Congress has been advised to “direct the Secretary of Health and Human Services to reduce payment rates for evaluation and management office visits provided in hospital outpatient departments so that total payment rates for these visits are the same whether the service is provided in an outpatient department or a physician office.” This recommendation was made by MedPac (Medicare Payment Advisory Commission) in their report to congress on March 12, 2012. If it is accepted, the incentive for many provider based clinics, those provider based clinics whose highest volume of service is evaluation and management services, will disappear. We have tried to provide some guidance on this issue, read on.

What is clear in our experience is the need to carefully look at all of the data from current business practices, which includes revenue, patient population and demographics. Additionally, a detailed comparative analysis of the hospital’s cost report to help determine the financial advantage of becoming Provider Based. The question is, if restructuring is necessary, will the return on investment support the conversion? For some of our clients the changeover was not worth the effort because of the changes to the infrastructure.  However, some have found it very rewarding. Either way, the decision trail must be based on the facts.

While Medicare reimburses differently for the services you render depending on your setting; as they should, all costs are not equal. Services billed as a physician office, i.e. POS 11, are paid using the physician fee schedule rates, and services furnished in a hospital outpatient department/location are paid under the ambulatory payment classification (APC) rates. The reimbursement mechanisms determined by Medicare on how to compensate healthcare providers for the physician and technical components of services rendered; results in the aggregate payments for services furnished in a hospital outpatient setting exceeding the payments made for the same services furnished in a physician office setting. Well that’s an obvious advantage, but, do you qualify to bill this way?

CMS has several requirements that must be met in order to qualify for Provider Based Status. These criteria focus on the following areas: licensure; ownership and control; administration and supervision; clinical services; financial integration; public awareness; and location in immediate vicinity of the main provider. This may or may not be advantageous for your facility; we can help you to be certain about which way to go.