Corporate Compliance

Note from the instructor: Reimbursement for outpatient services provided to critical access hospital patients

Medicare Insider, June 17, 2014

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This week’s note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.

I recently taught an HCPro’s open registration Medicare Boot Camp® – Critical Access Hospital (MBC-CAH) class. As many of you are probably aware, CAHs are a special category of small, rural hospitals that provide both inpatient and outpatient services, primarily in what would otherwise be medically underserved parts of the country. To ensure their ability to continue to do so, CAHs generally receive reimbursement for the facility component of both their inpatient and outpatient hospital services based on 101% of reasonable costs. While teaching the class, I was reminded of the complexity of the rules surrounding CAH reimbursement, particularly for services provided to CAH outpatients. We will focus on these complex rules in this week’s Medicare Insider note and in subsequent issues, as necessary.
 
Payment for inpatient facility and professional services
 
Currently, CAHs bill for the facility/technical component of covered Part A inpatient services to the A/B Medicare Administrative Contractor (A/B MAC) on the UB-04, and are reimbursed on the basis of 101% of reasonable costs, less the applicable Part A deductible and coinsurance amounts. Most professional services provided to CAH inpatients are billed separately to the A/B MAC on the CMS 1500, with the place of service reported as hospital inpatient. With the exception of payment for certain anesthesia services, payment is made under Part B, based on a fee schedule (e.g., Medicare Physician Fee Schedule [MPFS]), charge or other fee basis, less the applicable Part B deductible and coinsurance amounts.
 
Payment for the facility services is made to the CAH, and payment for the professional services is generally made to the respective practitioners.
 
Payment for outpatient facility and professional services under Method I
 
When I first began teaching the MBC-CAH class a number of years ago, the majority of CAHs had elected to receive reimbursement for services provided to their outpatients under what Medicare refers to as Method I. Under Method I, reimbursement for both the facility and professional services provided to CAH outpatients is similar to reimbursement for the facility and professional services provided to CAH inpatients. That is:
 
  • CAHs bill for the facility component of covered Part B outpatient services to the A/B MAC on the UB-04, and are reimbursed on the basis of 101% of reasonable costs, less the applicable Part B deductible and coinsurance amounts. 
  • Most professional services provided to CAH outpatients are billed separately to the A/B MAC on the CMS 1500, with the place of service reported as hospital outpatient department. With the exception of certain anesthesia services, payment is also made under Part B, based on a fee schedule (e.g., MPFS), charge or other fee basis, less the applicable Part B deductible and coinsurance amounts.
 
Under Method I, payment for the facility services is made to the CAH, and payment for the professional services is generally made to the respective practitioners. 
 
Method I payment example: A CAH charges $1,000 for an outpatient procedure. The cost of the procedure has been determined to be $500, based on its outpatient cost-to-charge ratio of .50. Assuming that the deductible has already been met, under Method I billing, what will be the total payment to the CAH for CAH facility services, including the patient’s coinsurance amount? (Beneficiary coinsurance for CAH outpatient facility services under Part B is equal to 20% of charges.) How much will be payable by the patient? How much will be payable by Medicare?
 
The CAH would be paid $200 from the patient and $305 from the A/BMAC for a total payment of $505:
     Total payment = (101% of reasonable costs) = (1.01 X $500) = $505
     Coinsurance = (20% of billed charges) = (.20 X $1000) = $200
     Medicare payment = (101% of reasonable costs – coinsurance) = ($505 – 200) = $305
 
Payment for outpatient facility and professional services under Method II
 
Over time, more and more CAHs have elected to receive reimbursement for both the facility and professional services provided to their outpatients under Method II. The CAH’s right to receive reimbursement for professional services, however, only applies to the professional services performed by practitioners who have elected to assign their right to payment to the CAH for services they provide to its outpatients during that cost report period (CRP). Each practitioner has the right to choose whether to assign his or her right to payment for a particular CRP. Once elected, the election will apply throughout that CRP, and the practitioner must attest that he or she will not bill Medicare directly during that CRP.  
 
Under Method II, with respect to those outpatient services whose professional component is provided by a practioner who has assigned his or her right to payment to the CAH for that CRP:
  • The CAH bills for both the respective facility and professional services to the A/B MAC on the same UB-04, reporting appropriate revenue and HCPCS codes for all services
    • Payment for the CAH facility services will be 101% of the reasonable cost for those services, less the applicable Part B deductible and coinsurance amounts
    • Payment for professional services will be paid at 115% of whatever amount the A/B MAC would pay under the MPFS, etc., based upon the type of service provided and the modifier applied to the HCPCS code
 
MPFS – (deductibles and coinsurance) X 115%
  • Payment for both the facility and professional services is made to the CAH
 
Under Method II, with respect to those outpatient services whose professional component is provided by a practioner who has not assigned his or her right to payment to the CAH for that CRP:
  • The CAH bills for the facility component of covered Part B outpatient services to the A/B MAC on the UB-04, and is reimbursed on the basis of 101% of reasonable costs, less the applicable Part B deductible and coinsurance amounts
  • Most professional services provided to its outpatients are billed separately to the A/B MAC on the CMS 1500, with the place of service reported as hospital outpatient department. With the exception of certain anesthesia services, payment is also made under Part B, based on a fee schedule (e.g., MPFS), charge or other fee basis, less the applicable Part B deductible and coinsurance amounts
  • Payment for the facility services is made to the CAH, and payment for the professional services is generally made to the respective practitioners
 
Method II payment example: In the same scenario as the Method I example, except the CAH has elected Method II billing, the participating physician’s charges for the procedure are $400 and the MPFS amount is $200. Under Method II, the patient is also responsible for applicable cost sharing amounts (Part B deductible and coinsurance) for the related professional services, including coinsurance equal to 20% of the MPFS amount for the professional service. Assuming that the deductible has already been met, what is the total payment to the CAH under Method II billing, including the patient’s total coinsurance, facility (FAC) reimbursement, and professional (PRO) fee reimbursement?
 
FAC reimbursement
     Same as in prior example—$505 ($200 coinsurance and $305 from Medicare)
PRO reimbursement
     Coinsurance = (20% of MPFS) = (.20 X $200) = $40
     Medicare payment = ((MPFS minus coinsurance) X 115%) = (($200 - $40) X 1.15) = ($160 X 1.15) = $184
Total payment
     Coinsurance = ($200 FAC + $40 PRO) = $240
     Medicare payment = ($305 FAC + $184 PRO) = $489
     Total payment = $240 + $489 = $729
 
Ongoing discussion and related resources
 
We will continue our discussion on CAH reimbursement issues, particularly relating to specific anesthesia services (both inpatient and outpatient), in a subsequent issue of Medicare Insider. For additional information, please see the following source authorities:
 
42 CFR 413.70
Medicare Claims Processing Manual, Chapter 4, Section 250ff
Medicare Claims Processing Manual, Chapter 12



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