Knowledge Base Category -

TRANSMITTALS

Remittance Advice Remark Code (RARC), Claims Adjustment Reason Code (CARC), Medicare Remit Easy Print (MREP) and PC Print Update

• Transmittal 3562, Change Request 9695, MLN Matters Article MM9695
• Issued July15, 2016, Effective October 1, 2016, Implementation October 3, 2016
• Affects physicians, providers, and suppliers submitting claims to Medicare Administrative Contractors (MACs) for services provided to Medicare beneficiaries.

Summary of Changes: The purpose of this Change Request (CR) is to update the Remittance Advice Remark Code (RARC) and Claim Adjustment Reason Code (CARC) lists and also to instruct ViPS Medicare System (VMS) and Fiscal Intermediary Shared System (FISS) to update Medicare Remit Easy Print (MREP) and PC Print.

The Supplemental Security Income (SSI)/Medicare Beneficiary Data for Fiscal Year 2014 for Inpatient Prospective Payment System (IPPS) Hospitals, Inpatient Rehabilitation Facilities (IRFs), and Long Term Care Hospitals (LTCH)

• Transmittal 1681, Change Request 9648, MLN Matters Article MM9648
• Issued July 15, 2016, Effective August 16, 2016, Implementation August 16, 2016
• Affects Inpatient Prospective Payment System (IPPS) hospitals, Inpatient Rehabilitation Facilities (IRFs), and Long Term Care Hospitals (LTCHs) submitting
• claims to Medicare Administrative Contractors (MACs) for services provided to Medicare beneficiaries.

Summary of Changes: Provides updated data for determining the disproportionate share adjustment for IPPS hospitals and the Low Income Patient (LIP) adjustment for IRFs as well as payments as applicable for LTCH discharges

Quarterly Update to the Correct Coding Initiative (CCI) Edits, Version 22.3, Effective October 1, 2016

• Transmittal 3561, Change Request 9725, MLN Matters Article MM9725
• Issued July 15, 2016, Effective October 1, 2016, Implementation October 3, 2016
• Affects physicians, providers, and suppliers submitting claims to Medicare Administrative Contractors (MACs) for services provided to Medicare beneficiaries.

Summary of Changes: This is the normal update to the CCI procedure to procedure edits.

July 2016 Update of the Hospital Outpatient Prospective Payment System (OPPS)

• Transmittal 3552 and 3557, Change Request 9658, MLN Matters Article MM9658
• Issued June 28 and July 1, 2016, Effective July 1, 2016, Implementation July 5, 2016
• Affects providers and suppliers who submit claims to Medicare Administrative Contractors (MACs), including Home Health and Hospice (HH&H) MACs, for services provided to Medicare beneficiaries and which are paid under the Outpatient Prospective Payment System (OPPS).

Summary of Changes: This Recurring Update Notification describes changes to and billing instructions for various payment policies implemented in the July 2016 OPPS update. Transmittal 3557 replaces Transmittal 3552 to include the statement announcing delay in implementation of the reporting for certain outpatient department services (that are similar to therapy services) (“non-therapy outpatient department services”) that are adjunctive to comprehensive APC procedures.

Medicare Coverage of Diagnostic Testing for Zika Virus

• MLN Matters Article SE1615
• Issued June 27, 2016
• Affects physicians, providers, and clinical diagnostic laboratories who submit claims to Medicare Administrative Contractors (MACs) for services to Medicare beneficiaries.

Summary of Changes: This MLN Matters Special Edition Article informs the public that Medicare covers Zika virus testing under Medicare Part B as long as the clinical diagnostic laboratory test is reasonable and necessary for the diagnosis or treatment of a person’s illness or injury. This article reminds laboratories furnishing Zika virus tests to contact their MACs for guidance on the appropriate billing codes to use on claims for Zika virus testing. Furthermore, laboratories should provide resources and cost information as may be requested by the MACs in order for the MACs to establish appropriate payment amounts for the tests.

Notice of New Interest Rate for Medicare Overpayments and Underpayments -4th Qtr Notification for FY 2016

• Transmittal 270, Change Request 9750
• Issued July 12, 2016, Effective July 18, 2016, Implementation July 18, 2016

Summary of Changes: Recurring notification of interest rates.

OTHER UPDATES

CMS Proposes Hospital Outpatient Prospective Payment System Changes to Better Support Physicians and Improve Patient Care

• 2017 OPPS Proposed Rule CMS-1656-P
• Issued July 6, 2016

Summary of Changes: This proposed rule would revise the Medicare hospital outpatient prospective payment system (OPPS) and the Medicare ambulatory surgical center (ASC) payment system for CY 2017 to implement applicable statutory requirements and changes arising from our continuing experience with these systems.

Medicare Quarterly Compliance Newsletter

• July 2016 Edition

Summary: Articles on Automatic External Defibrillators, Treprostinil Inhalation Solution, Therapeutic Shoes for Persons with Diabetes, and Hospital Outpatient Dental Services.

Are you tired of hearing about and reading about provider-based departments? If so, sorry, but some governmental agencies (for example, the Office of Inspector General (OIG), the Medicare Payment Advisory Commission (MedPAC), and even Congress) just won’t let it go. This issue is evidently “stuck in their craw” and so the discussion continues, and continues, and continues… This article looks at information from the June 2016 OIG report concerning provider-based facilities.

What Is a Provider-Based Department?

Provider-based status is a Medicare payment designation established by the Social Security Act that allows facilities with a provider-based designation to bill Medicare as a hospital outpatient department and thereby receive higher payments. Provider-based facilities may be on campus (within 250 yards of the main buildings of the main provider) or off campus (more than 250 yards but less than or equal to 35 miles from the main buildings of the main provider). Hospitals and their provider-based departments (PBDs) have to meet specific requirements described in 42 CFR § 413.65 and CMS Transmittal A-03-030. The requirements include practice licensure, integration of clinical services and financial operations, and compliance with nondiscrimination and health and safety rules. In addition, off-campus PBDs must meet requirements for administration, supervision, and location.

Major Concerns – Cost and Increasing Numbers

According to the OIG report, “Medicare often pays over 50 percent more for services performed in provider-based facilities than for the same services performed in a non-hospital based facility (i.e., a freestanding facility). Beneficiaries generally are responsible for higher copayments for most services in provider-based facilities than in freestanding facilities.” In provider-based departments, Medicare makes a payment to the PBD based on Outpatient Prospective Payment System (OPPS) payment rates and a separate payment to physicians for their professional services.

Another concern is the increasing numbers of PBDs. Over the past seven years, there has been a 33% increase in hospital outpatient services including those provided in PBDs. One reason for the increased number of PBDs is that more and more hospitals are purchasing freestanding facilities and converting them to provider-based facilities.

