Hospital-owned practices to receive lower Medicare rates under new rule

Starting July 1, physicians seeing patients who are hospitalized within three days before admission would need to file claims at the lower facility rate.

By Charles Fiegl amednews staff — Posted June 18, 2012

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Physicians and practice managers are not ready to comply with a July 1 deadline for a new Medicare billing policy that would pay lower rates for certain office visits and other services in facility-owned physician practices, associations representing doctors and administrators have told government officials.

Physician offices wholly owned or operated by hospitals will be required starting on that date to change their coding practices under a regulation from the Centers for Medicare & Medicaid Services. The policy requires a hospital and its entities providing outpatient services to coordinate billing efforts when patients are admitted to the hospital soon afterward.

A hospital would be required to notify its wholly owned or operated physician practices when a patient has been admitted to the facility. A practice that had treated the patient within the three days before the admission would need to update billing forms for that patient using a special coding modifier — signaling to Medicare that the office visit and other services provided during that window should be paid at the lower facility rate. Any claims that already had been filed for that patient would need to be refiled by the practice with the modifier attached.

The policy was scheduled to be implemented on Jan. 3, but CMS agreed to delay the policy because hospitals and practices said they needed more time to create communication channels necessary to meet the requirements. The rule had been finalized in the 2012 Medicare physician fee schedule in November 2011.

But many physician practices and hospitals have indicated that they still are not ready for the policy. The Medicare agency should give hospitals and practices more time to meet the requirements, said American Medical Association President Peter W. Carmel, MD.

“There is significant confusion related to the details of the three-day pay provision that is scheduled to go into effect on July 1,” Dr. Carmel said. “The AMA urges CMS to postpone implementing this provision until they provide clarity for physicians on who is affected and how to properly comply with the new rules to avoid billing errors and delays.”

Other organizations also have urged CMS to delay or rescind the rule. The Medical Group Management Assn. sent a May 23 letter requesting that the agency cancel the policy altogether.

“Even if the affected health care providers are able to coordinate their billing and accounting systems, this policy should be rescinded because of the needless administrative burdens and potential penalties it places on practices,” wrote MGMA-ACMPE President and CEO Susan Turney, MD. “Under the best circumstances, practices that are wholly owned or operated by hospitals would face a delay in submitting claims for all Medicare encounters.”

A practice that filed a claim without the modifier because it was unaware of a subsequent hospital admission could face a penalty for collecting an overpayment or submitting a false claim, the letter stated.

“As relationships between hospitals and physician practices continue to evolve, there are countless forms that they can take,” Dr. Turney stated. “CMS should recognize the unique collaborations that hospitals, group practices and other health care providers have formed and avoid setting payment policies that dictate their structure.”

On June 5, CMS officials discussed the policy during a conference call sponsored by the agency. The officials reiterated the compliance deadline of July 1.

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New billing modifier needed for certain claims

The Centers for Medicare & Medicaid Services requires the new payment modifier “PD” to be on claims for physician services provided in a wholly owned or operated hospital entity when the patient is admitted as an inpatient within three days. When the modifier is present, Medicare will pay:

  • Only the professional component of a service when it is split with a technical component, such as a diagnostic test.
  • The facility rate for a service without a professional and technical component split, such as an office visit.

Source: “Bundling of Payments for Services Provided to Outpatients Who Later Are Admitted as Inpatients: 3-Day Payment Window Policy and the Impact on Wholly Owned or Wholly Operated Physician Offices” MLN Matters, Centers for Medicare & Medicaid Services, Dec. 21, 2011 (link)

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