that the order requirements also adopted in the CY 2014 IPPS Final Rule are not proposed to change and an order complying with the new order requirements is still necessary to demonstrate the patient is considered an inpatient during this stay.

The rule contains other proposals including payment updates, a proposal for a new modifier to identify off-campus provider based department services, an increase to the outlier threshold, and quality proposals. As always, providers are encouraged to read the rule for policies significant to their operations and submit comments on proposals that will unduly or negative affect them. The comment deadline was not set in the display copy of the rule, but the rule is set to be published in the Federal Register on July 14 and the comment period is normally 60 days from the publication date.

Note from the instructor: CMS’ Advisory Panel on Hospital Outpatient Payment seeks input on chemotherapy supervision rules

This week’s note from the instructor is written by Debbie Mackaman, RHIA, CPCO, regulatory specialist for HCPro.  

Hospital outpatient therapeutic services paid under OPPS or paid to critical access hospitals (CAH) on a cost basis must be furnished “incident to” a physician’s service to be covered. There are four elements to meet incident to; however, furnishing the service under the appropriate level of supervision by a physician or non-physician practitioner has become the most complex.

In most circumstances, CMS has designated direct supervision to be the default level of supervision for hospital outpatient therapeutic services. CMS has also designated general supervision as appropriate for specific services that have been identified through a sub-regulatory process. The Advisory Panel on Hospital Outpatient Payment–called the Panel—which has included representation from CAHs since 2010, considers recommendations from providers and its own members.

The Panel meets in March and August, and CMS prioritizes requests for consideration by the Panel based on service volume, total expenditures, and frequency of requests. Hospitals may request that the Panel review a particular service and recommend to CMS that it be approved to be provided under general supervision. Following the Panel meeting, CMS posts their preliminary decisions on the Panel’s recommendations for a 30-day comment period. After the comment period, they will issue their decisions effective July 1 following the March meeting or January 1 following the August meeting.

On March 10, 2014, the Panel met and reviewed the supervision levels of eight HCPCS codes related to the administration of chemotherapy, complex drugs, or biologic agents. At that meeting, the Panel recommended that these codes be changed from direct to general supervision. However, CMS “believed that the appropriate supervision level for these services is inherently a clinical issue” and they decided not to change the supervision requirement. Although CMS solicited public comments regarding the clinical standards for supervision for both initial and subsequent administrations of these drugs, it appeared to CMS that the commenters misunderstood their intent of suggesting a different supervision level for the initial administration and when that same drug is being given in a subsequent encounter. Instead, CMS decided to refer these services back to the Panel for further deliberations at the August 2014 Panel meeting.

CMS explained that current clinical guidelines suggest that a general level of supervision is unsafe. They are asking for more input whether the supervision level should be direct for the initial administration followed by general for subsequent administrations of the same drug. CMS also stated that they “welcome other suggested approaches that balance professional and hospital viewpoints” and asked the Panel to weigh supervision levels as recommended by clinical guidelines from professional associations with the realities of hospital operations and patient care in rural areas.

On CMS’ hospital OPPS website, hospitals can also find the current list of hospital outpatient therapeutic services that are either designated as non-surgical extended duration therapeutic services (NSEDTS or “extended duration services”) or those that may be furnished under general supervision in accordance with applicable Medicare regulations and policies. When hospitals review the list, they may find a surprise that will go into effect on July 1, 2014. CMS’ preliminary decision on one of the recommendations from the March 10 Panel meeting stated that they would not move transfusion of blood or blood products (HCPCS 36430) from direct to general supervision.

“While we would not accept the Panel’s recommendation that CMS change the supervision level to general for CPT code 36430, we would designate this code as a Non-Surgical Extended Duration Therapeutic Services (or “extended duration services”), which would require an initial period of direct supervision with potential transition of the patient to general supervision. We believe blood transfusion warrants direct supervision initially to manage potential adverse events and reactions.”

In looking at the updated list, hospitals will find that HCPCS 36340 will change from direct supervision to general supervision which is contradictory to their March statement. For hospitals that struggle with meeting direct supervision for certain outpatient services, like blood transfusions, that are often provided by nursing staff and sometimes “after usual department hours,” this may be the solution they have been looking for.