Findings from Previous OIG Audits

In earlier reviews, the OIG found that CMS was not aware of the number of provider-based facilities or the increased cost associated with PBDs without a corresponding benefit. CMS has claimed that PBDs improve quality of care by offering increased beneficiary access and integration of care. CMS also has maintained that increased payments are appropriate to accommodate higher costs resulting from financial and clinical integration. But per the OIG, CMS has yet to provide any evidence provider-based facilities produce specific benefits to justify the higher costs compared to freestanding facilities.

Hospitals may voluntarily attest to provider-based status with supporting documentation required to be submitted to the Medicare Administrative Contractors for off-campus PBDs. The OIG found inconsistent reviews by the Medicare Regional Offices confirming the attestations. The OIG has also found that some physicians are receiving overpayments for services provided in PBDs if they report the incorrect place-of-service (POS) code.

Bottom line is the OIG recommended the complete elimination of provider-based status.

CMS Fixes

CMS did not concur with the OIG recommendation for eliminating provider-based status but did take some actions based on the OIG’s findings. Specifically, CMS

• Produced a set of standards (i.e., 42 CFR § 413.65) for provider-based facilities and entities designed to guard against abuse of the payment system,
• Developed a management information system that contains the results of provider-based reviews and enables CMS to monitor review status, and
• Developed detailed guidance on the proper use of place- of-service codes.

Due to continuing concerns from the OIG, the MedPAC committee, and Congress, CMS created new physician place-of-service codes to distinguish between services performed in on- or off-campus provider-based facilities. Effective January 1, 2016, physicians use place-of-service code 22 for services in on-campus provider-based facilities and place-of-service code 19 for services in off-campus provider-based facilities. Also, voluntary beginning January 2015 but mandatory effective January 1, 2016, CMS requires that hospital claims contain a specific two-digit modifier (modifier PO) for OPPS services furnished in an off-campus PBD.

Another significant development concerning provider-based status is the Bipartisan Budget Act of 2015 (BBA) which mandates that, effective January 1, 2017, only off-campus outpatient departments billing the OPPS for services before November 2, 2015, (grandfathered provider-based facilities) may continue to receive payment under OPPS. New off-campus provider-based facilities will be paid under payment systems equitable with independent and physician office payments. (Be on the lookout in next week’s Wednesday@One for details of how CMS proposes to handle this in the 2017 OPPS Proposed Rule.)

Remaining Problems

Although CMS has taken steps to improve its monitoring of provider-based billing, the OIG details a long list of remaining vulnerabilities related to PBDs, some of which include:

• Grandfathered facilities under the BBA will continue to generally receive higher payments (i.e., payments from both the OPPS and MPFS) for services than if the same services were provided in a freestanding facility (i.e., receiving payment only from the MPFS).
• Some hospital PBDs may be receiving overpayments because they do not meet all the PBD requirements. Due to the voluntary attestation process, CMS is unable to determine whether all provider-based facilities meet requirements to bill at the higher provider-based rate. CMS also reports challenges with the provider-based attestation review process because of difficulties obtaining supporting documentation.
• Some physicians may be receiving overpayments due to reporting of incorrect place-of-service codes. CMS has no means to ensure physicians use the correct POS codes because they do not match the facility component of a claim to the associated professional component of a claim.
• CMS cannot segregate billing by provider-based facilities, which is critical to ensuring appropriate payments and implementation of the BBA of 2015.

OIG Recommendations

The OIG continues to recommend that CMS eliminate provider-based status or equalize payment for the same services provided in different settings. If CMS does not accept these recommendations, the OIG recommends CMS:

• Implement systems and methods to monitor on- and off-campus billing by provider-based facilities to help implement the Bipartisan Budget Act of 2015 and better monitor billing by individual facilities.
• Require hospitals to submit attestations and supporting documentation for all of their provider-based facilities, both on and off campus with a deadline after which Medicare would deny claims for services in provider-based facilities that do not have an attestation on file with CMS.
• Determine how to address the issue of grandfathered facilities that do not meet regulatory requirements after January 1, 2017, and determine whether they may continue billing as provider-based facilities if they later come into compliance.
• Ensure that its regional offices and MACs apply provider-based requirements appropriately when reviewing documentation during their attestations reviews.
• Recover overpayments and take action to ensure hospitals and facilities improperly billing as provider-based do not receive higher provider-based payment in the future until non-compliance is corrected.

Requirements to be a PBD and Documents to Prove It

Hospitals need to understand the requirements for provider-based status, ensure that any on-campus or off-campus facilities for which the hospital is billing as provider-based meets the requirements, and be prepared to furnish appropriate documentation to CMS to support the PBD designation. The OIG report contained valuable information on the requirements and supporting documentation that is summarized below. Hospitals should read the OIG report for complete details of everything discussed in this article.

Requirement: A provider-based facility and the main provider must be operated under the same license, unless State laws prohibit this or require separate licenses.
Supporting Documentation: Copy of the State license or documentation that the State in which the facility is located requires a separate license

Requirement: Integrated clinical services including same clinical privileges, same monitoring and oversight, reporting relationship between PBD medical director and hospital chief medical officer, oversight by hospital medical staff committees, a unified medical records retrieval system, and integrated and fully accessible services.
Supporting Documentation: Information about whether professional staff of the PBD has clinical privileges at the main provider, a copy of the record retrieval policy of the main provider and provider-based facility, and examples of inpatient and outpatient service integration

Requirement: Fully integrated financial operations including costs reporting and financial status.
Supporting Documentation: Appropriate section of a main provider’s cost report or trial balance that show the provider-based facility’s revenues and expenses

Requirement: Provider-based facility is held out to the public and other payers as part of the main provider.
Supporting Documentation: Letterhead with a shared name, websites, and other examples to show that the facility is part of the main provider

Requirement: Compliance with applicable rules related to hospital anti-dumping, nondiscrimination, health and safety, Medicare agreement and Medicare payment.
Supporting Documentation: Copies of anti-dumping and nondiscrimination policies

Requirement (Off-Campus PBD): The hospital main provider must own 100-percent of the provider-based facility, have final responsibility and approval for administrative and personnel decisions, have the same governing body, and operate under the same organizational documents.
Supporting Documentation: Bylaws for the main provider and provider-based facility

Requirement (Off-Campus PBD): Hospital and PBD must have the same frequency, intensity, and level of accountability reporting relationship that exists between the main provider and one of its existing facilities plus additional requirements concerning direct supervision, monitoring, and oversight of the provider-based facility and the integration of administrative functions (e.g., billing services, payroll).
Supporting Documentation: An organizational chart that reflects reporting relationships and a list of the integrated administrative functions

Requirement (Off-Campus PBD): A provider-based facility must be located within a 35-mile radius of the main provider’s campus (with some exceptions).
Supporting Documentation: Maps indicating the location of each facility

Requirement (Off-Campus PBD): When providing treatment to a Medicare beneficiary that is not required by anti-dumping rules, off-campus PBDs must give beneficiaries written notice of potential hospital and physician co-insurance liabilities including an estimate of the amount of the additional liability before delivering the service.
Supporting Documentation: A copy of the form given to patients and a copy of policies regarding distribution of the form

It seems obvious that the discussions and changes regarding provider-based status are not over. So stay tuned for further news and be prepared for what may come.

