Updated on: November 29, -0001

Wherever You Go, There You Are: The Importance of Place of Service

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Original story posted on: January 25, 2017

Where a procedure is performed or a service is delivered can have an impact on how much the Centers for Medicare & Medicaid Services (CMS) or other payers are willing to pay. While there are nearly 50 different official place-of-service (POS) codes, CMS organizes them into two classifications: facility and non-facility. Interestingly, the terms can be a bit confusing, because they tend to intuitively refer to facility-based billing as well as billing for professional services. But alas, creating confusing concepts never seems to bother CMS very much. By definition, a “facility” place-of-service is thought of as a hospital or skilled nursing facility (SNF) or even an ambulatory surgery center (ASC) (POS codes 21, POS 31 and POS 24, respectively), while “non-facility” is most often associated with the physician’s office (POS code 11). Some of this can be a bit confusing. For example, as stated above, an SNF (POS 31) is classified as a “facility” location while a nursing facility (POS 32) is considered a “non-facility” for billing purposes. 

So, what’s the big deal? Well, for procedures that can be billed as either facility or non-facility, the big deal is the payment amount. Facility-based payments are lower than non-facility based payments, ceteris paribus. For example, let’s say that a provider trims a patient’s nails (CPT® code 11719). If he or she does it in the office (POS 11) or a nursing facility (POS 32), the total RVU is 0.39 (the non-facility amount), which translates to a Medicare allowable of approximately $13.96. If the same procedure is done in the ER (POS 23) or SNF (POS 31), then the RVU value drops to 0.22 (the facility amount) and the allowed amount is approximately $7.88; that’s a difference of $6.08. Now, this may not seem like a big deal, but if you do this 1,000 times a year, then it can quickly become a bigger deal. And for some codes, it can start out as a big deal. For example, for procedure code 21215 (lower jaw bone graft), the total non-facility RVU is 117.29 while the total facility RVU is 26.32; that’s a difference of 91.08. Put into terms of the Medicare allowable, this is a difference of approximately $3,261: a really big deal. And again, the more you do, the bigger the deal.

The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) agrees. In fact, POS issues were identified in its 2015 work plan and likely came from a study they performed the year before. According to OIG, between 2010 and 2012, Medicare overpaid physicians by some $33 million based on an incorrect POS being listed on claims. In many cases, this was because the physician performed the procedure in a facility location (i.e. an ASC) yet identified the place of service as non-facility (usually as their office, as POS 11). I know that at this point, it may be hard to believe that this is not an article on selecting the proper POS, but it’s more about how POS has become a compliance target. Evidence for this is the A/B Medicare Administrative Contractor (MAC). On its website, CMS says this: “A/B MACs process Medicare Part A and Medicare Part B claims for a defined geographic area or jurisdiction, servicing institutional providers, physicians, practitioners, and suppliers.” For larger health system or integrated delivery systems (IDSs), the presence of the A/B MAC creates a different kind of compliance risk that has to do with both matching professional services to facility services as well as calculating overpayment estimates for so-called “A/B” audits. This is when the payer (or auditor) crosses over from an improperly paid professional service to its matching facility-side service.

Let’s look at an example. Let’s say that I have a physician who performs a bunch of blepharoplasties (CPT Code 15823) in the local ASC. A CMS audit is conducted of the physician billing and they find that some percentage of those procedures did not meet medical necessity. Now remember, the audit is being performed on the physician for his or her professional fee. But if the procedure itself is found to have been overpaid because it did not meet medical necessity, then what about the payment to the ASC? Would it also be responsible to repay Medicare because if the procedure did not meet criteria for medical necessity, meaning that it should not have been performed? Or at the very least, should it not have been paid for by Medicare? If that is the case, then it would make sense that the downline charges, e.g. the ASC charge for that not-medically-necessary procedure should also not have been paid. This poses a real problem for all facilities where physicians are either employed or have an ownership interest and perform procedures in the ASC or the hospital. I recently handled an audit for which this was exactly the case. It was a mess for the hospital, because its employed physician performed the procedures in the operating room, and several were determined not to be medically necessary. So not only did the hospital have to refund the professional-based payments to Medicare, but the facility payments as well. 

This isn’t just about Medicare. I have seen this happen with Medicaid and TriCare payments as well. The point is, with all of the advances in technology that CMS now relies upon to improve its risk strategies, it’s not just about one side of the coin; it’s about both. It’s kind of like Christmas in that CMS knows if you’ve been bad or good, because while they have always had the data, they now have the ability to match crossovers between payers and POS designations with greater ease, speed, and accuracy.     

So, what is a provider to do? Well, if you are a physician who either owns or is part of a facility-owned organization or you are a leader of an organization that owns both providers and facility space, you need to be aware of the relationship between what is done and where it is done. When conducting your risk-based audits (which should be part of your compliance plan), look at the place of service. If you find a claim that contains a procedure that has been determined to have been paid in error, you need to look at refunding the professional fee – and, if performed in a facility setting, the facility payment as well. It is just as important to look at this from the other side. If you audit the facility side and find that the procedure should not have been paid, you should also look at the professional fee to see if it met the same criteria for either documentation or medical necessity.

The bottom line is that the POS indicators are selected by the provider, so there isn’t any excuse not to include those in your routine audits. If the government thinks it’s important to match up the facility to the non-facility, then as long as you accept their money, it’s important to you, because you are subject to recoupment from both sides. In our risk-based audit application, we now routinely import the POS indicators and advise organizations of possible crossover risk when the provider is identified as a possible audit risk and the POS indicates that the specific procedure was performed in their facility. As stated above, the data is available, so this should be a standard part of the audit plan. 

In the infamous words of Dr. Buckaroo Banzai in The Adventures of Buckaroo Banzai Across the 8th Dimension: “Hey, hey, hey – don't be mean. We don't have to be mean. 'Cause, remember: no matter where you go ... there you are.”

And that’s the world according to Frank.

Frank D. Cohen, MPA, MBB

Frank Cohen is the director of analytics and business Intelligence for DoctorsManagement, a Knoxville, Tenn. consulting firm. He specializes in data mining, applied statistics, practice analytics, decision support, and process improvement. He is a member of the RACmonitor editorial board and a popular contributor on Monitor Monday.

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