Note from the instructor: CMS Updates Special Edition Article on the Proper Use of Modifier -59

This week’s note from the instructor is written by Debbie Mackaman, RHIA, CPCO, regulatory specialist for HCPro.  

CMS has released an updated MLN Matters Special Edition article SE1418 on the proper use of modifier -59. This high-risk modifier has been the subject of much discussion within hospitals—both prospective payment system and critical access hospitals—and the subject of various audits by Medicare Administrative Contractors, Recovery Auditors, and the Office of the Inspector General (OIG).

For years, hospitals have been navigating the Procedure to Procedure (PTP) edits that were implemented under the National Correct Coding Initiative (NCCI). PTP edits are pairs of CPT or HCPCS Level II codes that are not both separately payable when billed by the same provider for the same beneficiary for the same date of service, unless an appropriate modifier is reported. Based on a Correct Coding Modifier Indicator (CCMI), certain modifiers will override an NCCI PTP edit and allow both services to be considered for separate payment.

However, CMS states that one of the functions of the NCCI PTP edits is to prevent payment for codes that report overlapping services, except in those instances where the services are “separate and distinct.” According to CMS and further confirmed by OIG audits, modifier -59 is often used incorrectly.

The previous article, SE0715, has now been replaced with SE1418. SE1418 describes three other “limited situations.” It also gives examples of when modifier -59 may be used if reporting two services as separate and distinct when they are performed during the same encounter. The following examples are given:

  • Modifier -59 is used appropriately for two services described by timed codes (i.e., per 15 minutes, per hour) when they are provided during the same encounter and only when they are performed sequentially (i.e., one service is completed before the subsequent service begins)
  • Modifier -59 is used appropriately for a diagnostic procedure which precedes a therapeutic procedure only when the diagnostic procedure is the basis for performing the therapeutic procedure
  • Modifier -59 is used appropriately for a diagnostic procedure which occurs subsequent to a completed therapeutic procedure only when the diagnostic procedure is not a common, expected, or necessary follow-up to the therapeutic procedure

Additional examples may be found on the NCCI Overview page, under the link “Modifier 59 Article: Proper Usage Regarding Distinct Procedural Service” although this article does not include the new CMS guidance. Further clarification can also be found in Chapter 1 of the NCCI Manual that states modifiers should only be appended to HCPCS/CPT codes if the clinical circumstances justify its use and that a modifier should not be appended to a HCPCS/CPT code solely to bypass an NCCI edit. If CMS imposes restrictions on the use of a modifier, the modifier may only be used to bypass an NCCI edit if the restrictions are fulfilled.

In discussing the proper application of modifiers with a variety of hospitals around the country, it seems like there are many different procedures and a variety of staff involved in this process. Coding and billing staff, auditing and compliance teams, and individual departments who have modifier -59 attached to HCPCS codes in the charge description master should all carefully review and discuss SE1418 to ensure the modifier is being used appropriately and proper payment is being received.

Note from the instructor: Reimbursement for outpatient services provided to critical access hospital patient

This week’s note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.  

I recently taught an HCPro’s open registration Medicare Boot Camp® – Critical Access Hospital (MBC-CAH) class. As many of you are probably aware, CAHs are a special category of small, rural hospitals that provide both inpatient and outpatient services, primarily in what would otherwise be medically under served parts of the country. To ensure their ability to continue to do so, CAHs generally receive reimbursement for the facility component of both their inpatient and outpatient hospital services based on 101% of reasonable costs. While teaching the class, I was reminded of the complexity of the rules surrounding CAH reimbursement, particularly for services provided to CAH outpatients. We will focus on these complex rules in this Medicare Insider note and in subsequent issues, as necessary.

Payment for inpatient facility and professional services

Currently, CAHs bill for the facility/technical component of covered Part A inpatient services to the A/B Medicare Administrative Contractor (A/B MAC) on the UB-04, and are reimbursed on the basis of 101% of reasonable costs, less the applicable Part A deductible and coinsurance amounts. Most professional services provided to CAH inpatients are billed separately to the A/B MAC on the CMS 1500, with the place of service reported as hospital inpatient. With the exception of payment for certain anesthesia services, payment is made under Part B, based on a fee schedule (e.g., Medicare Physician Fee Schedule [MPFS]), charge or other fee basis, less the applicable Part B deductible and coinsurance amounts.