Competition is the cornerstone of America’s free market economy. Everyone loves to get the best price and not pay more than someone else is paying. The same goes for Medicare. Medicare issued a final rule on June 17, 2016 that will change the Medicare payment rates for clinical diagnostic laboratory tests (CDLTs) paid under the Clinical Laboratory Fee Schedule (CLFS) to be competitive with what private insurers are paid. This rule was the result of legislation in the Protecting Access to Medicare Act of 2014 (PAMA). To determine the basis for the revised payment rates, certain laboratories will be required to submit payor data to Medicare.

REPORTING REQUIREMENTS

Who Reports? – Laboratories are required to report data to Medicare if, based on their National Provider Identifier (NPI),

• More than 50 percent of their total Medicare revenues are received under the CLFS and Physician Fee Schedule (PFS) and
• They receive payments under the CLFS of at least $12,500 during a six-month data collection period

Based on these criteria, approximately 95% of physician office laboratories, 55% of independent laboratories, and most hospital laboratories will be exempt from reporting.

A hospital outreach laboratory that is independently enrolled in Medicare and has its own NPI would meet the definition of an applicable laboratory if it meets the above criteria – that is at least 50 percent of its Medicare revenues are from CLFS and PFS services and its revenues from the CLFS are at least $12,500 during a data collection period.

What Is Reported? – Reporting entities will be required to report private payor payment rates for laboratory tests and the corresponding volumes of tests. Private payors for the purpose of this final rule are a health insurance issuer and a group health plan, a Part C Medicare Advantage plan, and a Medicaid managed care organization.

When is Data Collected and Reported? – CMS adopted a 6-month data collection period. The first data collection period will be from January 1, 2016 through June 30, 2016. The data collected during this period will be reported to CMS from January 1, 2017 through March 31, 2017. All subsequent data collection and reporting periods for CDLTs, except for ADLTs, will follow this same data collection and reporting schedule, every three years.

What Happens If An Applicable Lab Doesn’t Report? – The statute provides for civil monetary penalties of up to $10,000 per day, adjusted for inflation as required by the Inflation Adjustment Act Improvements Act of 2015, for each failure to report and/or each misrepresentation or omission in reporting private payor prices with respect to a CDLT.

Payment Rates

• Private payor rates for laboratory tests reported by the applicable laboratories will be the basis for the revised Medicare payment rates for most laboratory tests on the CLFS beginning in January 2018.
• The payment amount for a test on the CLFS furnished on or after January 1, 2018, will be equal to the weighted median of private payor rates determined for the test.
• The payment amount for a test cannot drop more than 10 percent as compared to the previous year’s payment amount for the first three years after implementation of the new payment system, and not more than 15 percent per year for the subsequent three years.
• Payment rates under the revised CLFS will be updated to reflect market rates paid by private payors every three years for most tests, and every year for ALDTs.

ADVANCED DIAGNOSTIC LABORATORY TESTS

Advanced diagnostic laboratory tests (ADLTs) will have different data collection, reporting, and payment policies associated with them. An ADLT is a laboratory test that is covered under Medicare Part B and is offered and furnished only by a single laboratory, that is not sold for use by a laboratory other than the original developing laboratory (or a successor owner), and that meets one of the following criteria:

1. The test is an analysis of multiple biomarkers of DNA, RNA, or proteins combined with a unique algorithm to yield a single patient-specific result;
2. The test is cleared or approved by the Food and Drug Administration (FDA);
3. The test meets other similar criteria established by the Secretary.

New ADLTs will be paid using their actual list charge amount during a new ADLT initial period of three quarters. Once the new ADLT initial period is over, payment for a new ADLT will be based on the weighted median private payor rate paid to the single laboratory and reported to CMS.

WHAT THIS MEANS FOR HOSPITALS

In the long run, hospitals will likely receive lower payments for clinical diagnostic laboratory tests. The impact of this will not be as significant as it once would have been since payment for most hospital outpatient lab tests is now bundled under the Outpatient Prospective Payment System (OPPS). Separate payment for laboratory tests is only made to OPPS hospitals if the lab tests are the only services provided for the day or if unrelated lab tests (those ordered by a different physician for a different diagnosis from other outpatient services) are furnished. The payment reduction will affect hospital outpatient laboratories and hospital reference lab services where patients and/or specimens are referred from a physician’s office to the hospital to obtain laboratory testing only.

It is also unlikely that a lot of hospital laboratories will meet the criteria to be an applicable reporting laboratory. The lab would have to be independently enrolled in Medicare with its own NPI number and meet the reporting criteria as explained above.

For more details on this topic see the Medicare Fact Sheet, Press Release, or the Final Rule.

So welcome to the free market economy of healthcare competitive payment rates. Probably a smart thing for our government, but another belt-tightening for hospitals that again must do more for less.

TRANSMITTALS

Recovering Overpayments from Providers Who Share Tax Identification Numbers

• MLN Matters Article SE1612
• Issued June 22, 2016
• Affects providers of services and suppliers who share the same Tax Identification Number (TIN) even though they may have different National Provider Identifiers or other billing numbers used to bill Medicare.

Summary of Changes: Allows CMS to recover payments made to a provider of services or supplier that shares the same TIN with a provider of services or supplier that has an outstanding Medicare overpayment across multiple states within a Medicare Administrative Contractor (MAC) jurisdiction

October Quarterly Update to 2016 Annual Update of HCPCS Codes Used for Skilled Nursing Facility (SNF) Consolidated Billing (CB) Enforcement

• Transmittal 3546, Change Request 9688, MLN Matters Article MM9688
• Issued June 17, 2016, Effective October 1, 2016, Implementation October 3, 2016
• Affects physicians, providers, and suppliers submitting claims to all Medicare Administrative Contractors (MACs) for services to Medicare beneficiaries who are in a Part A Skilled Nursing Facility (SNF) stay.

Summary of Changes: This notification provides updates to the lists of Healthcare Common Procedure Coding System (HCPCS) codes that are subject to the consolidated billing provision of the SNF Prospective Payment System (PPS)

JW Modifier: Drug Amount Discarded/Not Administered to any Patient

• Transmittal 3538, Change Request 9603, MLN Matters Article MM9603
• Issued June 9, 2016, Effective January 1, 2017, Implementation January 3, 2017
• Affects physicians, providers, and suppliers submitting claims to Medicare Administrative Contractors (MACs) for drugs or biologicals administered to Medicare beneficiaries.

