Incorrect POS Coding and Medicare Overpayments
By Adrienne Dresevic, Esq., and Leslie A. Rojas, Esq., of The Health Law Partners, P.C.
In May, the Office of Inspector General (OIG) published a report (available here) alleging that incorrect place-of-service (POS) coding on physician claims resulted in approximately $33.4 million in Medicare overpayments for services provided from January 2010 through September 2012.
By way of background, many Medicare Part B services (ie, physician services) may be provided in either facility (hospital or ambulatory surgical center) or non-facility (physician’s office) settings. Medicare reimburses physicians at a higher rate for services provided in a non-facility setting than in a facility setting. The physician or biller reports the location in which the physician provided the services by identifying the appropriate POS code. The amount Medicare pays for these services is determined by the Medicare Physician Fee Schedule (MPFS), which takes into account the physician work, malpractice insurance, and practice expense attributable to the service. When a POS code is submitted, Medicare determines if the MPFS facility or non-facility payment rate should apply for the setting in question – which in turn allows Medicare to take into account the practice expense associated with the physician’s service. For example, Medicare pays physicians at a higher rate for services performed in non-facility locations due to the increased practice expense associated with providing services in these locations (eg, staff, supplies, equipment, rent, utilities, etc., all paid for and provided by the physician/practice). Conversely, when a physician performs services in a facility, Medicare pays the physician for the services and pays the facility a separate fee for the facility’s overhead costs. Therefore, as the OIG report indicates, the POS code has a significant effect on the physician’s reimbursement.
Specifically, the report found that Medicare potentially overpaid physicians approximately $33.4 million for services provided in facility locations but coded as being provided in non-facility locations. The OIG attributed these findings to weak internal controls at the physician billing level and insufficient efforts at the Medicare contractor level during the post-payment review. The OIG separated the $33.4 million in overpayments into four categories:
- $7.3 million in potential overpayments for services performed in ambulatory surgical centers but billed with a non-facility POS code;
- $7.1 million in potential overpayments for services performed in hospital outpatient locations but billed with a non-facility POS code;
- $800,000 in potential overpayments for the services of 33 out of the 120 physicians selected for the review who stated they were not responsible for the incorrect billing, who did not agree that some claims had been coded incorrectly, or who did not respond to the OIG’s inquiries; and
- $18.2 million in potential overpayments for the services of the remaining unselected hospital outpatient location-based claims.
The report recommends that CMS recover the overpayments and increase its education efforts directed towards physicians and billing personnel.
POS coding issues have been on CMS’s radar for quite some time. However, with this recent report, physicians should expect increased scrutiny on POS coding. The report reminds physicians that it is their responsibility to become familiar with Medicare billing requirements. Chapter 26 of the Medicare Claims Processing Manual (available here) discusses the appropriate POS codes for facility and non-facility payment rates (see section 10.5, in particular). It is important that physicians, or the facilities billing on behalf of the physicians, properly train their billing personnel on correct POS coding. In particular, they should ensure that their billing personnel understand the definition of a “physician’s office” and other non-facility locations. Additionally, it is easy for billing personnel to develop the bad habit of always entering a non-facility POS code simply because, for example, the majority of the claims submitted by the physician are for services rendered in the physician’s office. Billing personal should be made aware of this common pitfall and understand that the POS code is specific to each individual claim submitted. Physicians should also educate their billing personnel on the significance of incorrect POS coding, including that POS coding directly affects the physician’s reimbursement and that serious repercussions may follow if overpayments were made to the physician.
Even after employee training, human error may result in incorrect billing. Physicians should also implement internal controls to catch POS coding errors. For example, the physician may choose to perform internal audits of submitted claims so that they can promptly correct POS coding issues or timely refund overpayments. It is in the physician’s best interest to identify and correct these errors quickly to avoid having to refund the overpayments to Medicare months (or years) down the line when the funds may not be readily available. The OIG also reported that some billing systems have undetected flaws in its design or implementation that result in all claims being submitted with a non-facility POS code. Physicians should verify that their billing systems have the proper setting implemented to avoid this problem.
Errors may occur even after employees are properly trained and internal controls are put in place. Therefore, providers should be aware that they must report and return overpayments by the later of: (1) 60 days after the date on which the overpayment was identified; or (2) the date any corresponding cost report is due (if applicable). Failure to do so may result in False Claims Act liability. Providers will receive more guidance on the 60-day rule by February 2016 when CMS is due to publish the accompanying regulations.
 Payment for physician services may be made to the physician or the physician’s employer, which may be a hospital or other facility. In the report, and this article, the term “physician” includes hospitals and other facilities authorized to bill and receive Medicare Part B payment for physician services.
Adrienne Dresevic, Esq. graduated Magna Cum Laude from Wayne State University Law School. Practicing healthcare law, she concentrates in Stark and fraud/abuse, representing various diagnostic imaging providers, e.g., IDTFs, mobile leasing entities, and radiology and multi-specialty group practices.
Leslie Rojas, Esq. graduated from Wayne State University Law School and is licensed to practice law in Michigan and Illinois. Practicing healthcare law, she concentrates on fraud/abuse issues, compliance with federal and state healthcare regulations, health information privacy and technology issues, and transactional and corporate aspects of healthcare.
The authors are members of The Health Law Partners, P.C. and may be reached at (248) 996-8510 or (212) 734-0128, or at www.thehlp.com.
For more regulatory news, visit www.ahraonline.org/news.