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Rural healthcare providers, particularly critical access hospitals (CAHs) and rural health clinics (RHCs), face some unique challenges for proper coding, billing, and reimbursement. While the Medicare program recognizes these unusual circumstances to some degree, the payment mechanisms nonetheless present issues.

Both CAHs and RHCs receive cost-based reimbursement. However, as with other healthcare providers, the overriding concern is to optimize reimbursement while staying fully in compliance.

For CAHs, there is a special payment mechanism that can generate additional income for physicians and qualified practitioners – namely, what is called Method II billing. In order to take advantage of Method II billing, the physicians and practitioners must agree to reassign their Medicare payments to the hospital. This is accomplished through the Centers for Medicare & Medicaid Services (CMS)-855-R form.  The increased reimbursement is 115 percent of what the physician or practitioner would have been paid, after the 20 percent coinsurance is factored.  In other words, if the MPFS (Medicare Physician Fee Schedule) payment amount is $100, subtract the 20-percent coinsurance, which results in a copayment amount of $20. The payment will then be 115 percent of $80, or $92.

Note that Method II billing is used only for outpatient services. Thus, the payment amount, using the $100 referenced above, is for the facility payment under MPFS. This means that the $100 represents the MPFS payment that has been reduced by the site-of-service differential. While the differential varies by CPT/HCPCS code, let us assume that the full MPFS payment is $115. Thus, using Method II billing recoups a portion of the MPFS reduced payment.

Assuming that physicians and practitioners agree to such an arrangement, the real challenge is that the billing for the professional services must be made on the UB-04 claim form. This means:

  1. The hospital’s chargemaster and claims filing system will need adjustment for professional billing on the UB-04; and
  2. The Medicare Administrative Contractor (MAC) will have to adjust its adjudication system to accommodate professional payment through the UB-04.

One of the key elements that is on the 1500 claim form involves the place of service (POS). This is not present on the UB-04, so there must be a mechanism established so that the site-of-service differential kicks in during the adjudication process. Overall, the issue is that a Part A MAC is adjudicating a Part B claim from the UB-04, so there can be a number of different issues.

A brief example of the use of Method II billing involves specialty clinics. Many CAHs have specialists visit their hospitals to oversee specialty clinics. If possible, these physicians should agree to Method II billing, at least for Medicare. If the physicians do so, then the specialty clinics will be provider-based, and Method II billing can occur.

Note: A separate compliance issue arises if some of the specialty clinics are provider-based (whether or not Method II billing occurs) and some of specialty clinics are managed on a rental basis. Some regional offices are adamant that the two types of arrangements cannot coexist. The basic assertion is that the “holding out to the public” requirement is violated.  See the provider-based rule (PBR) for more details.

As of April 1, RHCs are required to provide CPT/HCPCS codes on their claims. While this would not seem an undue burden at first glance, the way in which the claims are filed is rather strange. Programming or parameterizing billing systems to accommodate the new billing arrangements is somewhat problematic. CMS has gone through great machinations to maintain the billing process in order to use the AIR, or all-inclusive rate. 

The AIR depends upon the concept of a “visit.” What constitutes a visit, and conversely what does not constitute a visit, becomes important. For instance, an encounter with an RHC physician or practitioner for an evaluation and management service constitutes a visit. If the E/M service occurs on Monday and the patient returns on Wednesday for a minor surgical procedure, however, then does the surgical procedure constitute a separate visit?

The surgical service does constitute a visit, but the CMS adjudication systems are not ready to make proper payment. Thus, for these standalone surgical procedures, the claims must be held until Oct. 1 and the CG modifier must be used.

There is also the issue of what are called “incident-to” services. These are services provided by individuals other than RHC physicians or practitioners, for instance, a physical therapy service provided by a physical therapist, or a nursing service provided by a nurse (e.g., CPT 99211). These services must be provided under the supervision of an RHC physician or practitioner. But do these types of services constitute a visit, and if so, how should these types of services be billed?

There appear to be differing guidelines governing the answer to this question. On the one hand, there seems to be guidance that the costs for this type of non-visit service should simply be rolled into the cost report. There is other guidance that directs that the incident-to service charges be added onto the claim for a preceding visit. For instance, if the physical therapy services are placed on the claim for an E/M service, then the earlier date is used. Is this compliant? Filing a claim with a certain date of service when the service was actually provided on different date seems questionable.

Note: If the RHC practitioner provides the physical therapy service on a different date from an initial E/M service, then the physical therapy is considered a visit.

There is also the issue of the format of the actual claim that is filed. If there is both an E/M service and some other service(s) on the claim, then the charges for the other services must be reported on the separate line items (with appropriate revenue codes and HCPCS codes) and then also rolled into the E/M level so that appropriate total charges are captured for the visit. This amalgamation of charges must occur in order to properly drive the determination of the AIR for the given RHC.

Also, if both an E/M service along with other services are reported, then due consideration must be given to using the -25 and/or -59 modifiers in order for the claim to be properly adjudicated. Does CMS recognize these modifiers for such use? Also, there are questions about the calculation of copayments relative to this billing process. Preventative care generally does not involve copayment, whereas other services may.

Needless to say, the new requirements for RHCs to use CPT/HCPCS codes are less than straightforward. There are still some issues that must be resolved.

RHCs should work closely with their MACs to make certain that claims filing is being performed correctly, and to check to see which (if any) claims need be held until Oct. 1.

About the Author

Duane C. Abbey, Ph.D., CFP, is an educator, author and management consultant working in the healthcare field. He is president of Abbey & Abbey Consultants, Inc., which specializes in healthcare consulting and related areas. His firm is based in Ames, Iowa. Dr. Abbey earned his graduate degrees at the University of Notre Dame and Iowa State University.

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Duane C. Abbey, PhD, CFP

Duane C. Abbey, PhD, CFP, is an educator, author, and management consultant working in the healthcare field. He is president of Abbey & Abbey Consultants, Inc., which specializes in healthcare consulting and related areas. His firm is based in Ames, Iowa. Dr. Abbey earned his graduate degrees at the University of Notre Dame and Iowa State University. Dr. Abbey is a member of the RACmonitor editorial board and is a frequent guest on Monitor Mondays.

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