Summary of Changes: Transmittal 3530, dated May 24, 2016, is being rescinded and replaced by Transmittal 3538 to update the Effective and Implementation dates. Effective January 1, 2017, claims for discarded drug or biological amount not administered to any patient, shall be submitted using the JW modifier. Also, effective January 1, 2017, providers must document the discarded drugs or biologicals in patient's medical record. This CR updates the Section 40 - Discarded Drugs and Biologicals of Chapter 17 of the Claims Processing Manual 100-04.

Claim Status Category and Claim Status Codes Update

• Transmittal 3527, Change Request 9550, MLN Matters Article MM9550
• Issued May 20, 2016, Effective October 1, 2016, Implementation October 3, 2016
• Affects physicians, other providers, and suppliers submitting claims to Medicare Administrative Contractors (MACs) for services provided to Medicare beneficiaries..

Summary of Changes: The purpose of this Change Request (CR) is to update as needed the Claim Status and Claim Status Category Codes used for the Accredited Standards Committee (ASC) X12 276/277 Health Care Claim Status Request and Response and ASC X12 277 Health Care Claim Acknowledgment transactions. This Recurring Update Notification (RUN) can be found in Chapter 31, Section 20.7.

July 2016 Update of the Hospital Outpatient Prospective Payment System (OPPS)

• Transmittal 3523, Change Request 9658, MLN Matters Article MM 9658
• Issued May 13, 2016, Effective July 1, 2016, Implementation July 5, 2016
• Affects providers and suppliers who submit claims to Medicare Administrative Contractors (MACs), including Home Health and Hospice (HH&H) MACs, for services provided to Medicare beneficiaries and which are paid under the Outpatient Prospective Payment System (OPPS).

Summary of Changes: This Recurring Update Notification describes changes to and billing instructions for various payment policies implemented in the July 2016 OPPS update.

July 2016 Integrated Outpatient Code Editor (I/OCE) Specifications Version 17.2

• Transmittal 3524, Change Request 9661,MLN Matters Article MM9661
• Issued May 13, 2016, Effective July 1, 2016, Implementation July 5, 2016
• Affects providers submitting claims to Medicare Administrative Contractors (MACs) for outpatient services provided to Medicare beneficiaries and paid under the Outpatient Prospective Payment System (OPPS) and for outpatient claims from any non-OPPS provider not paid under the OPPS. It is also intended for claims for limited services when provided in a Home Health Agency (HHA) not under the Home Health PPS (HH PPS) or claims for services to a hospice patient for the treatment of a non-terminal illness..

Summary of Changes: This notification provides the Integrated OCE instructions and specifications for the Integrated OCE that will be utilized under the OPPS and Non-OPPS for hospital outpatient departments, community mental health centers, all non-OPPS providers, and for limited services when provided in a home health agency not under the Home Health Prospective Payment System or to a hospice patient for the treatment of a non-terminal illness. The attached Recurring Update Notification applies to 100-04, Chapter 4, section 40.1

OTHER NEWS

Temporary Pause of QIO Short Stay Reviews

• Inpatient Hospital Reviews Webpage
• Updated June 6, 2016

Summary of Changes: CMS requires that beginning June 6, 2016, the BFCC-QIOs re-review all short stay patient status claims that were denied under the QIO medical review process.

Medicare Will Use Private Payor Prices to Set Payment Rates for Clinical Diagnostic Laboratory Tests Starting in 2018

• CLFS Payment Rates Press Release
• Issued June 17, 2016
• Affects laboratories performing clinical diagnostic laboratory tests

Summary of Changes: CMS released a final rule implementing Section 216(a) of the Protecting Access to Medicare Act of 2014 (PAMA), requiring laboratories performing clinical diagnostic laboratory tests to report the amounts paid by private insurers for laboratory tests. Medicare will use these private insurer rates to calculate Medicare payment rates for laboratory tests paid under the Clinical Laboratory Fee Schedule (CLFS) beginning January 1, 2018. Further details of this rule can be found by clicking here.

CMS Proposes Rule to Improve Health Equity and Care Quality in Hospitals

• https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2016-Press-releases-items/2016-06-13.html
• Issued June 13, 2016
• Affects the 6,228 hospitals and critical access hospitals that participate in Medicare or Medicaid.

Summary of Changes: The rule proposes to reduce overuse of antibiotics and implement comprehensive requirements for infection prevention. The proposed rule also advances protections for traditionally underserved and often excluded populations based on race, color, religion, national origin, sex (including gender identity), age, disability, or sexual orientation. For a closer look at this proposed rule, click here.

Medicare Makes Enhancements to the Shared Savings Program to Strengthen Incentives for Quality Care

• https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2016-Press-releases-items/2016-06-06.html
• Issued June 6, 2016
• Affects Accountable Care Organizations in the Medicare Shared Savings Program.

Summary of Changes: CMS released a final rule improving how Medicare pays Accountable Care Organizations in the Medicare Shared Savings Program for delivering better patient care. Medicare is moving away from paying for each service a physician provides towards a system that rewards physicians for coordinating with each other. Accountable Care Organizations are a major part of that transition, rewarding providers that deliver high-quality, efficient, and coordinated care for patients.

Senseless massacres and suicides of prominent people in recent years have drawn attention to mental health issues in America. Some in our elderly population face a diagnosis of Alzheimer’s or other forms of dementia as they age. Our youth and all ages are at risk of life-altering drug and alcohol addictions. According to a Washington Post article from 2012, although the United States spends over $113 billion on mental health treatment, that is still not enough to serve all those who need it. Costs, limited access, and attitudes about mental health remain big barriers to treatment. One positive cited by the article is that recent federal legislation requires more expansive insurance coverage for mental health services.

Medicare covers a continuum of mental health services from inpatient hospital services, to partial hospitalization, to outpatient services. The coverage requirements of psychiatric Partial Hospitalization Program services are described in the Medicare Benefits Policy Manual, Chapter 6, section 70.3.

What a PHP Is

“Partial hospitalization is active treatment that incorporates an individualized treatment plan which describes a coordination of services wrapped around the particular needs of the patient, and includes a multidisciplinary team approach to patient care under the direction of a physician. The program reflects a high degree of structure and scheduling. According to current practice guidelines, the treatment goals should be measurable, functional, time-framed, medically necessary, and directly related to the reason for admission.”

