Keep Out of Hot Water with Proper POS

Place of service errors are on the OIG hit list, so be sure your coding is up to par.

By G.J. Verhovshek, MA, CPC

For the third consecutive year, the U.S. Department of Health & Human Services (HHS) Office of Inspector General (OIG) has included place-of-service (POS) errors as an area for review in its annual Work Plan. Judging from the results of several OIG audits over the past decade, POS coding is indeed a serious problem for many practices and facilities. Now’s the time to review your own POS coding to ensure you don’t become a target for OIG investigation, repayment demands, or worse.

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How POS Affects Payment

POS codes are two-digit codes used to indicate the setting in which a health care service was provided. There are approximately 50 POS codes; among the most familiar are 11 Office, 21 Inpatient hospital, and 24 Ambulatory surgical center (ASC). A complete list of POS codes may be found in the Medicare Claims Processing Manual, chapter 26, section 10.5. The American Medical Association’s (AMA’s) CPT® Professional Edition also includes a list of POS codes on the page adjacent to the inside front cover.

The coded POS has a direct impact on payment for services provided. As explained in MLN Matters® number: SE1104, “To account for the increased practice expense that physicians generally incur by performing services in their offices and other non-facility locations, Medicare reimburses physicians at a higher rate for certain services performed in these locations rather than in a hospital outpatient department or an ASC.”

A correct POS code ensures that Medicare does not incorrectly reimburse the physician for the overhead portion of a service performed in a facility setting. On the flip side, an incorrect POS code may result in overpayment if a physician provides a service in a facility setting, but indicates the service was provided in a non-facility setting.

Frequent Errors Raise OIG’s Ire

Assigning a POS seems initially straightforward—just determine where the service occurred and key in the correct code. As it turns out, however, POS errors are astonishingly frequent. And at a time when every health care dollar is being squeezed and scrutinized, POS errors have become a very big deal for government payers and auditors.

As an example of how pervasive POS errors are, the OIG audited select claims for a single payer (TrailBlazer Health Enterprises, LLC) for the two-year period Jan. 1, 2001-Dec. 31, 2002. Of those claims audited, 67 percent contained POS errors. From this, the OIG estimated TrailBlazer overpaid physicians $1,051,477 over the 24 months. In another audit involving claims submitted to National Heritage Insurance Company (NHIC) during 2002-2003, 81 percent of sampled claims contained POS errors. The OIG estimated that for all claims during the sample period, NHIC had overpaid physicians a total of $4,254,613 due to inappropriate POS codes.

In the results of a third audit published in 2010, the OIG estimated that Medicare contractors nationwide overpaid physicians $13.8 million during 2007 due to POS errors. An incredible 90 percent of claims sampled during the audit contained POS errors, in which physicians used non-facility POS codes on their claims for services that were actually performed in hospital outpatient departments or ASCs.

Partly as a result of these audits, the OIG has included POS errors as an area of investigation in its annual Work Plan since 2010. The 2012 Work Plan specifies, “We will review physicians’ coding on Medicare Part B claims for services performed in ambulatory surgical centers and hospital outpatient departments to determine whether they properly coded the places of service.”

The message from the OIG is clear: A crackdown of POS errors is underway.

Avoid POS Problems

The OIG identified several factors as the most common causes of POS errors:

  • Default physician billing software settings
  • Physicians’ billing personnel or agents were confused about the precise definition of a “physician’s office,” or were following established practice in applying the office POS code
  • Physicians’ billing agents were unaware that an incorrect POS code could change the Medicare payment for a specific service
  • Personnel made isolated data entry errors

In other words, most errors are mistakes rather than intentional efforts to gain overpayments—but that won’t prevent payers from seeking repayments if they find POS errors (in fact, seeking repayments is exactly what the OIG has suggested payers do). The good news is: The best way to prevent POS errors may be simple awareness of the problem.

All coding and billing personnel must know that POS codes affect reimbursement. POS codes should be double-checked prior to claims submission, and POS coding should be part of your internal auditing process. If possible, change billing software so the POS does not default to “physician office,” but rather requires that billing personnel enter the POS. If you use a third-party billing company, alert them that POS errors are on the radar for payers and the OIG.

