Corporate Compliance

OR facility fees and staffing guidelines

Compliance Monitor, May 20, 2005

Q: We have encountered a couple of hospitals that bill operating room (OR) rates based on the number of staff on the OR team. These hospitals include interns, residents, medical students, nurses, scrubs, and in some cases, surgeons, in the "count." This total number of people effectively sets the charge for the OR facility fee (revenue code 360) for all patients, including commercial and Medicare. What are your thoughts on this practice?

A: The practice of setting the OR rate with this methodology could be interpreted as double billing because teaching hospitals receive additional reimbursement associated with the cost for interns, residents, and surgeons. However, to the extent that these staff are used in lieu of other credentialed OR staff, or in addition to such staff (due to the complexity of the case), this practice may be a reasonable method to account for OR acuity.

Providers employ a number of methods to assign a fair and accurate price for OR time. The primary components of all methods are the valuation of three key costs: Space (and associated expenses, including equipment), routine supplies, and personnel.

Space and routine supplies are considered to be fixed costs. This means that regardless of the complexity of the procedure(s), these costs fluctuate very narrowly. The real variance occurs in personnel costs. These costs fluctuate significantly depending on the complexity of the case, surgeon preference, and staff availability.

The only charge structure that accurately reflects this variance in costs is one based upon staffing. You are correct to question who is included in a "staffing" time structure. Facilities are at risk for inappropriately billing due to a number of staffing-related issues. For example, the staff level should not be arbitrary--it must be linked to surgeon preference/request and medical necessity. In addition, billing for staff members who simply observe and do not contribute to the overall patient care could cause compliance risk.

If the interns, residents, and surgeons replace other personnel in the surgical suite, such as OR technicians or OR nursing staff, the hospital should include them in the staff time structure. On the other hand, it is inappropriate to add them to the existing staff merely to increase the charges with no medical necessity.

Medicare's reimbursement for OR services are fixed; therefore the only impact on charges is the potential of outlier payments. Commercial payers have accepted the staffing charge structure for years, and unless a provider is inappropriately raising the levels or using an inconsistent application methodology, it is unlikely they will object.

This question was answered by Keith Siddel, MBA, PhD, president and CEO of Hospital Resource Management in Creede, CO.

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