Site-of-service changes: A coder’s view

By Rita Scichilone, MHSA, RRA, CCS

Professional Management Midwest

Omaha, NE

Physicians who "take their show on the road" and provide services to patients in hospital outpatient departments remote from office locations will be reimbursed differently by Medicare if HCFA’s proposed site-of-service differential is implemented. This may cause many physicians to perform more services in the office rather than a hospital setting.

Before getting into why this is so, it’s helpful to look at how the current system works. Holding clinics at rural hospital locations is a great way to bring specialty services to patients in their home towns. In many instances the hospital will charge a facility fee to cover personnel, equipment, and supply costs associated with patient services. The physician bills only for the professional fees.

Under the current system, a physician holding a weekly cardiology clinic in a hospital outpatient department would receive 21% less reimbursement from Medicare for these patients compared to providing services for patients in a physician’s office. When site of service "22" is listed in box 24B of the HCFA 1500, the payment is reduced to reflect the difference in practice expenses. A common mistake some practices make is using site of service "11," which causes an overpayment for services and could be interpreted by the Medicare program as abusive billing. When the physician pays rent for the space and provides the staffing, equipment, and supplies, it is appropriate to bill for the service as an office-based visit. It is only when the hospital charges a facility fee and the physician does not provide "overhead" expenses that site of service "22" is designated.

In Iowa, for example, the participating cardiologist receives a $51.29 payment for an established patient receiving level four services, billed with code 99214. For patients receiving the same services in the hospital outpatient department, the payment would be reduced to $43.45.

Under the proposed system, code 99214 would have two different levels of practice expense relative value units (RVUs). One would be applied to hospital outpatients (site 22) and one would be for office patients (site 11). Currently, the practice expense RVU for this code is 0.5. Only the services that would be performed in either location would have the two levels assigned. Hospital inpatients, nursing home visits, home visits, ER services, and other evaluation and management services that are only provided in one location would have a single RVU for practice expense, as they always have.

Cost analysis would reveal impact

As mentioned earlier, the new ruling — if implemented — may have the effect of encouraging more physicians to perform services in the office rather than the hospital outpatient department. A cost analysis of practice expenses would be required to fully analyze the financial impact of performing services in one site of service or the other. (Editor’s note: A list of all codes affected is available on the American Health Consultants Web site at The list is in the Special Coverage section.)

Supply codes have been permitted for some office procedures that reimburse physicians for the extra expenses associated with specific procedures. Under this proposal, supply codes will not be accepted, as the cost of the supplies is included in the expense RVU assigned to the procedure codes. Separate payment would not be made for the current HCPCS codes for surgical trays or other currently allowed supplies (codes A42.63, A4300, and A4550). Services such as pain management clinics are often hospital-based and will be affected by this proposed rule. If the services are provided to hospital outpatients, the differential site of service RVU will be applied. On the other hand, if the services are provided to patients in the office, the normal practice expense RVU will apply, even if the office is located inside the hospital.