Updated on: November 29, -0001

ASCs Put on Notice: Those Pesky Device Credit Modifiers are still Required

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Original story posted on: February 24, 2016

“Since Medicare mandates that, as an ambulatory surgical center (ASC), we bill on a CMS-1500 claim form and not on a facility UB-04, how do we report value code FD to be in compliance with the newest device credit reporting changes? We’re confused!” 

It’s a good question that not many in the healthcare industry are teaching or covering, and at times I’ve been just as guilty of glossing over the unique needs of the ASCs when giving device credit seminars. So let’s take this opportunity to delve into and resolve this matter. 

In terms of reporting device credits under the Centers for Medicaid & Medicare Services’ (CMS) purview, there are no real upending changes to follow as there were for hospital outpatient departments (HOPDs) under the Outpatient Prospective Payment System (OPPS), which as of January 2014 streamlined the device credit reporting protocols, aligning them with the longstanding inpatient methodology. ASCs therefore do not report Value Code FD under the new outpatient protocols but instead still are tasked with following the “old” method of reporting device credit modifiers -FB and -FC. 

This method reduces the ASC reimbursement in “block” discount fashion, ignoring the actual amount of the device credit. For 2016, the Final Rule issued Nov. 13, 2015 in the Federal Register for OPPS/ASC did not include a list of reportable devices impacted by the credit policy, but it did include Table 66 for “ASC Covered Surgical Procedures Designated as Device-Intensive for CY 2016, Including ASC Covered Surgical Procedures for Which the No Cost/Full Credit or Partial Credit Device Adjustment Policy Will Apply.” This table lists the device-related procedures that cannot be performed without implanting a device (i.e., “device-intensive”), and for which the devices implanted (when credited) must be reported when the credits are 50 percent or greater of the replacement costs. 

By audit, the guidelines for reporting device credits based on the modifier system historically has been confusing for many providers, including ASCs. In some cases audits have shown a 100 percent error rate. This vulnerability hasn’t gone unnoticed by federal auditing agencies, and this “risk item” has been on the U.S. Department of Health and Human Services (HHS) Office of the Inspector General’s (OIG’s) radar screen for years, surfacing yet again in the OIG Work Plan for 2016. Which reporting errors is the OIG uncovering? Aside from ignoring the available credits and reporting the claims absent any efforts to recover the potential discounts, the majority of errors rest squarely on the reporting of device credit modifiers -FB and -FC. 

Modifier -FB is defined as “item provided without cost to provider, supplier or practitioner, or full credit received for replaced device.” Audit errors are divided into the “modifier -FB modifier was not reported correctly” group as well as the “modifier was omitted and the credit not reported” group. 

-FB reported in error: Again, modifier -FB is reported for no cost or fully (100 percent) credited devices, and includes a 1) device replaced by the manufacturer due to product or FDA recall, 2) device replaced under warranty due to defect or malfunction, or 3) device given to the provider as a free sample or at no cost. The most common provider error is in mis-reporting: appending this modifier to the wrong line-item code on the UB-04 or CMS-1500 claim form. For clarification, this modifier is not appended to the HCPCS-II device code that it targets as being reduced (as might be logically assumed), but instead is appended to the “anchoring” or main CPT procedure code for the ASC surgical procedure. Modifier -FB is an outpatient payment modifier, which means that it modifies reimbursement. In this case the modification is a rather significant payment reduction; therefore, it must be appended to the anchoring procedure code from which the Ambulatory Payment Classification (APC) group is derived and to which the bundled reimbursement is attached. The -FB modifier flags the payment edits to offset the APC payment by 100 percent of the reimbursement dollars associated with the implantable device. If the vendor offers a 100 percent credit then the CMS logic is to reduce the APC payment by the same percentage. Submitting claims with this modifier appended to the wrong code, e.g., to the device HCPCS-II code, doesn’t trip any particular claim edit flags at the CMS jurisdictional entity, which results in the provider receiving incorrect, unadjusted reimbursement. 

-FB omitted in error: A related error often made by providers that interestingly adjust the line item charge associated with the device credit is the omission of the modifier that trips the payment reduction. In this case, the modifier is not appended to the wrong code, it’s simply not coded. The credit scenario is known, but again, the modifier that flags the discount is not coded. Submitting the original claim or a corrected claim by reducing the device line item charge by the amount of the credit but still without reporting the -FB modifier with the anchoring CPT procedure code does nothing to influence reimbursement. CMS does not reduce payment from the line-item charge, but instead reduces payment via the -FB modifier.        

