The Medicare rules for billing services performed in off-campus Hospital Outpatient Departments (HOPD) changed with the passage of the Bipartisan Budget Act of 2015 (BBA), with the result that ownership of imaging centers by hospitals is becoming less attractive than it once was. HOPDs operating prior to November 2, 2015 are exempted from this change, but there might be other good reasons for hospitals to consider making alternative arrangements.
An imaging center owned and operated by a hospital was able to bill and be paid by Medicare as an outpatient department of the hospital using the Outpatient Prospective Payment System (OPPS) fee schedule. The OPPS fee schedule is generally higher than the Medicare Physician Fee Schedule (MPFS) for the same services, because it assumes that the facility incurs all of the costs of a full-service hospital, which are generally higher than those of an independent, stand-alone imaging center.
The BBA 2015 makes a distinction between HOPDs that are part of the hospital itself and those located off-campus. Medicare rules define “on-campus” as a department that is located within 250 yards of the main or satellite location of a hospital; everything else is “off-campus”. Beginning January 1, 2017, an off-campus HOPD would no longer be paid under the higher OPPS fee schedule but instead would receive payments billed under the MPFS at a rate that was 50% of the OPPS fee schedule. For 2018, the payment rate was lowered to be 40% of the OPPS fee schedule.
Note, however, that only the technical component reimbursement is reduced. Even if the facility uses global billing, the professional reimbursement to radiologists should not be affected.
Hospital Ownership of HOPDs Was Very Attractive
The hospital-level reimbursement offered by the OPPS fee schedule combined with the cost-efficient operation of a stand-alone imaging center offered an attractively high level of profitability. At the same time, physicians were seeing reductions in reimbursement from Medicare and private payers alike, so hospital acquisition of off-campus imaging centers became commonplace. The reimbursement reductions introduced by the BBA 2015 slowed that trend, but many HOPDs continue to exist and they present some unique billing and collections challenges for radiologists working in them.
Billing and Collection Challenges for Radiologists
For the radiology practice, revenue cycle management in an off-campus HOPD is just like that of the typical hospital in- or out-patient arrangement. Billing is done separately, with the facility billing the technical component under OPPS and the radiology group billing the professional component under MPFS. The facility is staffed by hospital personnel whose primary objective is to register patients into the hospital’s system without any special attention being given to the professional billing of the radiologists. This usually means the staff is trained only in the hospital’s billing requirements and not in the nuances of radiology billing, often without regard for prior authorizations or the collection of co-payments or co-insurance.
It is vitally important when billing separately that the radiology group and hospital accept all of the same insurance plans. When the radiology group is ‘out of network’ for a plan in which the hospital participates, the patient will be responsible for the full bill without coverage. This creates not only bad public relations for the imaging center but will impact collections for the radiology group. At best it will take longer to collect from the patient, and at worst there will be no payment at all. Some states are beginning to create legislation that would prohibit billing the patient in such circumstances.
From the Patient’s Perspective
A freestanding imaging center looks the same to patients whether it is owned and operated by a radiology group or a hospital. Their insurance carrier, whether it is Medicare or a commercial insurance company, will see the two as quite different, however. Most insurance plans provide different levels of coverage for diagnostic imaging at a hospital versus a radiologist’s office, and the balance that falls to the patient through the deductible or co-insurance can be quite different – usually a lot higher in a hospital setting. Prior authorization rules can be different between the two types of billing, as well.
In order to avoid confusion and potentially disgruntled patients, the imaging center should fully disclose the type of billing that will be rendered at the time the patient makes an appointment. This will afford them ample opportunity to contact their insurance carrier and obtain the correct coverage information. A hospital-owned facility should also let patients know up front that they will be receiving a separate bill from the radiology group, which often comes as a surprise to the patient.
The Case For Global Billing
It is beyond our scope in this article to offer advice on structuring the imaging center entity, but if the physicians and hospital can come to an arrangement where the facility’s services can be billed globally there could be advantages to all parties concerned. Here are some of the possible benefits:
- Marketability of the imaging center - Patients today are shopping for their healthcare services and part of their decision is based on cost and convenience. A fee structure that is not tied to the hospital’s rates can be more attractive to patients.
- Convenience for patients - A single, global bill that is easily explained to patients will simplify their experience and make it more likely that the claim will be paid. It will be easier for them to obtain authorization, submit claims and pay their co-payment or co-insurance when only one party is involved in the billing.
- Dedicated imaging center registrars can be well versed in the insurance requirements for billing and collection of the facility’s participating plans since they have only one set of rules to learn.
- Co-payments and co-insurance can be more easily collected at the time of service when only one entity is involved. This improves both cash flow and the patients’ satisfaction rates when they don’t have to be bothered with bills after their appointment. Often, their overall cost will be lower.
- Insurance payers are moving toward preferred payment arrangements with freestanding, non-hospital facilities that can provide services at lower cost.
Imaging centers that are operated as stand-alone facilities can see some advantages when they are able to do global billing over the split billing required as a hospital outpatient department. The change in Medicare reimbursement for HOPDs may reduce the financial advantage of hospital ownership and cause such facilities to re-think their strategy to gain some market advantage by offering lower cost and a better patient experience.
Going forward, all types of radiology practices will benefit from understanding and embracing the new consumer-driven healthcare economy. Subscribe to our radiology RCM blog to learn how your radiology practice can prioritize the patient experience as a key component of revenue maximization.
Sandy Coffta is the Vice President of Client Services at Healthcare Administrative Partners.