Hospitals: Check Your Addresses or Face Medicare Claims Returns! - McDermott Will & Emery

Hospitals: Check Your Addresses or Face Medicare Claims Returns!


Following an implementation delay during the COVID-19 public health emergency (PHE), on August 1, 2023, the Centers for Medicare and Medicaid Services (CMS) initiated Medicare hospital claims edits that will return certain claims when the address where a service was provided does not exactly match an address in the hospital’s Medicare Provider Enrollment, Chain, and Ownership System (PECOS) enrollment file or where the reported address requires a “PO” or “PN” modifier and neither modifier is present. Additional details are provided in a CMS Medicare Learning Network (MLN) article. Hospitals that bill Medicare for outpatient services should ensure that their billing systems are reporting the actual address where services were rendered on claims to Medicare. They also should ensure that all addresses where services are rendered are listed in the hospital’s Medicare PECOS enrollment file and that all claims for services at off-campus outpatient locations contain the “PO” or “PN” modifier. Our prior coverage of this claim edit is available here.

In Depth


Hospitals commonly furnish services in more than one location. For example, a hospital may have multiple campuses where inpatient services are furnished, and it is very common for a hospital to have off-campus outpatient facilities where hospital services are also furnished. Hospitals have long been required to enroll each provider-based location where hospital services are furnished on the hospital’s Medicare enrollment form (the Form CMS-855A), which is maintained in the hospital’s provider file through PECOS. Medicare outpatient service providers, including hospitals, are also required to report the nine-digit ZIP code of the service facility on the facility claim submitted for payment.

In recent years, legislative changes have mandated payment changes intended to address a payment difference between off-campus provider-based departments (which are hospital service locations) and physician offices paid exclusively under the Medicare Physician Fee Schedule (MPFS). To implement these payment methodology changes, CMS requires hospital items and services furnished at off-campus outpatient provider-based departments to be reported with the appropriate modifier. Payment for items and services furnished at off-campus provider-based departments established after November 2, 2015, are generally reported with modifier PN, which results in a lower payment rate than the rates applicable to on-campus provider-based locations and certain “excepted off-campus provider-based departments.” In contrast, modifier PO is used for services furnished at “excepted off-campus provider-based departments.” The appropriate modifier is required to be reported with every HCPCS code for all outpatient hospital items and services furnished in all off-campus provider-based department of a hospital. Reporting the appropriate service location on claims for services also permits CMS to utilize the ZIP code included in the service facility information field of submitted claims to determine the appropriate payment methodology or locality.

As part of ongoing efforts to apply “site neutral” payment policies between hospitals and other locations where similar healthcare services are provided, CMS announced in 2017 that it would be implementing claims edits to reject claims for hospital outpatient services when the location of the service reported on the claim for payment does not precisely match a practice location address listed in the hospital’s Medicare enrollment file in PECOS. In mid-2019, CMS announced that implementation of the edits was imminent, but ultimately did not activate the edits prior to the COVID-19 PHE. CMS then suspended the implementation of the edits during the PHE, which ended May 11, 2023.

Implementation of Claims Edits for Hospitals

After a more than three-year delay due to the PHE and after conducting additional claims testing, CMS believes that the claim edits are now functioning correctly. Accordingly, as of August 1, 2023, CMS has instructed the Medicare Administrative Contractors (MACs) to prepare for permanent implementation of the claims edits.
Specifically, the “billing provider address” and “service facility address,” if applicable, that are reported by a hospital on a claim for services must appropriately reflect the location where the services are furnished. The “billing provider address” for services furnished on the main campus of the hospital or the “service facility address” for services furnished at a remote campus or off-campus outpatient location, must match a practice location address listed in the hospital’s Medicare enrollment file in PECOS. CMS established a separate claims edit to identify claims for services at off-campus outpatient locations that did not include either the PO (excepted services, paid at the full Outpatient Prospective Payment System (OPPS) rate) or PN (non-excepted services, paid at the lower fee schedule rate) modifiers. Implementation of these edits was delayed through several rounds of testing, while CMS worked to ensure that the claims edits functioned correctly. Meanwhile, throughout the testing process, CMS continued to notify hospitals of the forthcoming edit and need for each hospital to ensure that it had systems to properly identify the location of services on claims and that all such locations were included in the hospital’s PECOS record.

Key Takeaways

Hospitals should immediately evaluate their current billing systems to ensure that they are reporting, on claims to Medicare, the actual location where hospitals services were rendered. If the actual location address is not being reported—for example, the main hospital address is reported as the service location on all claims—steps should be taken as soon as possible to ensure that the correct location is reported. In addition, hospitals should identify all locations where hospital services are provided and compare them to the list of practice locations on the hospital’s Medicare enrollment record in PECOS. If any locations are missing (or no longer operational) the hospital should immediately submit an update via PECOS to revise the hospital’s Form CMS-855A to correct the practice location information. In addition, hospitals that provide services at off-campus outpatient locations should ensure that the PO or PN modifier is being applied correctly to all services rendered to Medicare beneficiaries at off-campus outpatient locations.

Although the claim edits will return claims that fail the edits to the hospital to allow for correction and reprocessing within the timely filing deadlines, failure to ensure that the correct information is reported on the claim and is reported in PECOS could result in material adverse consequences, including overpayments, false claims liability and revocation of the hospital’s Medicare provider agreement. Therefore, the implementation of these claim edits may provide an opportunity for hospitals to conduct a review of billing practices and Medicare enrollment records to confirm compliance with Medicare rules, identify any gaps, and take timely corrective action.