What a PHP Is Not

A PHP is not a program that is:

• Comprised primarily of diversionary activity, social, or recreational therapy
• A psychosocial program which provides only a structured environment, socialization, and/or vocational rehabilitation
• Only for monitoring the management of medication for patients whose psychiatric condition is otherwise stable

Patients eligible for a PHP program are patients trying to avoid a new or continued hospitalization for psychiatric services – hence, the need for the acute, intense, structured combination of services provided by a PHP. Patients participating in a PHP program must:

• Be under the care of a physician who certifies the need for PHP
• Have a plan of care that requires at least 20 hours a week of therapeutic services
• Have a mental disorder which severely interferes with multiple areas of daily life, including social, vocational, and/or educational functioning (generally acute in nature)
• Have an adequate support system to sustain/maintain themselves outside the PHP and must not be an imminent danger to themselves or others
• Be willing and able to participate with active treatment of their mental disorder and tolerate the intensity of a PHP

Medicare recently released a MLN Matters Special Education (SE) Article SE1607 describing edits being implemented to enforce the requirement for a minimum of 20 hours per week of therapeutic services for patients in a Partial Hospitalization Program (PHP). There are three edits that will become effective July 2016:

• IOCE Edit 95 (FISS Reason Code W7095) - Partial hospitalization claim span is equal to or more than 4 days with insufficient number of hours of service
• IOCE Edit 96 (FISS Reason Code W7096) - Partial hospitalization interim claim from and through dates must span more than 4 days
• IOCE Edit 97 (FISS Reason Code W7097) - Partial hospitalization services are required to be billed weekly

Initially all three edits will cause the claim to “return to provider” (RTP) for correction, but beginning with the October 2016 IOCE updates, edit 95 (insufficient hours) will cause the claim to deny.

In addition to the amount of treatment, documentation requirements for a PHP admission include an initial physician certification that identifies the patient’s diagnosis, psychiatric need, and that the patient would require inpatient treatment if not for the PHP. Recertifications, required at day 18 and at least every 30 days after that, describe the patient’s response to treatment, reason for continued need for PHP and goals to facilitate discharge. Patients in a PHP must be under a treatment plan that:

• Is prescribed and signed by a physician,
• Identifies treatment goals that directly address the presenting symptoms and are the basis for evaluation of patient response,
• Describes a coordination of services including a multidisciplinary team approach to patient care, and
• Is individualized and structured to meet the particular needs of the patient.

Documentation must also include progress notes showing the services were provided, the nature of the treatment service, the patient’s response to the therapeutic intervention and its relation to the goals indicated in the treatment plan.

Hopefully expanded mental health coverage, growing awareness of mental health issues, and programs such as the partial hospitalization programs will make a positive impact on this country’s mental health. It is an issue that could affect any of us, directly or indirectly. It is a cry for help.

A medical claim is a form of communication with a healthcare payer that request payment and describes the services provided to a patient, plus other pertinent information. Medicare and other payers have detailed specifications about the types of information that must be included on a claim. Modifiers are often used on claims to explain the special circumstances of a particular item or service. In honor of National Occupational Therapy (OT) month, we examine some modifiers that are often required for rehabilitative services.

The American Occupational Therapy Association website states that occupational therapists and assistants are part of a vitally important profession that helps people across the lifespan participate in the things they want and need to do through the therapeutic use of everyday activities. In addition to clinical responsibilities, including complete and thorough documentation of their medical services, OTs and other rehabilitative therapists such as physical therapists (PT) and speech language pathologists (SLP) are required to understand some aspects of Medicare therapy billing. For example, therapists need to understand the proper use of some billing modifiers.

Therapy Discipline Modifiers

Services for Medicare patients provided by rehabilitative therapists must be appended with a modifier that describes the therapy discipline. Modifiers are used to identify therapy services whether or not financial limitations (therapy caps) are in effect. When limitations are in effect, Medicare tracks the financial limitation based on the presence of therapy modifiers. The therapy modifiers are:

• GN – Services delivered under an outpatient speech-language pathology plan of care;
• GO - Services delivered under an outpatient occupational therapy plan of care; or,
• GP - Services delivered under an outpatient physical therapy plan of care.

Modifiers GN, GO, and GP refer only to services provided under plans of care for rehabilitative therapy services. They should never be used with codes that are not on the list of applicable therapy services. For institutional claims, the modifiers must correlate with the respective revenue code (PT – modifier GP with revenue code 42x; OT – modifier GO with revenue code 43x; and SLP – modifier GN with revenue code 44x).

Modifier 59

Modifier 59 is appended to a CPT/HCPCS procedure code to indicate that a procedure or service was distinct or independent from other services performed on the same day. It is used to identify procedures/services that are not normally reported together, but are appropriate under the circumstances.

For PT, OT and SLP services, providers should not report more than one physical medicine and rehabilitation therapy service for the same fifteen minute time period with the exception of “supervised modality” codes. Some National Correct Coding Initiative (NCCI) procedure-to-procedure edits pair a “timed” therapy CPT code with another “timed” CPT code or a non-timed CPT code as services that would not normally be reported together. These edits may be bypassed with modifier 59 if the two procedures of a code pair edit are performed in different timed intervals even if sequential during the same patient encounter. When modifier 59 is used, documentation in the therapy record must support that the services were performed at separate and distinct time periods.

Modifier KX

Medicare sets financial limitations on the amount of therapy services a beneficiary may receive in a calendar year. For 2016 the therapy cap amounts are $1,960 for physical therapy (PT) and speech-language pathology (SLP) services combined and $1,960 for occupational therapy (OT) services. Medicare allows an exception when the patient’s condition requires continued skilled therapy beyond the amount payable under the therapy cap, to achieve their prior functional status or maximum expected functional status within a reasonable amount of time. Documentation in the therapy record must justify a medically necessary need for additional therapy beyond the therapy cap.

When exceptions are in effect and the beneficiary qualifies for a therapy cap exception, the provider must add a KX modifier to the therapy HCPCS code subject to the cap limits. By appending the KX modifier, the provider is attesting that the services billed:

• Are reasonable and necessary services that require the skills of a therapist; and
• Are justified by appropriate documentation in the medical record,; and
• Qualify for an exception using the automatic process exception.

When the cap is exceeded by at least one line on the claim, use the KX modifier on all of the lines on that institutional claim that refer to the same therapy cap (PT/SLP or OT), regardless of whether the other services exceed the cap. For example, if one PT service line exceeds the cap, use the KX modifier on all the PT and SLP service lines (also identified with the GP or GN modifier) for that claim. When the PT/SLP cap is exceeded by PT services, the SLP lines on the claim may meet the requirements for an exception due to the complexity of two episodes of service. In addition to the KX modifier, the GN, GP and GO modifiers shall continue to be reported.

Be sure that services are medically necessary and that documentation is sufficiently detailed to support the use of the modifier. Medicare is aware of the potential for misuse of the KX modifier. Note that:

• Routine use of the KX modifier for all patients with certain conditions will likely show up on data analysis as aberrant and invite inquiry.
• Use of the KX modifier when there is no indication that the cap is likely to be exceeded is abusive.
• If the use of the KX modifier is determined to be inaccurate, the provider/supplier is subject to sanctions resulting from providing inaccurate information on a claim.

