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Reporting the Correct Place of Service *Reminder*

Medicare once again reminded physicians and their billing agents to ensure that they are reporting the correct place of service on physician claims, particularly on claims for outpatient physician services payable under Part B. Such services include a wide variety of medical and surgical procedures, office visits, and consultations, which may be performed in facilities, including hospitals and provider-based departments and clinics, as well as in non-facility locations, such as freestanding clinics and urgent care centers.

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Because there is a site-of-service payment differential for these services, it is essential to determine and report on the claim whether they were furnished in a facility or non-facility setting.

Physicians are paid for services furnished to Medicare beneficiaries under a specific payment methodology referred to as the Medicare physician fee schedule (MPFS). Payments under this methodology have three components, which are designed to cover physician costs in each of these three categories: practice expense, physician work, and malpractice insurance.

The practice expense portion of the MPFS payment is designed to cover the physician's overhead expenses, which are generally higher if he or she performs that service in a freestanding clinic, rather than in a facility setting, such as a hospital outpatient department or a provider-based clinic. Therefore, the practice expense portion of the applicable MPFS payment is higher when the site of service identified on a particular claim reflects a non-facility, rather than a facility setting to cover the higher overhead costs incurred.

If however, a physician, or his or her billing agent, incorrectly codes a non-facility site of service when that service actually was performed in a facility setting, then the physician would receive more reimbursement than he or she is entitled to, resulting in an overpayment. Such overpayments increase the claims error rate and subject the physician to overpayment determinations under the RAC and other Medicare correct payment programs.

In a recent audit, the Office of Inspector General (OIG) found that many physicians were incorrectly coding for the site of service, resulting in significant overpayments. The OIG warned that it is critical for physicians and their billing agents, to code the site of service correctly, and thus, avoid such overpayments in the future. Hospitals, which often act as billing agents for employed or contracted physicians are encouraged to review their existing physician billing practices to assure that they are accurately identifying and reporting appropriate site-of-service codes on all physician claims.