Above all, providers should verify that they are reporting the POS code that applies to the setting in which the service was provided, and that the submitted procedure code is compatible with that POS. For example, Office or Other Outpatient codes (procedure codes 99201-99215) should be billed with POS codes 11, POS 22 Outpatient hospital, etc., whereas home service (99341-99350) should be billed with POS 12 Home.

Clear Guidance on POS Definitions

Occasionally, a POS error occurs because of genuine confusion over exactly how the POS is defined. For example, what is the POS if a physician leases office space from an ambulatory surgery center (ASC)? If a physician sells his or her practice to a hospital, is the office location still considered freestanding for reimbursement purposes?

To clarify POS definitions, observe the following guidelines:

  • An office (POS 11) is a location where the physician (or group) pays all of the overhead expenses, including rent (or mortgage), staff salaries, supplies, utilities, etc.
  • In an outpatient hospital (POS 22), the hospital employs the staff, owns the space, and incurs all of the overhead expenses. The hospital bills a facility fee to cover the cost of the expenses. Outpatient hospital locations include the observation unit, outpatient surgery unit, endoscopy suite, and hospital clinics.
  • An emergency room (POS 23) is a hospital location where emergency diagnosis and treatment of illness or injury is performed. The hospital charges a facility fee to cover the overhead costs.
  • An inpatient hospital (POS 21) includes all services provided to a patient that has been formally admitted to the hospital. All overhead expenses are billed through the hospital.
  • An ASC (POS 24) is certified by Medicare to perform designated surgical procedures. The ASC bills a facility fee to cover the cost of overhead associated with the procedures. Laboratory and radiology services, other than those performed to assist in a procedure, are not permitted in the ASC during the ASC hours of operation. Other non-surgical services, imaging, infusions, or diagnostic procedures not on Medicare’s list of ASC-approved services should not be performed in the facility.

POS = Location Where Patients Receive Service

Per the Centers for Medicare & Medicaid Services (CMS) Transmittal 2407, the place of service (POS) code for all physicians paid under the Medicare Physician Fee Schedule (MFPS) must match the setting in which the beneficiary receives the face-to-face service. Billable, non face-to-face services (such as when a physician interprets diagnostic test results) are billed to the POS in which the beneficiary received the technical portion of the service.

As an example, MLN Matters® number: MM7631 offers the following scenario:

“A beneficiary receives an MRI at an outpatient hospital near his/her home. The hospital submits a claim that would correspond to the TC [technical] portion of the MRI. The physician furnishes the PC [professional] portion of the beneficiary’s MRI from his/her office location. POS code 22 [outpatient hospital] will be used on the physician’s claim for the PC to indicate that the beneficiary received the face-to-face portion of the MRI, the TC, at the outpatient hospital.”

There are two exceptions to the rule that says the physician always uses the POS code where the beneficiary is receiving care as a hospital inpatient or an outpatient of a hospital, regardless of where the beneficiary encounters the face-to-face service.

1. When a physician, practitioner, or supplier provides services to a patient who is an inpatient of a hospital, the inpatient hospital POS code 21 will be used irrespective of the setting where the patient actually receives the face-to-face encounter.

2. Physicians or practitioners who perform services in a hospital outpatient department will use POS code 22 (outpatient hospital) unless the physician maintains separate office space in the hospital or on the hospital campus and that physician office space is not considered a provider-based department of the hospital as defined in 42. C.F.R. 413.65. Physicians will use POS code 11 (office) when services are performed in a separately maintained physician office space in the hospital or on the hospital campus and that physician office space is not considered a provider-based department of the hospital as defined in 42.C.F.R. 413.6. Use of POS code 11 (office) in the hospital outpatient department or on hospital campus is subject to the physician self-referral provisions set forth in 42 C.F.R 411.353 through 411.357.

References: Transmittal R2407CP and MLN Matters® Number: MM7631.

 

G.J. Verhovshek, MA, CPC, is managing editor at AAPC.

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