For more information on the use of the KX modifier, see the Medicare Claims Processing Manual, Chapter 5 , Section 10.3.

Functional Limitation Modifiers

In 2013, Medicare began requiring the reporting of rehabilitative therapy functional limitation information on claims. Claims for outpatient therapy services are required to include non-payable G-codes and modifiers, which describe a beneficiary’s functional limitation and severity level, at specified intervals during the therapy episode of care. The severity modifier reflects the beneficiary’s percentage of functional impairment as determined by the clinician furnishing the therapy services for each functional status: current, goal, or discharge.

Therapists must document in the medical record how they made the modifier selection so that the same process can be followed at succeeding assessment intervals. For more information on functional limitation codes and modifiers, see the Medicare Benefit Policy Manual, Chapter 15, Section 220.4.

When communicating with Medicare and other payers, providers must know the specifics of the service and claim requirements. Proper use of modifiers to provide additional information about the services rendered is necessary for clear communication.

When medical emergencies occur in public places, such as restaurants, movie theaters, or on airplanes, we often hear “is there a doctor in the house?” For certain diagnostic outpatient hospital procedures, Medicare wants to know if there is a doctor in the room. Descriptions of Medicare physician supervision requirements for both diagnostic and non-diagnostic services can be found in the Medicare Benefits Policy Manual, Chapter 6, sections 20.4 and 20.5.

Therapeutic Services

In 2010, CMS caused quite a ruckus when they “clarified” the physician supervision requirements for hospital therapeutic services. After several more clarifications, the final Medicare guidelines, from 2011 forward, for most hospital outpatient non-diagnostic services is “direct supervision” which means the physician must be immediately available to furnish assistance and direction throughout the performance of the procedure. The physician does not have to be in the room, on the campus, or within any other physical boundary as long as he or she is immediately available. Other factors for “direct supervision” of therapeutic services are:

• In addition to physicians and clinical psychologists, licensed clinical social workers, physician assistants, nurse practitioners, clinical nurse specialists, and certified nurse-midwives may furnish the required supervision of hospital outpatient therapeutic services that they may personally furnish in accordance with State law and all additional rules governing the provision of their services.
• Immediate availability requires the immediate physical presence of the supervisory physician or non-physician practitioner.
• The supervisory physician or non-physician practitioner may not be performing another procedure or service that he or she could not interrupt.
• The supervisory physician or non-physician practitioner must have, within his or her State scope of practice and hospital-granted privileges, the knowledge, skills, ability, and privileges to perform the service or procedure.

Diagnostic Services

The type of supervision required for diagnostic services furnished in an outpatient hospital setting is determined by the supervision levels listed in the quarterly updated Medicare Physician Fee Schedule (PFS) Relative Value File which can be found at PFS Relative Value Files. Select the appropriate year and quarter (A correlates to 1st quarter, B to 2nd quarter, etc.). You will want to select the spreadsheet that starts with PPRRVU. The pdf document in the folder explains the various designations within the file. For example, some of the definitions related to Physician Supervision of Diagnostic Procedures are:

• 01 = Procedure must be performed under the general supervision of a physician.
• 02 = Procedure must be performed under the direct supervision of a physician.
• 03 = Procedure must be performed under the personal supervision of physician.
• 09 = Concept does not apply.

See the complete document for explanations of all the assignments.

General supervision means the procedure is furnished under the physician’s overall direction and control, but the physician’s presence is not required during the performance of the procedure. Direct supervision for outpatient hospital diagnostic services has the same requirements that are described above for direct supervision of therapeutic services except that diagnostic services require supervision by a physician. Personal supervision means a physician must be in attendance in the room during the performance of the procedure.

As stated above, diagnostic services require supervision by a physician and in general may not be supervised by non-physician practitioners. There are exceptions that allow some diagnostic tests furnished by certain non-physician practitioners to be furnished without physician supervision. When these non-physician practitioners personally perform a diagnostic service they must meet only the physician supervision requirements for that type of practitioner when they directly provide a service. For example, nurse practitioners must work in collaboration with a physician, and assistants must practice under the general supervision of a physician. Non-physician practitioners, including physician assistants, nurse practitioners, clinical nurse specialists, and certified nurse midwives, cannot provide the required physician supervision when other hospital staff are performing diagnostic tests.

Hospitals need to be aware of the supervision requirements for diagnostic services, particularly those services that require personal supervision where the physician must be in the room during the performance of the procedure. There are over 200 CPT codes in the 2016 PFS RVU file that require personal supervision, with almost 150 of those being radiology procedures in the 70010-79999 CPT code range. This includes radiology procedures such as myelography, arthrography, angiography and venography, among others. Medicare allows payment for diagnostic services only when those services are furnished under the appropriate level of supervision.

Hospitals need to ensure that venograms, arthrograms and other relevant radiology services are only performed when a physician is in the room. Lack of appropriate supervision can result in an inappropriate Medicare payment. When personal supervision is required, there must be “a doctor in the room.”

A common mnemonic device to aid memory is to come up with a short sentence or phrase using the first letters of what you are trying to remember. Since it is spring and we are planning our vegetable garden, for PGATO I came up with “please gather all the okra.” If you have never grown okra, you may not realize the gathering demands of okra in the miserably hot, sultry days of late summer. The reward however is the delicious, Southern dish of fried okra. For Medicare services, rewards are two-fold – one is helping patients to recover or improve and two is the Medicare reimbursement you receive if you have followed all of Medicare’s requirements for billing, coding, and documentation. Like okra plants can be prickly, so can Medicare requirements.

PGATO is my memory tool for remembering all of the components for proper documentation to support billing of psychotherapy - plan, goals, activity, time, and outcomes. CPT codes 90832-90838 represent insight oriented, behavior modifying, supportive, and/or interactive psychotherapy. Reviews by the Comprehensive Error Rate Testing (CERT) contractors have identified issues with missing documentation.

Plan and Goals

A recent CERT review (see Cahaba Article Psychotherapy Codes) has identified errors in outpatient psychotherapy CPT codes 90832 and 90834, Type of Bill 13X. The primary issue identified on review was the absence of a signed, individualized plan of care for the services billed.

The individualized treatment plan must state the type, amount, frequency and duration of the services to be furnished and indicate the diagnoses and anticipated goals. Treatment goals should be measurable and objective. Documentation should include specific therapeutic interventions planned and an estimated duration of treatment.

