Place of service matters in Medicare billing

Last December, I reported that the U.S. Department of Health and Human Services Office of Inspector General (OIG) planned to examine place of service (POS) coding by physicians as part of its fiscal year 2015 work plan. Last month, the OIG revealed its findings: Medicare contractors overpaid physicians $33.4 million between January 2010 and September 2012 as a result of incorrect coding related to POS. Specifically, physicians were incorrectly paid for performing these services in non-facility locations, such as physician offices or independent clinics, when they were actually working at facility locations, such as ambulatory surgery centers (ASCs) or hospital outpatient centers.

The difference between a physician’s payment for services performed in the office and services performed in a facility can be significant. Physicians are paid more for professional services performed in their offices than those they perform at hospital outpatient centers and ASCs. When a physician performs in a facility like an ASC, Medicare pays the facility, not the physician, for the facility’s overhead expense. In turn, Medicare pays the physician less under the physician fee schedule because the physician did not have the overhead and much of the other practice expenses of the facility’s location of service.

In the end, it all boils down to the POS reported on the claim. When a physician provides an office-based service, the physician should bill with the correct POS code, generally a POS code 11. When a physician provides a facility-based service, the physician should bill the services with an appropriate POS code reflecting the type of facility, for example, a POS code 22 for hospital outpatient centers or a POS code 24 for ASCs.

So, what can your practice do to avoid such errors? OIG’s report made a number of suggestions, including making sure:

• Billing staff is clear about the definition of “physician’s office” or other non-facility locations and understands the need to code POS appropriately.

• Billing staff is aware that the POS code can affect Medicare payment and that inaccurate use of non-facility POS codes can mean potential Medicare overpayments.

• Billing systems are not designed to submit all physician professional service claims with a non-facility POS code.

• You implement internal controls to identify potential coding errors before claim submission.

As noted, inaccurate use of POS codes can lead to Medicare overpayments, which, in turn, can lead to overpayment recovery efforts on the part of the Centers for Medicare & Medicaid Services (CMS) and its contractors. For instance, based on its findings, OIG recommend that CMS direct its Medicare contractors to initiate, in accordance with CMS policies, the immediate recovery of $7.3 million in potential overpayments from physicians who incorrectly coded physician services performed in ASCs and $19 million in potential overpayments related to the services that may have been performed in hospital outpatient locations. That’s in addition to the $7.1 million in potential overpayments 87 physicians told CMS they intended to pay back for incorrectly coding physician services performed in hospital outpatient locations.

OIG also recommended that CMS and its contractors continue to educate physicians and billing personnel on the importance of internal controls to ensure the correct POS coding for physician services. Finally, OIG recommended stronger and wider efforts to perform coordinated data matches of non-facility-coded physician services and facility claims to identify physician services that are at a high risk for POS miscoding and recover the overpayments that are identified as a result.

All of which means a likely greater focus and scrutiny on POS coding going forward, especially since this is not the OIG’s first inquiry into POS billing.

– Kent Moore, Senior Strategist for Physician Payment for the American Academy of Family Physicians