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Accuracy of Place-of-Service Codes on Claims for Medicare Part B Physician Services When Beneficiaries Are Inpatients Under Part A

Generally, Medicare makes payments under Part B for physician services and payments under Part A for the costs of inpatient stays at inpatient facilities such as skilled nursing facilities (SNFs) and hospitals. While Medicare pays both SNFs and hospitals through prospective payment systems for the costs of inpatient stays, physician services provided to SNF and hospital inpatients are paid according to the Medicare Physician Fee Schedule. The amount Medicare pays physician service providers (such as physicians, podiatrists, and nurse practitioners, referred to collectively as "physicians") can vary based on where the service is provided (such as a SNF, hospital, or physician's office). Physician services can include medical and surgical procedures, office visits, and medical consultations. Fee schedule payments for physician services are based on three major categories of physician costs: practice expense, physician work, and malpractice insurance. The practice expense is intended to cover overhead costs involved in providing a service. To account for different practice expenses that physicians incur at different settings, Medicare designates a nonfacility rate and a facility rate for each service within the fee schedule. Because physicians generally incur higher practice expenses by performing services in their offices and other nonfacility settings such as independent clinics and urgent care facilities, Medicare generally reimburses physicians at a higher nonfacility rate for services performed in these settings. For services performed at a facility setting such as a SNF or hospital, Medicare generally reimburses physicians for services at a lower facility rate, and the prospective payment system payment to the facility covers the overhead expense. Physicians indicate the applicable place of service on a Medicare claim using a two-digit place-of-service code to ensure that Medicare properly reimburses the physician at either the nonfacility rate or the facility rate. The physical setting where a physician performs a service does not always determine the appropriate place-of-service code. For example, when a beneficiary is a registered inpatient at a hospital or SNF, physician services should always be coded with a facility place-of-service code and paid at the facility rate. This is irrespective of the setting where the patient actually receives the facetoface encounter. Our preliminary data analysis indicates that during 2018 and 2019, Medicare may have paid a significant number of Part B physician service claim lines at the nonfacility rate when the beneficiary was a Part A inpatient at either a hospital or SNF. We will determine whether Medicare appropriately paid claims for Part B physician services based on the correct place-of-service code when a beneficiary was an inpatient at a SNF or hospital.

Announced or Revised Agency Title Component Report Number(s) Expected Issue Date (FY)
June 2021 Centers for Medicare and Medicaid Services Accuracy of Place-of-Service Codes on Claims for Medicare Part B Physician Services When Beneficiaries Are Inpatients Under Part A Office of Audit Services W-00-21-35872 2022