Chapter 13
Medicare Reimbursement

13.1 Medicare Fee Schedule: A Resource Based Relative Value Scale (RBRVS)

The Medicare Fee Schedule is a resource based relative value scale (RBRVS) which assigns values to procedures in relation to one another. The relative value for each service will be the sum of relative value units representing three components: 1. The amount and complexity of work that goes into performing the service; 2. The usual overhead costs to the physician associated with providing the service such as rent, equipment, personnel expenses, and supplies; and 3. The cost to the physician to obtain professional liability or malpractice insurance as it relates to specific procedures. Each component has a corresponding Geographic Practice Cost Index which reflects the relative cost of practicing in a locality against a national average. Each relative value is multiplied by the corresponding Geographic Practice Cost Index. The three component factors are then accumulated to arrive at an adjusted amount. This amount is then multiplied by the conversion factor to establish the Medicare full fee schedule amount in the Medicare Physician Fee Schedule Data Base (MPFSDB), implemented.

This fee schedule includes all physician and "incident to physician" services, and effectively replaces the reasonable charge system for these specialties, with the exception of codes listed below, which are still reimbursed under the reasonable charge system. Under the Medicare Fee Schedule (MFS), all physicians within a locality are reimbursed the same amount for a service without regard to specialty. Since 1998, Medicare payments for physician assistants, nurse practitioners and clinical nurse specialists are linked to the physician fee schedule.

a. Codes That Would Be Reimbursed Under the Reasonable Charge System if Covered.

Transportation/Ambulance Services:

A0030, A0040, A0050, A0225, A0300, A0302, A0304, A0306, A0308, A0310, A0320, A0322, A0324, A0326, A0328, A0330, A0340, A0342, A0344, A0346, A0348, A0350, A0360, A0362, A0364, A0366, A0368, A0370, A0380, A0382, A0384, A0390, A0392, A0394, A0396, A0398, A0420, A0422, A0424, Z0224

Medical Supplies: A4212, A4590

Intraocular Lenses: V2630, V2631, V2632

Blood Products: P9010, P9011, P9012, P9013, P9016, P9017, P9018, P9019, P9020, P9021, P9022, P9023

Transfusion Medicine: 86850, 86860, 86870, 86880, 86885, 86886, 86890, 86891, 86900, 86901, 86903, 86904, 86905, 86906, 86915, 86920, 86921, 86922, 86927, 86930, 86931, 86932, 86945, 89650, 86965, 86970, 86971, 86972, 86975, 86976, 86977, 86978, 86985, 895810, 89251, 89252, 89253, 89254, 89255, 89256, 89257, 89258, 89259, 89260, 89261, 89264

EMG Device: E0746


13.2 Resource - Based Practice Expense

Section 121 of the Social Security Act Admendments of 1994 required HCFA to develop a methodology for a resource-based system for determining practice expense relative value units (RVUs) for all Medicare Fee Schedule services.

In accordance with the Balanced Budget Act of 1997, the new practice expense resource-based RVUs will be phased in over a four-year period. The first phase of the resource-based practice expense went into effect January 1, 1999. The resource-based practice expense RVUs will be based on:

Beginning in 2002, the practice expense RVUs will be entirely resource-based.

The development of the resourse-based practice expense RVUs replaced the current policy that takes a 50 percent reduction of the practice expense RVUs for certain places of service. The new policy will generally identify two levels of practice expense and RVUs for each procedure code. The new levels apply to facility and non-facility settings. The higher non-facility practice expense RVUs will be used for services performed in a doctor's office, the patient's home, or a facility or institution other than a hospital, skilled nursing facility (SNF) or ambulatory surgical center (ASC). The lower facility practice expense RVUs will be used for the services furnished to hospital, SNF, and ASC patients.

13.3 Professional/Technical Component

a. Purchased Technical Components

When billing for purchased services, providers (other than non-physician providers) must split the billing of the diagnostic test to indicate the technical portion of the test was purchased from another provider/supplier while the professional component of the test was done by themselves.

