June 2004 Bulletin

CMS clarifies billing for SNF patients

How to avoid reimbursement headaches

By Daniel H. Sung, JD

Recently, AAOS members have raised the issue of reimbursement under Medicare for diagnostic services provided to patients in skilled nursing facilities (SNF). Some orthopaedic surgeons have been denied or received reduced payments when they take and interpret X-rays in their office for SNF patients.

To address this situation, the Centers for Medicare and Medicaid Services (CMS) recently published instructions (Pub. 100-04 Medicare Claims Processing, Transmittal 183, May 21, 2004) that clarify the requirements imposed on SNFs when they obtain services from health care providers. CMS published these new guidelines because of many complaints from physicians arising from billing problems for SNF patients.

There are three scenarios involving Medicare SNF patients that can create reimbursement headaches for physicians:

  1. The physician is unaware of the specific billing rules that pertain to SNFs.
  2. The SNF is unaware of the specific billing rules or is unwilling to reimburse physicians for the services they provide to its patients.
  3. The physician doesn’t know that the patient is from an SNF, and the patient hasn’t notified the SNF about seeing the physician.

Consolidated billing rule

In April 2001, Congress enacted a law that required consolidated billing for SNFs. This meant that SNFs became responsible for Medicare billing of the entire package of care that their patients receive. SNFs could no longer unbundle services to an outside health care provider, who would then submit a separate bill directly to Medicare. Instead, SNFs have to furnish the services or supplies directly or under an arrangement with an outside provider. The SNF, rather than the health care provider, bills Medicare.

There are a few exceptions to this rule, the most significant being that physicians can separately bill Medicare for their professional services. However, physicians must still look to the SNF, rather than Medicare, for payment of non-professional services.

The practical effect of this rule creates administrative hassles for orthopaedic surgeons who perform diagnostic tests on SNF patients. For example, an orthopaedic surgeon may treat a patient with a hip fracture in the emergency room. Once the hip is fixed, the patient may be admitted to an SNF. It would not be uncommon for the patient to return to the orthopaedic surgeon who treated the hip fracture for periodic examination and X-rays to ensure the fracture is healing satisfactorily.

Typically, an orthopaedic surgeon who takes and interprets an X-ray in the office would bill Medicare for generating and interpreting the X-ray. However, because the consolidated billing rule for SNFs applies to this situation, the orthopaedic surgeon must seek reimbursement from the SNF for all services provided, except for professional services. So to be fully reimbursed, the orthopaedic surgeon in this case would have to submit two bills — one to Medicare for interpreting the X-ray that covers the professional component (using modifier –26), and another to the SNF for generating the X-ray in the office that covers the technical component (using modifier TC).

Reluctant reimbursement

Another instance where billing for SNF patients is a problem is when the SNF is unaware of the consolidated billing rule or is unwilling to reimburse physicians for the services they provide to SNF patients.

On this point, the recently published CMS Transmittal 183 provides guidance. It emphasizes that SNFs must have written agreements in place with all their suppliers, including physicians, that specify how and when the supplier is to be paid for services provided. The CMS transmittal further notes that an SNF’s failure to have this written agreement would put the SNF at risk of being “in violation of the terms of its provider agreement” with Medicare.

Even though the duty to maintain written agreements falls on SNFs, health care providers still must deal with more paperwork because they will have to ensure that they have a written agreement with every SNF that they have a relationship with. Health care providers also face a certain degree of risk if there is no written agreement because the lack of one puts the health care provider at risk for not being paid for services provided to SNF patients. Medicare will not reimburse the provider if the SNF fails to pay for services rendered.

It is important to note that this agreement is a direct negotiation between the SNF and the health care provider. Therefore, the amount or timing of payment are completely negotiable and are not subject to Medicare allowable charge limits. In sum, orthopaedic surgeons should negotiate the best payment rates they can with each SNF that they deal with for non-professional services provided to SNF patients.

Totally unaware

In some instances, a SNF patient might see a physician without notifying the SNF. In this case, the physician is probably unaware that the patient is coming from a SNF; furthermore, the SNF may not know that its patient has seen an outside health care provider.

CMS Transmittal 183 suggests that SNFs make every effort to educate patients on the applicable requirements of the consolidated billing rule. In particular, the transmittal suggests that SNFs should take particular care to ensure that their patients understand the need to consult the SNF before obtaining any services offsite. The transmittal also suggests that health care providers make efforts to determine whether any patient they see is receiving care from a SNF.

To avoide this scenario, consider adding a checkbox to your patient charge sheet that asks whether the patient is an SNF resident. This additional question will enable you to identify SNF patients quickly and will alert your office staff to the special billing requirements for SNF patients.

Daniel H. Sung, JD, is a policy analyst in the AAOS department of socioeconomic and state society affairs.


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