Health Information Management

Q/A: Correct use of modifier -FB and -FC

APCs Insider, January 13, 2012

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Q: Our billing office is concerned about reports that the OIG is auditing for  appropriate use of the following modifiers:

  • -FB (Item provided without cost to provider, supplier or practitioner, or credit received for replacement device [examples, but not limited to covered under warranty, replaced due to defect, free samples])
  • -FC (Partial credit received for replaced device)

We know this is related to pacemaker recalls, but the billing office doesn’t know whether a replacement was due to a recall or the battery simply needed replacement. No one seems to know at the time of the procedure that the cost is discounted and that modifier -FC will be applicable. Billing office staff members say they know only when the invoice arrives.
Can you help us sort this out?

A: CMS has required use of modifiers -FB and -FC since 2007 and 2008, respectively, to reflect the reporting of a device that the provider obtained  at no cost (modifier -FB) or at a discounted cost (modifier -FC).

The modifiers are appropriate for reporting devices related to a recall situation, but their use is not limited to this circumstance. Append modifier -FB when a facility incurs no cost or receives full credit for the cost of a device. Append modifier -FC when a facility received a manufacturer credit of 50% or more of the cost of a device.

When CMS packaged the cost of devices into the APC payment for the procedures, it created a situation for many procedures in which the total APC payment is largely due to the cost of the device. CMS noted in the OPPS final rules for 2007 and 2008 that it believes payment should be decreased when a facility obtains a device at a decreased cost.  CMS does not believe that the Medicare program or a beneficiary should pay for something that a facility received at a substantially discounted cost. As a result, CMS created these modifiers for use in these instances. Report the appropriate modifier  with the HCPCS code for the procedure, not  the device; this triggers a reduced APC payment.

Establishing a communication process to ensure that the appropriate parties are informed about situations in which one of these modifiers is applicable. The individual responsible for appending the modifier varies by  facility, depending on internal processes, and may not be the individual who reports the HCPCS code.

CMS realized that information about partial discounts may not be known when a procedure is performed,  so it published instructions in the January 2008 update to OPPS in Transmittal 1417:

Because hospitals may not know at the time the device replacement procedure takes place whether or how much credit the manufacturer will provide for the device, hospitals have the option of either: (1) submitting the claims immediately without the FC modifier and submitting a claim adjustment with the -FC modifier at a later date once the credit determination is made; or (2) holding the claim until a determination is made on the level of credit.

The good news is that the modifiers do not apply to every possible scenario in which a facility receives an item at a discounted cost. In 2009, CMS created a specific list of devices and APCs for which the cost of a device accounts for the majority of the APC payment and for which these modifiers are applicable based on the percentage of payment related to the device. Select the Final Rule and then the file titled “OPPS Final Without Cost of With Credit Device Information.” 

CMS provides further instructions in the Medicare Claims Processing Manual, Chapter 4, §§20.6.9, 20.6.10 and §61.3 for reporting  the modifiers and charges.

Editor’s note: Denise Williams, RN, CPC-H, vice president of revenue integrity services at Health Revenue Assurance Associates, Inc., in Plantation, FL, answered this question.

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