Incorrect Billing Results in Overpayments Due to Incorrect Place of Service Billed

An Office of Inspector General’s (OIG) report “Medicare Paid Millions More for Physician Services at Higher Nonfacility Rates Rather Than at Lower Facility Rates While Enrollees Were Inpatients of Facilities” recently found an issue where Part B providers were improperly paid a higher, non-facility payment rate because the incorrect place of service was billed.

For purposes of payment under the Medicare Physician Fee Schedule (MPFS), the place of service (POS) code is generally used to reflect the actual setting where the beneficiary receives the face-to-face service. For example, if the physician’s face-to-face encounter with a patient occurs in the office, the correct POS code on the claim, in general, reflects the two-digit POS code 11 for office.

There are two exceptions to this general rule when a service is rendered to a patient who is a registered inpatient or outpatient of a hospital or a skilled nursing facility (SNF). In these cases, the correct POS code, regardless of where the face-to-face service occurs, the appropriate inpatient, outpatient, or SNF POS code must be used to mirror the patient’s registration status in the facility setting.  

For Medicare Physician Fee Schedule (MPFS) payment purposes the determinant of payment is the locality where the physician or supplier furnished the service. Medicare has both facility and non-facility designations for payment purposes depending on the two-digit POS that represents where the face-to-face encounter took place. The jurisdiction for processing a request for payment for services paid under the MPFS, is governed by the payment locality where the physician or supplier furnished the service and will be based on the ZIP Code. CMS requires that the address and ZIP Code of the physician’s practice location, the inpatient, outpatient, or SNF facility be placed on the claim form to determine the appropriate locality. This information is entered in item 32 on the paper claim Form CMS-1500 or in the corresponding loop on its electronic equivalent. 

Based on the two-digit place of service billed (and reflected in the patient’s medical record and any facility record), is used to determine if the service is paid at the facility or non-facility pricing. The chart below designates the facility setting and facility pricing designation for four of the two-digit place of service codes. The CMS Internet Only Manual (IOM) 100-04 Chater 26 Section 10.5 (PDF) has additional information on which POS codes are paid at a facility or non-facility rate.

As outlined in the OIG report, any claims determined to have been billed with an incorrect two-digit place of service code will be adjusted, a subsequent overpayment letter will be issued, and providers will be required to refund any overpayments based on the incorrect payment amount due to facility/non-facility pricing difference. Providers are encouraged to take action to make certain that the correct two-digit place of service code is used and accurately matches any facility patient registration in a facility where the patient may have been seen. 

Resources

• Internet-Only Manual (IOM) 100-04 Chapter 26 Section 10.6 Medicare Claims Processing Manual (PDF)
• U.S. Department of Health and Human Services Office of Inspector General Medicare Paid Millions More for Physician Services at Higher Nonfacility Rates Rather Than at Lower Facility Rates While Enrollees Were Inpatients of Facilities