Services must reasonably be expected to improve the patient’s condition. The treatment must be designed to reduce or control the patient’s psychiatric symptoms so as to prevent relapse or hospitalization, and improve or maintain the patient’s level of functioning. Psychotherapy services are not covered for severe and profound intellectual disabilities. Also, psychotherapy services are not covered for dementia patients when documentation indicates that dementia has produced a severe enough cognitive defect to prevent psychotherapy from being effective. When a patient has dementia, the capacity to meaningfully benefit from psychotherapy must be documented in the medical record.

Activity and Time

Another CERT review as described in MLN Matters Article SE1407 identified the main error as not clearly documenting the amount of time spent only on psychotherapy services.

The medical record must indicate the time spent in the psychotherapy encounter and the therapeutic maneuvers, such as behavior modification, supportive or interpretive interactions that were applied to produce a therapeutic change. Behavior modification is not a separate service, but is an adjunctive measure in psychotherapy.

A variety of techniques are recognized for coverage under the psychotherapy codes; however, the services must be performed by persons authorized by their state to render psychotherapy services (such as physicians, clinical psychologists, registered nurses with special training, and clinical social workers). Medicare coverage of procedure codes 90832-90838 does not include teaching grooming skills, monitoring activities of daily living, recreational therapy (dance, art, play) or social interaction.

Psychotherapy codes 90832-90838 are timed codes and the documentation must support the time billed as a psychotherapy encounter. The time associated with these codes is for face-to-face services only with the patient (or patient and family). In general, providers should select the code that most closely matches the actual time spent performing psychotherapy. CPT® provides flexibility by identifying time ranges that may be associated with each of the three codes:

• Code 90832 (or + 90833) 30 minutes: 16 to 37 minutes
• Code 90834 (or + 90836) 45 minutes: 38 to 52 minutes, or
• Code 90837 (or + 90838) 60 minutes: 53 minutes or longer

Do not bill psychotherapy codes for sessions lasting less than 16 minutes.

CPT codes 90833, 90836, and 90838 are add-on codes for psychotherapy services provided with an evaluation and management (E&M) service. Both services are payable if they are significant and separately identifiable and billed using the correct codes. Time spent for the E&M service is separate from the time spent providing psychotherapy and time spent providing psychotherapy cannot be used to meet criteria for the E&M service. Because time is indicated in the code descriptor for the psychotherapy CPT codes, it is important for providers to clearly document in the patient’s medical record the time spent providing the psychotherapy service rather than entering one time period including the E&M service.

Outcomes

A periodic summary of goals, progress toward goals and an updated treatment plan must be included in the medical record. The general expectation is that the treatment plan will be updated at least every three months.

There are no specific limits on the length of time that services may be covered, but the duration of a course of psychotherapy must be individualized for each patient. As long as the evidence shows that the patient continues to show improvement in accordance with their individualized treatment plan, and the frequency of services is within the norms of practice, coverage may be continued. However, prolonged periods of psychotherapy must be well-supported in the medical record and include a description of the necessity for ongoing treatment.

You may want to come up with your own memory tool for remembering to include all the required documentation components of psychotherapy. However you choose to remember, meeting Medicare’s prickly requirements will help guarantee appropriate payments.

The month of March is National Nutrition Month and March 9, 2016 was Registered Dietitian Nutritionist Day.   According to the Academy of Nutrition and Dietetics website - “As the nation’s food and nutrition experts, registered dietitian nutritionists are committed to improving the health of their patients and community.” We at MMP, Inc. would like to acknowledge dietitians, nutritionists, and all those who work in the field of nutrition and thank them for their commitment to helping hospital patients. We also want to take this opportunity to look at some guidelines and information related to hospital dietitian services allowed and covered by Medicare.

Ordering Therapeutic Diets

Several years ago, a deficiency report released by CMS identified 147 deficiencies for hospitals related to dietary standards. In response to these deficiencies and to minimize regulatory requirements for hospitals, CMS revised the Hospital Conditions of Participation at section 482.28(b)(2) effective July 11, 2014 as follows:

§482.28(b)(2) -All patient diets, including therapeutic diets, must be ordered by a practitioner responsible for the care of the patient, or by a qualified dietitian or qualified nutrition professional as authorized by the medical staff and in accordance with State law governing dietitians and nutrition professionals.

The final rule can be read at Federal Register Final Rule May 12, 2014

The revision allows registered dietitians to order patient diets independently, which they are trained to do, without requiring the supervision or approval of a physician or other practitioner, if allowed by State law and hospital privileging.

CMS made the following comments related to this change:

“[T]he addition of ordering privileges enhances the ability that RDNs already have to provide timely, cost-effective, and evidence-based nutrition services as the recognized nutrition experts on a hospital interdisciplinary team.”

“We believe that the greater flexibility for hospitals and medical staffs to enlist the services of non-physician practitioners to carry out the patient care duties for which they are trained and licensed will allow them to meet the needs of their patients most efficiently and effectively.”

The problem many hospitals may face with the revised rule relates to State law. Another

link from the Academy of Nutrition and Dietetics website shows the status of State laws for allowing therapeutic diet orders by dietitians, including a color-coded map. Therefore hospitals and dietitians must be familiar with the laws for their particular State before seeking hospital privileging for RDNs to order patient diets. For example, Alabama State law states in section 420-5-7-.14 (3)(a): "Therapeutic diets shall be prescribed by the practitioner or practitioners responsible for the care of the patients." The Academy of Nutrition and Dietetics will be working with affiliate leaders to remove existing impediments through statutory or regulatory changes.

Medical Nutrition Therapy (MNT) Services

Medicare covers medical nutrition therapy (MNT) upon physician referral for beneficiaries with diabetes or renal disease when furnished by a registered dietitian or nutrition professional meeting certain requirements. Basic coverage includes initial assessment visit, follow-up visits for interventions, and reassessments within the year for a total of 3 hours for the first calendar year of a diagnosis of diabetes or renal disease and 2 hours for subsequent years for a renal disease diagnosis.

Important points about MNT services include:

• The treating physician must make a referral and indicate a diagnosis of diabetes or renal disease.
• Renal disease means chronic renal insufficiency (not severe enough to require dialysis or a transplant; GFR of 13-50) or successful renal transplant within the last 36 months.
• Diabetes Self Management Training (DSMT) and MNT can be provided within the same time period, but not on the same day.
• The number of hours covered in an episode of care may not be exceeded unless a second referral is received from the treating physician.
• Additional covered hours of MNT services may be covered beyond the number of hours typically covered under an episode of care when the treating physician determines there is a change of diagnosis or medical condition within such episode of care that makes a change in diet necessary.
• Hours may not be carried over into the following calendar year.
• MNT can be provided individually (one-to-one) or in a group setting.

Dietitians and nutritionists must meet the profession standards as described in Section 300.3 of the Medicare Claims Processing Manual, Chapter 4 and be enrolled as a provider in the Medicare program.

