CPR’s “Coding Corner” focuses on coding, compliance, and documentation issues relating specifically to physician billing. This month’s tip comes from G. John Verhovshek, managing editor for AAPC, a training and credentialing association for the business side of health care.

Place of Service (POS) codes identify where a health care service is provided, which directly affects payment. As explained in MLN Matters® Number: SE1104, “To account for the increased practice expense that physicians generally incur by performing services in their offices and other non-facility locations, Medicare reimburses physicians at a higher rate for certain services performed in these locations rather than in a hospital outpatient department or an ASC.”

Although POS coding seems straightforward, errors are common. For example, the Office of the Inspector General (OIG) reviewed a sample of outpatient surgery claims filed in 2009 and found that 83 percent of those billed with "POS 11 Office" were performed in an ASC or hospital.

To clarify POS definitions, observe the following:

• An office (POS 11) is where the physician (or group) pays all of the overhead expenses, including rent (or mortgage), staff salaries, supplies, utilities, etc.
• In an outpatient hospital (POS 22), the hospital employs the staff, owns the space and incurs all of the overhead expenses. Outpatient hospital locations include the observation unit, outpatient surgery unit, endoscopy suite, and hospital clinics.
• An emergency room (POS 23) is a hospital location where emergency diagnosis and treatment of illness or injury is performed.
• An inpatient hospital (POS 21) includes all services provided to a patient that has been formally admitted to the hospital.
• An ambulatory surgery center (ASC/POS 24) is certified by Medicare to perform designated surgical procedures. Laboratory and radiology services, other than those performed to assist in a procedure, are not permitted in the ASC during the ASC hours of operation. Other non-surgical services, imaging, infusions or diagnostic procedures not on Medicare’s list of ASC-approved services should not be performed in the facility.

Per CMS Transmittal R2407CP, the POS code for all physicians paid under the Medicare Physician Fee Schedule must match the setting in which the beneficiary receives the face-to-face service. Billable, non face-to-face services (e.g., interpretation of diagnostic test results) should be billed to the POS in which the beneficiary received the technical portion of the service. There are two exceptions to this rule.

• When services are provided to a hospital inpatient, POS code 21 is correct regardless of the setting where the patient actually receives the face-to-face encounter.
• Physicians/practitioners who perform services in a hospital outpatient department will use POS code 22 unless the physician maintains separate office space in the hospital or on hospital campus, and that physician office space is not considered a provider-based department of the hospital. In such a case, the appropriate POS code is 11 (office).