Provider Types Affected

Providers submitting claims to Medicare contractors (carriers, Fiscal Intermediaries (FI), and/or Part A/B Medicare Administrative Contractors (A/B MAC)) for services provided to Medicare beneficiaries, which are paid under the OPPS or the ASC payment system

Provider Action Needed

Impact to You

This article informs affected providers of how partial credits for medical devices are to be reported and paid under the OPPS and ASC payment systems.

What You Need to Know

The Centers for Medicare & Medicaid Services (CMS) is implementing a partial device credit policy for hospitals paid under the OPPS and for ASCs paid under the revised ASC payment system (for services furnished on or after January 1, 2008). The partial credit policy applies to the same devices, Ambulatory Payment Classifications (APCs), and ASC procedures to which the no cost or full credit policy applies. Medicare payment will be reduced by 50 percent of the estimated cost of the device (i.e., the device offset percentage) in cases in which the hospital or ASC reports that it received a partial credit of 50 percent or more of the cost of the new device that is being implanted. See the table of applicable APCs at http://www.cms.hhs.gov/HospitalOutpatientPPS/ for the percentage reduction to the payment when the hospital reports a partial credit of 50 percent or more for a specified replacement device (also listed in those tables).

A table of covered ASC surgical procedures to which the partial device credit policy applies is available at http://cms.hhs.gov/ASCPayment/ . Table 58 provides the device offset percentages for the selected OPPS APCs to which the partial device credit policy applies under the revised ASC payment system. ASCs will receive the same amount of payment reduction (in dollars) as a hospital when reporting a partial credit for a new replacement device.

What You Need to Do

See the Background and Additional Information Sections of this article for further details regarding this change.

Background

In general, CMS includes the full payment for devices with the payment for the service in which the device is used by using only outpatient hospital claims that contain the full cost of medical devices in setting the Medicare payment rates.

In some cases, the cost of the device is a very large proportion of the cost of the procedure on which the APC payment for the procedure is based. Thus, when the provider receives partial credit for the device and therefore, does not incur the full cost of the procedure, it is necessary to adjust the payment so that the payment reflects the reduced cost of the device. This is necessary to:

• Provide an appropriate payment for the service, and
• Ensure that the Medicare beneficiary’s co-payment liability is reduced when appropriate.

CMS determined that partial credits occur more commonly than do full credits or no cost devices. In addition, CMS has learned that typical industry practice for some types of devices is to:

• Provide a 50 percent credit in cases of device failure (including battery depletion) under warranty if a device failed before three years of use, and
• Prorate the credit over time between three and five years after the initial device implantation, as the useful life of the device declines.

In these cases, neither the hospital nor ASC is incurring the full cost of the device, although the Medicare payment is calculated based on the full cost of the device.

Effective for services furnished on or after January 1, 2007, CMS implemented a policy to adjust the OPPS payment for procedures assigned to selected APCs when any of the specified devices was implanted in a beneficiary (and remained in the patient at least temporarily) and was furnished either without cost or with full credit for the cost of the device being replaced. See CR5263 (Transmittal 1103, November 3, 2006; http://www.cms.hhs.gov/transmittals/downloads/R1103CP.pdf ) or related MLN Matters article (MM5263: http://www.cms.hhs.gov/MLNMattersArticles/downloads/MM5263.pdf ) and the Medicare Claims Processing Manual (Pub.100-4, Chapter 4, Section 61.3; http://www.cms.hhs.gov/manuals/downloads/clm104c04.pdf ) on the CMS Web site.

Hospitals report the occurrence of a no cost or full credit device to CMS by reporting the -FB modifier on the line with the procedure code in which the no cost or full credit device is used when the device is on the list of specified devices to which this policy applies. The lists of affected devices and APCs are located at http://www.cms.hhs.gov/HospitalOutpatientPPS/ on the CMS Web site.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA; Section 626) requires implementation of a revised ASC payment system no later than January 1, 2008. The revised payment system to be implemented January 1, 2008, is based on the relative payment weights established under the OPPS and many of the payment policies of the OPPS, including the full device credit policy. A special edition MLN Matters article outlining the new ASC payment system is available at http://www.cms.hhs.gov/MLNMattersArticles/downloads/SE0742.pdf on the CMS Web site.

Effective January 1, 2008, CMS is also implementing a partial device credit policy under both the OPPS and the ASC payment system.