The following codes can be paid if submitted by a registered dietitian or nutrition professional who meets the specified requirements; or a hospital that has received reassigned benefits from a registered dietitian or nutritionist. Payment is only made for MNT services actually attended by the beneficiary and documented by the provider. MNT is not covered for inpatients of a hospital or skilled nursing facility.

• 97802 – MNT; initial assessment and intervention, individual, face-to-face with the patient, each 15 minutes (only for the initial visit)
• 97803 - Re-assessment and intervention, individual, face-to-face with the patient, each 15 minutes
• 97804 - Group (2 or more individual(s)), each 30 minutes
• G0270 - Medical Nutrition Therapy; reassessment and subsequent intervention(s) following second referral in same year for change in diagnosis, medical condition or treatment regimen (including additional hours needed for renal disease), individual, face to face with the patient, each 15 minutes
• G0271 - Medical Nutrition Therapy; reassessment and subsequent intervention(s) following second referral in same year for change in diagnosis, medical condition, or treatment regimen (including additional hours needed for renal disease) group (2 or more individuals), each 30 minutes

So here’s to eating right for everyone, but especially hospital patients, diabetic patients, and patients with renal disease. The knowledgeable advice and direction of a dietitian/nutritionist can make a critical difference.

If you are involved at all with issues relating to the Hospital Outpatient Prospective Payment Rule (OPPS), you likely already know that payment for observation services changed from a composite payment to a comprehensive payment for 2016. But what does this really mean for hospitals?   Whether you are paid more or less than last year for a particular claim depends on the number and types of services being performed. As Medicare intends when creating payment bundles, there are “winners” and “losers” when looking at individual claims – that is, some claims will receive higher reimbursement and some lesser than the previous year.

That said, I still thought it would be interesting to look at some individual observation claims and the differences in Medicare payment amounts from 2015 to 2016. First, a review of the rules for observation services:

The purpose of observation services has not changed in many years. As stated in the Medicare Benefits Policy Manual, Chapter 2, section 60.1 – “Observation care is a well-defined set of specific, clinically appropriate services, which include ongoing short term treatment, assessment, and reassessment before a decision can be made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital.” In simpler language – the patient is too sick to be sent home and not sick enough to expect a two-midnight hospital stay (inpatient admission), so they are kept in a hospital bed for treatment and tests to determine if they need to be admitted or may safely be sent home. Under the two-midnight rule, patients receiving necessary hospital care that will pass a second midnight should be admitted as inpatients. A physician’s order is required for a patient to receive observation services.

Observation services are billed per hour with HCPCS code G0378. In order to receive separate payment for observation services, the following criteria must be met:

• The patient must receive 8 or more hours of observation services,
• Observation hours must be billed on the day of or the day after certain visit codes:
• An ED visit, type A or type B (CPT codes 99281-99285 or HCPCS codes G0380-G0384) – this requirement was changed for 2016 to include all ED visit levels; previously only high level ED visits qualified for observation payment.
• Critical care services (CPT 99291)
• A clinic visit (HCPCS code G0463)
• A direct referral to observation (HCPCS code G0379) on the same day as observation hours
• There must be no other services on the claim that have an OPPS status indicator (SI) of “J1” (services paid under comprehensive APCs).
• There must be no other services on the claim that have an OPPS status indicator (SI) of “T” (surgical services) – another change from previous years where observation was not paid if there was a T status procedure on the day of or the day before observation hours. For 2016 the observation payment will not be made if there is a T status procedure on any day on the claim.

As a Comprehensive APC, observation now has a status indicator of “J2” and the Medicare unadjusted comprehensive observation payment amount is $2,174.14. Since it is a comprehensive APC, the payment for all adjunctive services is bundled into the observation payment with only a few exceptions. This means for a claim that contains observation services that meets the above criteria, your hospital will receive one payment of approximately $2,174 for the entire claim. Other services on the claim will not be paid separately. As stated above, this is the Medicare national unadjusted payment rate; most hospitals will receive less based on their wage index and a portion of the adjusted payment (around $430) is the patient’s co-pay. Let’s look at some examples.

These are just some general examples about observation payments. These examples do not include discussion of services that were packaged in 2015, such as labs and routine, lower-cost ancillary services since this has not changed in 2016. All references to payment are based on the Medicare unadjusted fee schedules for 2015 and 2016.

Example 1: A level 4 ED visit with an ensuing 17 hours of observation services. Patient received a CTA of the lower extremity and two IV push injections. Total Medicare unadjusted payment for 2015 equals " $1657. 2016 Comprehensive Observation payment " $2,174. Increase for 2016 of $517.

Example 2: A level 5 ED visit with an ensuing 35 hours of observation services. Patient received two CTs (with contrast), a chest x-ray, a vaccine injection, an EEG, an IV infusion and an IV push. Total Medicare unadjusted payment for 2015 equals " $2,044. 2016 Comprehensive Observation payment " $2,174. Increase for 2016 of $130.

Example 3: A level 3 ED visit with an ensuing 10 hours of observation services. Patient received a CTA of the heart, a chest x-ray, and an hour of hydration. Remember that in 2015 a Level 3 ED visit did not qualify for an observation composite payment. Total Medicare unadjusted payment for 2015 equals " $582. 2016 Comprehensive Observation payment " $2,174. Increase for 2016 of $1592.

Example 4: A level 5 ED visit with an ensuing 18 hours of observation services. Patient received a CTA of the chest, a chest x-ray, an IV push, an hour of hydration, a myocardial SPECT study, and an Echo. Total Medicare unadjusted payment for 2015 equals " $3,280. 2016 Comprehensive Observation payment " $2,174. Decrease for 2016 of $1106.

Example 5: A level 5 ED visit with an ensuing 26 hours of observation services. Patient received several MRAs and MRIs without contrast, three hours of hydration, an Echo, a Duplex scan of extracranial arteries, and a CNS visual evoked potential. Total Medicare unadjusted payment for 2015 equals " $2,787. 2016 Comprehensive Observation payment " $2,174. Decrease for 2016 of $613.

So what is a hospital to make of this and are there actions that need to be taken? First, hospitals simply need to be aware of this change in payment structure. The only actions hospitals can take concerning comprehensive observation payments, increased packaging in general, the overall shift to prospective payment systems, and the transition to value-based payments instead of fee-for-service is to operate more effectively and efficiently. Focus on the best outcomes for the least amount of cost. Control utilization of services – do the necessary things that affect patient outcomes, but don’t overdo testing or treatments that are not necessary. Make sure you are treating and testing the patient in the appropriate setting – don’t perform tests that could and should be provided as outpatient services on an observation patient or an inpatient. The healthcare world is changing rapidly and only those providers who rise to the challenge of better outcomes in a cost-effective manner will survive. There will be winners and losers…