February 22, 2021 | Jessica Zeff

3 Minute Read

What Outpatient Rehab Departments Need to Know about Location Regulations

Location, Location, Location!!

This is the phrase realtors quote about the ability to get top dollar when selling a property and in healthcare, this is a phrase that can determine coverage and payment methods – who knew??

Therapy providers have some of the fewest restrictions when it comes to locations of just about any other Medicare benefit category, meaning that therapists can take their services to patients located pretty much anywhere. However, who bills and what claim form the services are billed on and the resulting payment rate will be impacted by the location.1 This is where compliance comes in because it’s important to ask questions about the location of the patient and the therapy services as well as the relationship of the patient to a healthcare facility provider in order to know how to bill appropriately.

What are some possible types of patients and locations for therapy services – at least from a Medicare perspective?  Take a look at this list…..2

  • Therapists’ private practice locations
  • Registered hospital outpatients in hospital locations
  • Registered hospital inpatients in hospital locations
  • Patients at home, but not under a home health plan of care
  • Patients at home under a home health plan of care
  • Skilled nursing home patients under their inpatient Part A benefit
  • Skilled nursing home patients no longer under inpatient (i.e., Part B)
  • Comprehensive outpatient rehabilitation facilities (CORFs)
  • Rehabilitation agencies

What to Consider from a Billing Compliance Perspective

First consider whether the patient is under the care of another healthcare provider.  For example, in the list above, there are several different healthcare providers:

  • Hospitals
  • Home health agencies (HHAs)
  • Skilled nursing facilities (SNFs)
  • CORFs
  • Rehabilitation agencies

When patients are under the care of a healthcare provider, therapists are usually employed or contracted by these healthcare providers and it is the healthcare provider’s responsibility to bill and receive payment for the therapy services.  At times, particularly for hospital inpatient services, home health agencies and skilled nursing facilities, there is no separate or additional payment for therapy services. Rather, payment for the therapy is part of the case rate or per diem rate paid for the inpatient care. For outpatient therapy, the payment may be the same as that made when the patient is seen in therapists’ private practice locations or when they provide therapy services to patients at home or in rented pools.3 In outpatient locations whether or not the patient is seen in a facility, the payment rates are determined under the Medicare Physician Fee Schedule (MPFS).  

You can read more about the key differences between inpatient acute and outpatient physical therapy here

Requirements for Reporting Location

Interestingly, hospitals are required to report the actual service location on their institutional claims4 and the phrase “location, location, location” has come to have even more significance following the passing of Section 603 of the Bipartisan Budget Act of 2015. This law created a “date line in the sand,” so to speak, by stipulating that any new off-campus outpatient hospital locations (off-campus is considered greater than 250 yards from the main hospital buildings) establishedafter the Act’s implementation date are no longer paid under the outpatient hospital payment method. Instead, the new off-campus outpatient hospital locations are subject to a different payment method that equates to a 60% payment reduction.6

Needless to say, hospitals want to keep their services either on-campus or in older, off-campus locations that are grandfathered under this law and continue to be paid at 100% of the outpatient hospital payment rates.  This means many hospitals have and will continue to evaluate where services are located and whether a location change could help preserve or improve payment.

Alternatively, there is the outpatient therapy benefit under the Medicare program. Under the benefit, hospitals are paid, for example, under the Medicare physician fee schedule or the Ambulatory Surgery Center fee schedule. Where hospitals are paid under the Medicare benefit for outpatient therapy, the section 603 rules regarding on- and off-campus locations do not apply.7 

The difference in rules suggests that where a hospital is in receipt of the Medicare benefit for outpatient therapy services, it may be worth considering the value of relocating off-campus. Relocation under these circumstances means that a hospital will continue to receive the same payment as in the former location because the payment method for outpatient therapy under the Medicare benefit is not changed based on hospital provider-based department or location requirements.  This can even prove to be a benefit for patients as a different location may have better parking and building access for those with mobility needs and other accessibility requirements.  

So the next time you are thinking about the best location for therapy services, do consider how these rules impact your organization alongside strategies for meeting patients’ needs and providing high standards of care.

Convert Your Hospital Therapy Department from a Cost Center to a Profit Driver

Leverage outpatient therapy services to boost your hospital’s bottom line.

This blog is made available by Net Health for informational purposes only. It is not meant to constitute legal or compliance advice.  Readers should seek the guidance of their own legal counsel and compliance resources before acting on any information provided here.

1CMS Publication 100-04, Chapter 5, Section 10
2CMS Publication 100-04, Chapter 5
3CMS Publication 100-02, Chapter 15, Section 220
4CMS Publication 100-04, Chapter 1, Section 50
542 CFR 413.65
6CMS Publication 100-04, Chapter 4, Section 10.1
7CMS Publication 100-02, Chapter 15, Section 220

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