Medicare regulations for purchased technical components of tests require the purchasing physician to identify the supplier from whom the test was purchased and the amount the supplier charged the billing physician, net of any discounts. Reference Chapter 9, section 9.3, on reporting requirements (Block 20).

If you have purchased the technical component of these services, you must enter the purchase price under charges if the “YES” block is checked. A “YES” check indicates that an entity other than the entity billing for the service performed the diagnosis test. A “NO” check indicates that “no purchased” tests are included on the claim”. When “YES” is annotated, block 32 must be completed. When billing for multiple purchased diagnostic tests, each test must be submitted on a separate claim form.

Additionally, you must itemize charges for the technical and professional components of the test. Report the TC modifier (technical component) and the 26 modifier (professional component) after each procedure code to identify these components.

Note: If the technical component of the diagnostic services was NOT purchased, block 20 should be checked “NO”. If the technical portion of the diagnostic service was purchased, blocks 20 and 32 of the HCFA 1500 claim form must be completed.

b. Non-Physician Billing for PC/TC

With the changes initiated as a result of the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993), the participating versus non-participating payment differential was expanded to non-physicians for all services reimbursed from the physician fee schedule. Therefore, the professional and technical components of diagnostic tests are both subject to non-participating payment limitations.

As a result of these OBRA 1993 changes, there is no longer a need to bill separately for the professional and technical components of diagnostic services for services performed on or after January 1, 1994.

If you are performing both the professional and technical components of a diagnostic test, bill for the global fee. If you are purchasing the professional component of the test, continue to bill the components separately, and report the Medicare Provider Identification Number of the physician who provided you with the interpretation.

13.4 Interest on Medicare Payment

The Omnibus Budget Reconciliation Act requires the Medicare carrier to pay interest on all “clean” claims. The annual rate of interest and time frame at which interest is applied changes periodically based on government direction. Effective January 1, 1999, the interest rate for delayed payment will be 6.75%. The rate is applicable to clean paper and electronic claims that have not been paid by the 30th day after the date of receipt.

Clean Claims - A clean claim is defined as: a claim which does not require investigation or development outside the Medicare Carriers operation on a prepayment basis. Such a claim is one that:

Interest Calculation - To determine the amount of interest due, the Medicare carrier must multiply the amount of reimbursement times the annual interest rate, divide the product by 365 to determine daily interest rates. Medicare carriers then multiply this dividend by the number of days for which interest is due.

13.5 Reciprocal and Locum Tenens Billing Arrangements

The Health Care Financing Administration issued clarification on reciprocal and locum tenens billing arrangements. The requirements for the submission of claims under reciprocal and locum tenens billing arrangements are the same for assigned and non-assigned claims.

a. Reciprocal Billing Arrangements

A patient's regular physician may submit claims, and if assignment is accepted, may receive the Part B payment for covered visit services (including emergency visits and related services) which the regular physician arranges to be provided by substitute physician on an occasional reciprocal basis, if:

If the only substitution services a physician performs in connection with an operation are post-operative services furnished during the period covered by the global fee, these services do not need to be identified on the claim as substitution services. If post-operative services performed in the global period by the substitute physician are billed, they will be denied as part of the global service.

A physician may have reciprocal arrangements with more than one physician. The arrangements do not need to be in writing.

b. Medical Group Claims Under Reciprocal Billing Arrangements

These requirements do not apply to the substitution arrangements among physicians in the same medical group where claims are submitted in the name of the group. On claims submitted by the group, the group physician who actually performed the service must be identified as the rendering physician.

For a medical group to submit assigned and non-assigned claims for the covered visit services of a substitute physician who is not a member of the group, the requirements are the same as outlined under section 13.5a, including the use of the Q5 modifier. In addition, the medical group physician for whom the substitution services are furnished must be identified by reporting the provider identification number (PIN) in block 24K of the appropriate line item.

For an independent physician to submit assigned and non-assigned claims for the substitution services of a physician who is a member of a medical group, the same requirements apply.

