1. Schaum, Kathleen D. MS

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As a wound/ulcer management reimbursement strategy and education consultant, this author receives many requests for coding, payment, and coverage assistance. For the past few months, a two-digit code has plagued numerous providers. Please join me in reviewing several scenarios that paint the picture of this code, which has caused numerous repayments/reduced payments.


Scenario 1. A coder for a physician called to tell me that the wound/ulcer management physician just completed a postpayment audit for debridements performed in skilled nursing facilities (SNFs). The coder knew she reported the correct debridement codes, but the physician was asked for repayments for every audited claim.


Scenario 2. A physician called to say that he just received the results of a postpayment audit for the application of cellular and/or tissue-based products (CTPs) for skin wounds for patients he managed in an on-campus hospital-owned outpatient wound/ulcer management provider-based department (PBD). The physician said his documentation met all of the requirements of the local coverage determination published by the Medicare Administrative Contractor (MAC) that processes his claims, and he reported the correct CTP application and product code, the correct modifier, and the correct units. However, he was asked for repayments for every claim that was reviewed.


Scenario 3. A physician called to ask if Medicare had reduced payments for wound/ulcer management services and procedures performed in physician offices. The physician shared a lengthy list of codes that were paid significantly less for the past 3 months.


Before reading on, take a few minutes to guess the problem that caused the repayments/reduced payments in these scenarios.


When presented with these and other similar scenarios, this consultant always made the same request: "Please send a copy of the deidentified claims, remittance advices, and documentation that you submitted to the MAC and/or auditor." Following is what this consultant uncovered after reviewing the information that was provided for the above scenarios.


Scenario 1. The physician had a contract with the SNFs and billed them for the selective debridements that he performed during the patients' Medicare Part A stays and the Medicare Part B noncovered stays. The coder correctly billed the surgical debridements to the Part B MAC. The physician's documentation was impeccable. That caused this author to start at the top of each claim and review every field. The problem was in the Place of Service (POS) field of the claim. The coder reported the two-digit POS as 11, Office, rather than 31, Skilled Nursing Facility. When the coder was asked about the incorrect POS code, she said she reported 11 because "I billed it from the physician's office." That incorrect POS code caused every audited claim to be paid at the Medicare physician office rate, which is higher than the Medicare facility rate. Because the physician was overpaid for every claim, he incurred a repayment for every claim.


Scenario 2. The physician was correct: his documentation met all the CTP documentation requirements of his MAC's local coverage determination, his claims reported the correct CTP application and product code, the correct modifier, and the correct units. As in Scenario 1, this consultant then reviewed every field of every claim. In this case the POS was reported as 11, Office, rather than 22, On Campus-Outpatient Hospital. When the physician's billing company was queried about the incorrect POS code, they said, "The physician never told us he performed the work in a hospital outpatient PBD." Again, that incorrect POS code caused every audited claim to be paid at the Medicare physician office rate, which is higher than the Medicare facility rate. Because the physician was overpaid for every claim, he incurred a repayment for every claim.


Scenario 3. This physician provided wound/ulcer management services in hospital outpatient PBDs, SNFs, and his own office. After reviewing a sample of all the physician's claims, this consultant noticed that all of the claims reported the POS as 22, On Campus-Outpatient Hospital. Because POS 22 and POS 31, Skilled Nursing Facility, are paid the same facility rate, the incorrect POS did not affect the Medicare payment. However, by reporting POS 22 rather than POS 11, every physician office claim was paid at the lower Medicare facility rate. For example: When the physician performed selective debridement in his office and reported POS 22, he was paid $36.29 instead of the $102.59 he should have been paid.


By now readers should have an appreciation for the importance of reporting correct POS codes. Following are some frequently asked questions that this consultant has received about POS codes.


Q: What are the definitions of the POS codes and how can I determine if the physician/qualified healthcare professional (QHP) will be paid the higher nonfacility (office) rate or the lower facility rate?


A: The Medicare Claim Processing Manual, Chapter 26, Sections 10.5 and 10.61 provides all of the POS codes, definitions, and Medicare payment rate designations, as well as the instructions for using the POS codes. Please note that the list of POS codes is extensive. It even includes places of service such as schools (03); homeless shelters (04); prisons/correctional facilities (09); mobile units (15); and temporary lodging such as hotels, campgrounds, cruise ships (16). In addition, the POS codes differentiate among sites of care such as assisted living facilities (13), group homes (14), SNFs (31), nursing facilities (32), and custodial care facilities (33); as well as off-campus-outpatient hospitals (19) and on-campus outpatient hospitals (22). See the Table for the complete definitions of the POS codes that created the problems in the discussed scenarios.


Q: Are physicians/QHPs required to report POS codes on their Medicare claims?


A: Yes, physicians/QHPs are required to report the POS codes on all claims they submit to Medicare Part B contractors. The POS code identifies the site of care where the service/procedure was performed by the physician/QHP to the patient.


Q: Why do physicians/QHPs receive higher Medicare payment rates for work performed in their offices?


A: The Medicare Physician Fee Schedule includes three major components for every service and procedure: practice expense (office overhead cost), physician work, and malpractice insurance. Because physicians incur higher practice expenses in their offices, Medicare pays higher rates for POS 11.


Q: How can coders and billing companies know the POS where a physician/QHP performed his work, especially if the physician/QHP goes to several sites of care each day/week?


A: The physician/QHP, coders, and billing companies should implement an internal control system to prevent incorrect reporting of POS codes. For example, the physician/QHP could report the POS in documentation, on charge sheets, and so on for every patient encounter. Then the coders and billing companies will know the exact POS code to report.


In addition, one of the internal audit topics for physician/QHP offices should be to verify if the POS code reported on the claim matched the exact place where the physician/QHP performed the work.


Q: If a physician/QHP rents office space in a hospital or on the hospital campus and cares for patients in that office, what POS code should be reported on the Medicare claim?


A: When physicians/QHPs rent and maintain separate office space in a hospital or on the hospital campus, and the physician/QHP office is not considered a PBD of the hospital, and the physician/QHP should report POS 11


Q: Do private payers require POS codes?


A: Most private payers use and require POS codes on physician/QHP claims. Some private payers even publish medical policies that specify the places of service where certain services and procedures can be performed. Coders and billing companies who prepare physician/QHP claims should verify the POS policies of their patients' payers.



These scenarios are great examples of how physician/QHPs can incur repayments/payment reductions even though their documentation and coding are correct. Physicians/QHPs should implement a process for communicating the correct POS for every patient encounter. Do not let a simple two-digit code affect your revenue!




1. Centers for Medicare & Medicaid Services. Medicare Claims Processing Manual. Chapter 26 - Completing and Processing Form CMS-1500 Data Set. September 2020. Last accessed June 17, 2021. [Context Link]