Applying Medicare’s device offset rules: When, why, and how

by Judith L. Kares, JD

During a recent Medicare Boot Camp®—Hospital Version class, I was reminded how complex and confusing many of the payment rules are under the OPPS, particularly those related to device offsets. This week we will focus on these offset rules so that hospitals can assure compliance with applicable coding, billing, and payment requirements.

Packaging under the OPPS

The OPPS is the primary payment methodology for hospital services covered under Medicare Part B, including both outpatient hospital services and certain inpatient hospital services that are not covered under Part A. One of the unique aspects of the OPPS is that not all items and services covered and payable under the OPPS are “separately” payable. The payment for such services is said to be “packaged” into the payment for other services, including more significant services that are assigned to an individual ambulatory payment classification (APC). For example, the vast majority of devices, as well as a significant number of drugs and biologicals, are packaged into the procedures that utilize them. With respect to what are referred to as “device-intensive” procedures, more than 40% of the payment for the procedure is designed to cover the cost of the related device.

In addition, certain services that are generally separately payable may, in certain circumstances, be payable as part of a bundle of services assigned either to a composite APC or a comprehensive APC (C-APC). Composite APCs are special APCs that provide for a single payment when multiple outpatient services, coded with specified HCPCS codes, are reported together on the same claim. Only limited specific services are included in the composite APC. Comprehensive APCs, on the other hand, are special APCs that provide for a single payment for the highest ranking primary procedure (designated by status indicator J1) and all “adjunctive” services reported on the claim with the primary procedure, unless specifically excluded. In many cases, that single payment will cover all of the services provided in connection with the primary service, even though many of those services would otherwise be separately payable, including other device-intensive procedures into which the payment for related devices is packaged.

Applying various device offset rules

These device offset rules are a consequence of Medicare packaging payment for most devices into the payment for the related procedures. There are multiple situations where hospitals must be able to identify the portion of the procedure payment designed to cover the cost of the device.

To read the complete article on Medicare Compliance Watch, click here.