Hospitals and ASCs report the occurrence of a partial credit device to CMS by reporting the -FC modifier on the line with the procedure code in which the partial credit device is used when the device is on the list of specified devices to which this policy applies. The devices, APCs, and covered ASC surgical procedures to which the partial device credit policy applies are the same as the devices, APCs, and covered ASC surgical procedures to which the full device credit policy applies (–FB modifier).

For services furnished on or after January 1, 2008, hospitals and ASCs are required to report modifier - FC, with the procedure code for all cases in which:

• The device being implanted is on the list of creditable devices;
• The procedure code in which the device is used is assigned to an APC that is on the list of APCs to which the policy applies in the case of hospitals, or on the list of procedures to which the policy applies in the case of ASCs; and
• The hospital or ASC received a credit of 50 percent or more of the estimated cost of the new replacement device.

The list of devices, APCs, and ASC procedures to which this policy applies is available at http://www.cms.hhs.gov/HospitalOutpatientPPS/ on the CMS Web site. The reduction to the APC payment amount when the hospital reports a partial credit for the new replacement device is available on that Web site as well. An ASC will receive the same amount of payment reduction (in dollars) as a hospital when it reports receiving a partial device credit for a particular procedure.

Remember that both hospitals and ASCs are required to report the -FC modifier with the code for the device implantation procedure, not with the code for the device. Failure to include the proper modifiers on claims as appropriate may result in payment to which the provider is not entitled. If hospitals report the modifier with the device code instead of the procedure code, the claim will be returned.

Because hospitals may not know the amount of credit the manufacturer will provide for the replacement device when the replacement procedure takes place, hospitals will have the option of either: (1) submitting the claim for the device replacement procedure to their Medicare contractor immediately without the FC modifier and then submitting a claim adjustment with the FC modifier at a later date once a credit determination is made; or (2) holding the claim for the device replacement procedure until a determination is made by the manufacturer on the partial credit amount, and submitting the claim with the FC modifier appended to the implantation procedure code if the partial credit is 50 percent or more of the cost of the replacement device.

ASCs have the same two billing options as outlined above for hospitals, but if an ASC chooses Option 1 and bills for a replacement device procedure prior to receiving a manufacturer's credit determination, it must subsequently contact the Medicare contractor regarding a claims adjustment if a credit of 50 percent or more is received.

When hospitals or ASCs use Option 1, they should be mindful that the initial Medicare payment for the procedure involving the replacement device is conditional and subject to adjustment.

Following are some hypothetical examples that illustrate the revised policy:

OPPS Examples (all payment amounts are hypothetical):

ASC Examples (All payment amounts are hypothetical):

Note: Payment for devices, with the exception of pass through devices, are packaged into payment for the device implantation procedure. In the below examples, the device is not shown as a separate line item on the ASC claim because, in order to ensure appropriate payment, ASCs should not report packaged devices as separate line items on the claim.

Additional Information

To view the official instruction (CR5668) on which this article is based, providers may visit http://www.cms.hhs.gov/transmittals/downloads/R1383CP.pdf on the CMS Web site.

If you have any questions, please contact your Medicare carrier, FI, or A/B MAC at their toll-free number, which may be found on the CMS Web site at http://www.cms.hhs.gov/MLNProducts/downloads/CallCenterTollNumDirectory.zip on the CMS Web site.

Disclaimer
This article was prepared as a service to the public and is not intended to grant rights or impose obligations. This article may contain references or links to statutes, regulations, or other policy materials. The information provided is only intended to be a general summary. It is not intended to take the place of either the written law or regulations. We encourage readers to review the specific statutes, regulations and other interpretive materials for a full and accurate statement of their contents.

News Flash -Medicare Remit Easy Print (MREP) - Still using Standard Paper Remittance Advices (SPR)? Did you know that with the new MREP software that is available to you (for free!), you can view and print as many or as few claims as needed? With the MREP software, you can navigate and view an Electronic Remittance Advice (ERA) using your personal computer. This is especially helpful when you need to print only one claim from the Remittance Advice (RA) when forwarding a claim to a secondary payer. CMS developed the MREP software to enable you to read and print the HIPAA-compliant ERA, also known as Transaction 835 or -the 835-. Contact your carrier, A/B MAC or DME MAC to find out more about MREP and/or for information on how to receive HIPAA compliant ERAs.

Posted: 12/07/2007