Resolution: As a basis for accurate and consistent modifier reporting, instruction in the correct coding of the -FB modifier may be one initial step to take. At a claim level perspective, once the credit amount is verified as 100 percent, the -FB modifier has to be appended to the anchoring CPT code for the major procedure associated with the implantable device. For credits not known immediately after the procedure, and unless a “pre-bill hold” is placed on each claim with a pending device credit, once the CMS-1500 claim forms have dropped, diligent follow-up will be essential for compliance (and ultimately, correct reimbursement). 

Modifier -FC is defined as “partial credit of 50 percent or more received for replaced device.” Like -FB modifier mistakes, audit errors for this payment modifier are divided into two major findings: “modifier -FC was not reported correctly” and “modifier -FC was omitted and the credit not was reported.” 

-FC reported in error: Because modifier -FC is reported for device credits ranging from 50 to 99.9 percent, and because the partial credits may have been extended with payment of the invoice or after the replacement procedure has been performed and the device has been returned to the vendor for testing (interrogation), various time lags my need to be managed, and consequently, myriad “snags” in the ASC’s device credit monitoring system can occur. It’s a bit akin to having 15 balls in the air, all different sizes and all requiring skilled handling, all at one time. Difficulties can arise and errors can occur in both calculating the device threshold as well as reporting the modifier on the appropriate code (similar to -FB modifier mistakes). Often, the credit amount is miscalculated against the replacement cost of the device or device component, and the final percentage is miscalculated as below 50 percent. And because claims that should bear the -FC modifier usually far outnumber those with the -FB modifier, the process for tracking and correcting them once the vendor credit memo has been received, perhaps weeks or months after the initial claim has dropped, has the potential to be overwhelming, depending on the ASC’s device-intensive procedure volume.

-FC omitted in error: Omission of this modifier on the CMS-1500 by ASCs occurs on a regular basis, although again, curiously upon audit, the predominant finding in this category of errors is that the line-item device charge still has been reduced from the usual charge by the credit amount; therefore, it’s apparent from the submitted documentation that there is a known credit for the case. But without the -FC modifier to designate the device as having a 50 percent-or-greater credit, improper Medicare payment ensues. Analysis shows that even the subsequently corrected claims exhibit the same error, causing Medicare (on paper) to reverse the initial reimbursement, re-adjudicate the claim, and then pay the exact same amount to the provider.  

Resolution: As with modifier -FB, the initial logical step might be staff education and training that targets correct reporting of modifier -FC. Because there are typically many more partial credit occurrences to report than full (100 percent) credits, and because many credit amounts are not known in advance of device interrogation by the vendor, there might be time lapses between the actual ex-plantation/replacement procedures and receipt of the credits. It then becomes paramount to have an assiduous device credit tracking and monitoring system established, manned by knowledgeable and persistent staff.

Conclusion: Designating staff with accountable roles and responsibilities within the device credit tracking and monitoring workflow process is essential for successful and compliant implantable medical device credit management. Staff must “own” their piece of the process, implemented through corporate policy. Firm decisions need to be made by department directors about who does what; this includes vendor representative interface (i.e., good communication with the device company), lapsed credit memo tracking and monitoring, and both initial and corrected claims follow-up and follow-through. Instituting a policy for timely feedback reportable at monthly interdepartmental work group or committee meetings on the status of current device credit processes, volume of pending credits, and cases for which difficulty has arisen is likewise an essential compliance plan feature. ASCs can adroitly identify, track, and manage implantable medical device credits per federal guidelines; it just takes a workable policy, fluid workflow processes, and an educated, alert staff! 

About the Author

Michael G. Calahan, PA, MBA, is the vice president of hospital and physician compliance for HealthCare Consulting Solutions (HCS).  Michael lives and works in the Washington, D.C. metro area, specializing in compliance, clinical operations, revenue cycle management, CDI, and coding/billing in the facility inpatient/outpatient and physician arenas.

Contact the Author

mcalahan@hcsglobal.net

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Michael Calahan, PA, MBA, AHIMA-Approved ICD-10 CM/PCS Trainer

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