Payment for the facility services is made to the CAH, and payment for the professional services is generally made to the respective practitioners.

Payment for outpatient facility and professional services under Method I

When I first began teaching the MBC-CAH class a number of years ago, the majority of CAHs had elected to receive reimbursement for services provided to their outpatients under what Medicare refers to as Method I. Under Method I, reimbursement for both the facility and professional services provided to CAH outpatients is similar to reimbursement for the facility and professional services provided to CAH inpatients. That is:

  • CAHs bill for the facility component of covered Part B outpatient services to the A/B MAC on the UB-04, and are reimbursed on the basis of 101% of reasonable costs, less the applicable Part B deductible and coinsurance amounts.
  • Most professional services provided to CAH outpatients are billed separately to the A/B MAC on the CMS 1500, with the place of service reported as hospital outpatient department. With the exception of certain anesthesia services, payment is also made under Part B, based on a fee schedule (e.g., MPFS), charge or other fee basis, less the applicable Part B deductible and coinsurance amounts.

Under Method I, payment for the facility services is made to the CAH, and payment for the professional services is generally made to the respective practitioners.

Method I payment example: A CAH charges $1,000 for an outpatient procedure. The cost of the procedure has been determined to be $500, based on its outpatient cost-to-charge ratio of .50.  Assuming that the deductible has already been met, under Method I billing, what will be the total payment to the CAH for CAH facility services, including the patient’s coinsurance amount?  (Beneficiary coinsurance for CAH outpatient facility services under Part B is equal to 20% of charges.) How much will be payable by the patient? How much will be payable by Medicare?

The CAH would be paid $200 from the patient and $305 from the A/BMAC for a total payment of $505:

–     Total payment = (101% of reasonable costs) = (1.01 X $500) = $505

–     Coinsurance = (20% of billed charges) = (.20 X $1000) = $200

–     Medicare payment = (101% of reasonable costs – coinsurance) = ($505 – 200) = $305

Payment for outpatient facility and professional services under Method II

Over time, more and more CAHs have elected to receive reimbursement for both the facility and professional services provided to their outpatients under Method II. The CAH’s right to receive reimbursement for professional services, however, only applies to the professional services performed by practitioners who have elected to assign their right to payment to the CAH for services they provide to its outpatients during that cost report period (CRP). Each practitioner has the right to choose whether to assign his or her right to payment for a particular CRP. Once elected, the election will apply throughout that CRP, and the practitioner must attest that he or she will not bill Medicare directly during that CRP.

Under Method II, with respect to those outpatient services whose professional component is provided by a practioner who has assigned his or her right to payment to the CAH for that CRP:

  • The CAH bills for both the respective facility and professional services to the A/B MAC on the same UB-04, reporting appropriate revenue and HCPCS codes for all services
    • Payment for the CAH facility services will be 101% of the reasonable cost for those services, less the applicable Part B deductible and coinsurance amounts
    • Payment for professional services will be paid at 115% of whatever amount the A/B MAC would pay under the MPFS, etc., based upon the type of service provided and the modifier applied to the HCPCS code

MPFS – (deductibles and coinsurance) X 115%

  • Payment for both the facility and professional services is made to the CAH

Under Method II, with respect to those outpatient services whose professional component is provided by a practioner who has not assigned his or her right to payment to the CAH for that CRP:

  • The CAH bills for the facility component of covered Part B outpatient services to the A/B MAC on the UB-04, and is reimbursed on the basis of 101% of reasonable costs, less the applicable Part B deductible and coinsurance amounts
  • Most professional services provided to its outpatients are billed separately to the A/B MAC on the CMS 1500, with the place of service reported as hospital outpatient department. With the exception of certain anesthesia services, payment is also made under Part B, based on a fee schedule (e.g., MPFS), charge or other fee basis, less the applicable Part B deductible and coinsurance amounts
  • Payment for the facility services is made to the CAH, and payment for the professional services is generally made to the respective practitioners

Method II payment example: In the same scenario as the Method I example, except the CAH has elected Method II billing, the participating physician’s charges for the procedure are $400 and the MPFS amount is $200. Under Method II, the patient is also responsible for applicable cost sharing amounts (Part B deductible and coinsurance) for the related professional services, including coinsurance equal to 20% of the MPFS amount for the professional service. Assuming that the deductible has already been met, what is the total payment to the CAH under Method II billing, including the patient’s total coinsurance, facility (FAC) reimbursement, and professional (PRO) fee reimbursement?

