CMS introduces a new modifier for hospital-owned physician practices.
By Barbara J. Cobuzzi, MBA, CPC, CPC-H, CPC-P, CPC-I, CHCC, CENTC
Effective July 1, 2012, Medicare will pay the facility rate (rather than the usually greater office or non-facility rate) for physicians’ services clinically related to an inpatient admission, occurring within 72 hours of the admission, and furnished by a physician practice wholly-owned or wholly-operated by a hospital. When a service is comprised of both technical and professional components (TC and PC), Medicare will pay only the PC under the same circumstances. The payment window applies whether the inpatient and outpatient diagnosis codes are the same. This three-day payment window already applies to diagnostic services, but will soon apply to non-diagnostic services, as well.
The Centers for Medicare & Medicaid Services (CMS) announced the expansion of the three-day payment window in the Nov. 28, 2011 Federal Register. Per CMS, “The 3-day payment window applies to all diagnostic and related non-diagnostic services provided within the window, including drug therapies and imaging services, assuming those services are related to the inpatient admission.” Also included in the rule is “any service that a wholly owned or wholly operated physician practice would bill separately from the global surgical package, such as a separate initial evaluation of a problem by the surgeon to determine the need for surgery or separate diagnostic tests …”
For example, a Medicare patient visits an orthopedist (whose practice is controlled by the hospital system) after a fall, due to pain in the upper leg and hip. She is barely ambulatory and arrives at the office with the assistance of her son. After performing and documenting a history, exam, and medical decision making (MDM) that meet the requirements of a level III, new patient visit (99203 Office or other outpatient visit for the evaluation and management of a new patient, which requires these 3 key components: A detailed history; A detailed examination; Medical decision making of low complexity), the orthopedist orders an X-ray (e.g., 73510 Radiologic examination, hip, unilateral; complete, minimum of 2 views), which is performed in the office. After reviewing the X-ray, the physician sees that the patient has a small hip fracture and will need to be admitted for arthroplasty.
Because the patient is admitted within 72 hours of the visit, the evaluation and management (E/M) service (99203) will be paid at the facility rate (2.2 relative value units (RVUs), versus 3.09 RVUs in a non-facility setting, or a difference of approximately $31), and only the PC of the X-ray will be paid (.09 RVUs, versus .93 RVUs for the global procedure, or a difference of approximately $29).
The three-day payment window may also apply in the case of complications following an office visit or office procedure. For instance, a pain management physician whose practice is owned by the hospital system gives a joint injection in the office. Two days later, the patient arrives in the emergency room (ER) with numbness and some paralysis in the limb, and the patient is admitted. The injection and any related E/M that may have performed two days earlier will be paid at the facility RVU rate rather than at the office (non-facility) rate.
Identify Services Provided within the Window with Modifier PD
CMS has introduced the new HCPCS Level II modifier PD Diagnostic or related non-diagnostic item or service provided in a wholly owned or wholly operated entity to a patient who is admitted as an inpatient within 3 days, or 1 day to identify claims for related services provided within 72 hours of an inpatient admission.
The introduction of modifier PD and the expansion of the three-day payment window to non-diagnostic services adds an administrative layer of complexity to medical billing and coding for both the hospital and the practices it owns and/or controls. Specifically, claims provided by any physician practice owned or controlled by a hospital will have to be held for at least three days prior to submission: The practice does not want to submit a claim without modifier PD only to find out later the patient was admitted within 72 hours of receiving the service.
Per CMS’ instruction, it is not up to the physician practice to determine when to apply modifier PD; rather “the hospital will be responsible for notifying the practice of related inpatient admissions for a patient who received services in a wholly owned or wholly operated physician practice within the 3-day (or, when appropriate, 1-day) payment window prior to the inpatient stay.”
Initially, CMS was to begin enforcing the use of modifier PD on Jan. 1, 2012. Because processes and workflow changes will be needed to effectively implement proper and accurate use of modifier PD, CMS has delayed the required implementation until July 1, 2012; however, modifier PD is available for use as of Jan. 1, and CMS recommends that practices “should begin to append the modifier to claims subject to the 3-day payment window at that time.”
Exceptions to the Three-day Rule
The three-day payment window for non-diagnostic services does not apply to either rural health care (RHC) or federally qualified health care centers (FQHC), unless they are owned and/or controlled by a hospital.
If non-diagnostic services are not clinically related to an inpatient admission within 72 hours, the hospital or wholly-owned or wholly-operated physician practice should document the reason those services are not clinically related in the beneficiary’s medical record. In such a case, the practice would receive the full non-facility payment for the provided services. However, the payment may have to be appealed to demonstrate to CMS that the admission was not related.
Apply the Rules
If your practice is wholly-owned or -controlled by a hospital, the following applies:
- Claims will need to be held for three days to determine if any patients receiving services were admitted to the hospital for a “clinically related service” during that time (the diagnosis does not have to be the same for the physician service and the admitting diagnosis).
- For any patients where the above condition applies, the practice must apply modifier PD for all services by July 1, 2012. The modifier is available as of Jan. 1, 2012.
- It is the responsibility of the hospital to notify the practice of all patients admitted within 72 hours of a physician service, and the reason for the admission.
- Reimbursement for these services will be paid at the PC if the procedure is split into the two parts: PC and TC. Otherwise, these services will be paid at the facility rate, not the non-facility (office) rate, even though the place of service (POS) was the office (POS 11).
- If you are in a wholly-owned RHC or FQHC, no changes are taking place.
The timing of this new rule and subsequent payment reduction to physician practices is interesting. Many physician practices that never would have thought of selling out to a hospital in the past are rethinking this strategy in response to the government push for accountable care organizations (ACOs). The downside to such an arrangement, unfortunately, includes greater restrictions and reduced payments.
Barbara J. Cobuzzi, MBA, CPC, CENTC, CPC-H, CPC-P, CPC-I, CHCC, is president of CRN Healthcare Solutions and senior coder and auditor for The Coding Network. She is consulting editor for Otolaryngology Coding Alert and has spoken, taught, and consulted widely on coding, reimbursement, compliance, and health care-related topics nationally.
March 1st, 2012
The Centers for Medicare & Medicaid Services (CMS) has established new payment modifier PD Diagnostic or related nondiagnostic item or service provided in a wholly owned or operated entity to a patient who is admitted as an inpatient within 3 days. Physicians, suppliers, and providers are now required to append modifier PD to preadmission diagnostic and admission-related nondiagnositic services reported with HCPCS Level II or CPT® codes subject to the 3-day payment window policy.
Modifier PD is available for claims with dates of service on or after Jan. 1, 2012. This is changed from the effective date of Jan. 10, 2012, established in CMS Transmittal 2297. CMS advises entities to begin coordinating their billing practices and claims processing procedures with their hospitals to ensure compliance with the 3-day payment window policy no later than for claims received on or after July 1, 2012.
When modifier PD is present on claims for service, Medicare will pay:
- Only the professional component (PC) for CPT®/HCPCS Level II codes with a technical component (TC)/PC split that are provided in the 3-calendar day (or, 1-calendar day) payment window; and
- The facility rate for codes without a TC/PC split.
See MLN Matters MM7502 for background information relating to the 3-day window payment policy. AAPC’s Barbara J. Cobuzzi, MBA, CPC, CPC-H, CPC-P, CPC-I, CHCC, CENTC, offers additional guidance.
January 13th, 2012