Corporate Compliance

Note: Locality adjustment for Medicare Physician Fee Schedule-based payments

Medicare Insider, February 24, 2009

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CMS issued Transmittal 1681 February 13, 2009, related to locality adjustment for payments made to hospitals derived from the Medicare Physician Fee Schedule (MPFS). The MPFS is used as the basis to determine payment amounts for several types of services, for instance physical therapy, speech language pathology, and occupational therapy. These payments will now be based on the MPFS amount for the ZIP code where the actual service facility is located rather than the main facility’s ZIP code. 

Transmittal 1681 relates to a requirement dating from January 1, 2007, for providers to submit ZIP codes for the actual service locations for outpatient services. Although providers were required to report these ZIP codes since that time, the Fiscal Intermediary Standard System (FISS) could not process them. Transmittal 1681 implements a process change in FISS to capture the ZIP code data and make it available for the payment processing logic. This will allow payments for MPFS based services to be based on the ZIP code of the service location.

The transmittal also clarifies that providers may bring to the attention of their contractor claims that were paid incorrectly due to the ZIP code not being taken into account. The contractors have been instructed to adjust these claims if brought to their attention. The effective date of the transmittal is October 1, 2007, meaning providers may go back to October of 2007 and request claims adjustments for affected claims. 

Note, however that the transmittal has an implementation date of July 6, 2009. This means that the system changes to process these claims correctly, taking into account the ZIP code information, may not be in place until that date. For this reason, providers should contact their local FI or MAC and determine when system changes have been implemented and how to submit adjustment requests. Providers may need to submit adjustment requests for any claims processed before the implementation date later this year.


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