FAC reimbursement

–     Same as in prior example—$505 ($200 coinsurance and $305 from Medicare)

PRO reimbursement

–     Coinsurance = (20% of MPFS) = (.20 X $200) = $40

–     Medicare payment = ((MPFS minus coinsurance)  X 115%) = (($200 – $40) X 1.15) = ($160 X 1.15) = $184

Total payment

–     Coinsurance = ($200 FAC + $40 PRO) = $240

–     Medicare payment = ($305 FAC + $184 PRO) = $489

–     Total payment = $240 + $489 = $729

Ongoing discussion and related resources

We will continue our discussion on CAH reimbursement issues, particularly relating to specific anesthesia services (both inpatient and outpatient), in a subsequent issue of Medicare Insider. For additional information, please see the following source authorities:

42 CFR 413.70

Medicare Claims Processing Manual, Chapter 4, Section 250ff

Medicare Claims Processing Manual, Chapter 12

Your chance to win a FREE HCPro webcast!

Dear healthcare professional,

Medical Records Briefing is conducting it’s a benchmarking survey on electronic health record implementation, and we would appreciate your input. Please take a few moments to complete this survey. The results along with commentary from industry experts will be featured in the October 2014 issue of Medical Records Briefing.

To show our thanks, we will select one respondent at random to win a complimentary HCPro on-demand webcast of his or her choice. To enter to win, please include your contact information at the end of the survey once you have answered the questions.

The link below will take you to the survey’s website; simply click on the link to answer the survey questions online. If the click-through does not work, please cut and paste the URL below into the address bar of your browser.

Here’s the link to the survey: https://www.surveymonkey.com/s/J6DRJBR.

Thank you for your input!

2015 OPPS Proposed Rule CMS reintroduces Comprehensive APCs, proposes expanded packaging

by Steven Andrews

The 2015 OPPS proposed rule, released July 3 by CMS, is relatively short at less than 700 pages, but contains refinements to the previously introduced Comprehensive APC policy, significant packaging of ancillary services, and a change for inpatient certification requirements.

“In terms of the volume of changes, it’s less than we normally see, but in terms of impact, it’s on par with last year’s big changes,” says Kimberly Anderwood Hoy Baker, JD, director of Medicare and Compliance for HCPro, a division of BLR, in Danvers, Massachusetts.

Jugna Shah, MPH, president of Nimitt Consulting, agrees and encourages hospitals to begin assessing financial impact now in light of CMS’ packaging proposals.

Comprehensive APCs

CMS has proposed implementing a concept it finalized in the 2014 OPPS final rule by introducing Comprehensive APCs for device-dependent APCs. With Comprehensive APCs, a single payment will be made rather than separate, individual APC payments, Shah says.

The 2015 OPPS proposed rule includes some lower-cost device-dependent APCs and two new APCs for other procedures and technologies that are either largely device dependent or represent single session services with multiple components. After additional consolidation and restructuring, CMS is now proposing 28 Comprehensive APCs for 2015.

The most significant change to the policy is a proposed “complexity adjustment.” The adjustment is applied when a primary procedure assigned to a Comprehensive APC is reported with other specified procedures also assigned to Comprehensive APCs or with a specified packaged add-on code. When the facility reports one of these combinations, CMS will increase the payable APC to the next higher APC in the clinical group, similar to DRGs on the inpatient side.

“This is the first time in OPPS history where we have something like severity adjustment,” says Baker.

Device-dependent edits

Instead of eliminating all device-dependent edits, beginning in CY 2015, CMS proposes to require that facilities report a device code for procedures currently assigned to a device-dependent APC.

Under CMS’ proposal, the device claims edit would be met by reporting any medical device C code currently listed among the device edits for the CY 2014 device-dependent APCs, rather than reporting a particular device C code(s).