Physicians who are members of a group but who bill in their own names are treated as independent physicians for purposes of this provision.

c. Locum Tenens Billing Arrangements

It is a long-standing and widespread practice for substitute physicians to cover professional practices when the regular physicians are absent for reasons such as illness, pregnancy, vacation, or continuing medical education, and for the regular physician to bill and receive payment for the substitute physician's services as though they were performed by the regular physician. The substitute physician generally has no practice of his or her own and moves from area to area as needed. The regular physician generally pays the substitute physician a fixed amount per diem, with the substitute physician having the status of an independent contractor rather than of an employee. These substitute physicians are generally called "locum tenens" physicians.

For services furnished, the patient's regular physician may submit the claim, and (if assignment is accepted) receive Medicare payment for covered visit services (including emergency visits and related services) of a locum tenens physician who is not an employee of the regular physician and whose services for patients of the regular physician are not restricted to the regular physician's offices, if:

If the only substitution services a physician performs in connection with an operation are post-operative services furnished during the period covered by the global fee, these services do not need to be identified on the claim as substitution services. If post-operative services performed in the global period by the substitute physician are billed, they will be denied as part of the global service.

d. Medical Group Claims Under Locum Tenens Arrangements

For a medical group to submit assigned and non-assigned claims for services a locum tenens physician provides for patients of the regular physician who is a member of the group, the requirements mentioned above apply. For purposes of these requirements, per diem or similar fee-for-time compensation which the group pays the locum tenens physician is considered paid by the regular physician. Also, a physician who has left the group and for whom the group has engaged a locum tensens physician as a temporary replacement, may still be considered a member of the group until a permanent replacement is obtained.

The group must enter the Q6 modifier after each procedure code. In addition, the medical group physician for whom the substitution services are furnished must be identified as the rendering physicians for each service billed.

Physicians who are members of a group but who bill in their own names are generally treated as independent physicians for purposes of the requirements for locum tenens services. Compensation paid by the group to the locum tenens physician is considered paid by the regular physician for purposes of those requirements. The term regular physician includes a physician who has left the group and for whom the group has hired the locum tenens as a replacement.

e. Covered Visit Service Defined for Reciprocal and Locum Tenens Billing

The term "covered visit service" includes not only those services ordinarily characterized as a covered physician visit but also any other covered items and services furnished by the substitute physician or by others as incident to the substitute physician's services.

Items and services furnished by the staff of the substitute physician covered as incident to his or her services if billed by the substitute physician are still covered if billed by the regular physician.

Items and services furnished by the staff of the regular physician covered as incident to his or her services if furnished under the regular physician's supervision are still covered if furnished under the supervision of the substitute physician.

f. Continuous Period Of Covered Services for Reciprocal and Locum Tenens Billing

A continuous period of covered visit services begins with the day on which the substitute physician provides covered visit services to Medicare patients of the regular physician, and it ends with the last day on which the substitute physician provides these services to these patients before the regular physician returns to work. This period continues without interruption for days on which no covered visit services are provided to patients on behalf of the regular physician or are furnished by some other substitute physician on behalf of the regular physician. A new period of covered visit services can begin after the regular physician has returned to work.

Example: The regular physician goes on vacation on June 30, 1996 and returns to work on September 4, 1996. A substitute physician provides services to Medicare patients of the regular physician on July 2, 1996, and at various times thereafter, including August 30th and September 2, 1996. The continuous period of covered visit services begins on July 2nd and runs through September 2nd, a period of 63 days.

Since the September 2nd services are furnished after the expiration of 60 days of the period, the regular physician is not entitled to bill and receive direct payment for them. The substitute physician must bill for these services in his or her own name. The regular physician may, however, bill and receive payment for the services which the substitute physician provided his or her behalf in the period July 2nd through August 30th.

g. Payment Amounts and Limiting Charges

The Limiting Charge and the payment for services identified as reciprocal services or locum tenens services will be calculated as though the regular physician provided the services. In addition, advance notices for waiver of liability and the prohibition against billing for not medically necessary services are to be given in the name of the regular physician.

A physician or other person who falsely certifies that the requirements for reciprocal and locum tenens billing arrangements are met may be subject to possible civil and criminal penalties for fraud. Also, the physician's right to receive payment or to submit claims under this provision or even to accept any assignments may be revoked.