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The Centers for Medicare & Medicaid Services’ final rule clarifies changes to PPS for federally qualified health centers and raises some reimbursement issues to prepare for.

Navigating health reform

Are You Prepared for Changes in the Prospective Payment System?

  • 10/6/2014

On May 2, 2014, the Centers for Medicare & Medicaid Services (CMS) published a final rule establishing a prospective payment system (PPS) for Federally Qualified Health Centers (FQHCs). The rule mandates PPS reimbursement for FQHCs effective for Medicare cost reporting periods beginning on or after October 1, 2014. While many of the key provisions of the proposed FQHC PPS rule remain unchanged, the final rule clarifies certain aspects regarding PPS implementation. As a result, FQHCs will need to take steps to prevent unnecessary reductions in reimbursement under this new rule.

What’s new?

CMS established a national baseline PPS rate of $158.85 per encounter. This base rate will be adjusted by a geographic adjustment factor (GAF) which is based on the location where the services are delivered. Thus, for organizations with multiple locations, the geographically adjusted rate may differ between sites. In addition, the PPS rate will be increased by 34.16 percent when services are provided to new patients as well as patients receiving an initial preventive physical exam or annual wellness visit.

Sample PPS Rate Calculation: $158.85 x GAF x 1.3416 (if applicable) = PPS Rate

While the final rule indicates these provisions will result in an increase of approximately 32 percent in the Medicare payments to FQHCs, this does not account for the “lesser of” provision in which CMS will pay 80 percent of the lesser of the provider’s actual charge or the Medicare PPS rate. Beneficiary coinsurance will remain at 20 percent. However, coinsurance will be calculated based on the lesser of the provider’s actual charge or the Medicare PPS rate. New payment codes (G-codes) are being established for billing under the PPS system. Providers are required to report a total charge for the G-code encounter. This single charge should reflect the sum of the individual charges that equate to a typical bundle of services that are furnished per diem to a Medicare beneficiary.

CMS further indicated that Medicare Advantage (MA) wrap-around payments will be based on the difference between the PPS rate and the MA contracted rate if the contracted rate is lower than the amount Medicare would otherwise pay for FQHC services.

FQHC’s can expect some challenges in the following areas as a result of the PPS rule:

  • Reimbursement
  • Coding and billing for services
  • Denials management
  • Payment accuracy validation processes
  • Cost report cost allocations

What remains the same?

The reasonable costs of the pneumococcal and influenza vaccines, allowable graduate medical education costs, and bad debts will continue to be determined and reimbursed through the cost report. Also, an additional payment is still allowed for an illness, injury, or a mental health visit that occurs subsequent to the first visit that requires additional diagnosis or treatment on the same day. Claims must continue to report the detailed health care common procedure coding system (HCPCS) codes to describe all services that occurred during the encounter.

How we can help

CliftonLarsonAllen can help your organization prepare for this change. We can help you understand the final rule and clarify the necessary transitions and implementation steps that need to be in place prior to your next cost reporting period beginning on or after October 1, 2014. This is particularly important as it relates to necessary revisions to your charges and billing practices. We can provide the following services to assist you:

  1. Safeguards to avoid lost reimbursement
  2. Coding and billing assessment
  3. Managed care wrap-around payment analysis
  4. Cost report and cost report allocation reviews