“It’s nice that CMS heard commenters’ concerns about the elimination of all device-to-procedure edits altogether and has instead proposed to retain some level of editing,” says Shah. “This is critical to ensure that the agency receives completely coded claims for future rate-setting.”

Packaging increases

The rule includes four proposals to continue expanding packaging, a common theme for the OPPS in recent years.

“CMS continues full steam ahead with packaging, and has added an interesting twist to how it’s looking at packaging additional services, using a dollar threshold,” Shah says.

CMS proposes to package add-on codes assigned to device-dependent APCs (paid separately in CY 2014) starting in CY 2015, since these device-dependent add-on codes will be paid under the Comprehensive APC policy. These codes are listed in Table 9 of the proposed rule.

CMS also proposes to conditionally package ancillary services that have a geometric mean cost of less than or equal to $100 (with some exceptions, including preventive service, counseling/psychiatry, and drug administration services).

Additionally, CMS proposes to eliminate status indicator X (ancillary services). This means that all CPT® codes currently assigned to status indicator X will either be reassigned to status indicator Q1 (conditionally packaged) or S (significant procedure, not discounted).

If finalized, ancillary services with status indicator Q1 will not generate separate payment when provided on the same date of service as another separately payable procedure with a status indicator of S, T (significant procedure, multiple reduction applies), or V (clinic or ED visit), but will generate separate payment if provided on their own.

Providers will need to carefully examine the proposed changes and assess the financial impact of the proposed packaging changes, which will require an examination of claims rather than individual CPT codes or line items, Shah says.

Finally, CMS proposes to package and change the status indicator from A (services furnished to a hospital outpatient paid under a fee schedule or payment system other than OPPS) to N (items and services packaged into APC rates) for all DMEPOS prosthetic supplies.

CMS says this is consistent with the change it finalized for CY 2014 for all non-prosthetic DMEPOS supplies (with the status indicator changed from A to N). If this proposed change is finalized for CY 2015, then all medical and surgical supplies would be packaged in the OPPS.

Physician certification of inpatient services

CMS is proposing several changes to requirements related to inpatient physician certification, according to Baker.

Although CMS will continue to require a physician order for inpatient services, it will no longer require certification that the stay was medically necessary in most cases. CMS believes that in most cases the admission order, medical record, and progress notes contain sufficient information to support the medical necessity of an inpatient admission without a separate requirement of an additional, formal, physician certification, with two exceptions.

For stays of 20 days or longer and outlier cases, CMS believes physician certification is needed and therefore proposes to require formal physician certification beyond the admission order to substantiate the medical necessity for these cases.

E/M visits

CMS proposed no changes to E/M visit configuration or payment policy methodology in 2015, a year after CMS proposed replacing all E/M visit levels with three HCPCS Level II G-codes. CMS proposes to continue using the single visit G code and existing coding convention for Type A and Type B ED visits, though the agency says it plans on looking at different payment methodologies for the most costly ED trauma-type cases.

Additional proposals

CMS proposed the packaging threshold to remain at $90, the same as CY 2014, and for the average sales price plus 6% remains in effect for all separately payable drugs, biologicals, and radiopharmaceuticals. CMS proposed no changes to packaging of diagnostic radiopharmaceuticals and contrast agents, or the payment methodology of therapeutic radiopharmaceuticals or brachytherapy for 2015.

To better understand the frequency and type of services furnished in provider-based departments in off-campus locations, CMS proposes a new data collection requirement that, if finalized, would impact both physician and hospital reporting, according to Shah.

Specifically, CMS is proposing to collect this information beginning January 1, 2015, by requiring the use of a new HCPCS modifier that would be reported with every code for physician and outpatient hospital services furnished in an off-campus provider-based department of a hospital.

The modifier would be reported on both the CMS-1500 claim form for physician services and the UB-04 form (CMS Form 1450) for hospital outpatient services. CMS is asking for additional public comment on whether the use of a modifier is the best mechanism for collecting this service-level data.

“If providers do not like or support this option, they need to comment now, because this is the second time CMS has asked for comments and alternatives,” Shah says. “If they are not provided, it seems very likely that CMS will finalize this.”

CMS will accept comments on the proposed rule until September 2, 2014, and will respond to comments in a final rule to be issued on or around November 1, 2014. The proposed rule will appear in the July 14 issue of the Federal Register.