SNF Payments Explained
By Joe McTernan

Who is responsible for paying for O&P services delivered to Medicare patients in a Skilled Nursing Facility (SNF)?

The answer has been both confusing and controversial.

Legislative and administrative changes have altered the rules regarding SNF billing several times over the last few years, confusing O&P providers and SNF administrators.

To help answer your questions regarding SNF payments, AOPA developed a decision tree for determining the party responsible for paying for an O&P device delivered in a SNF.

What follows is an explanation of the history of O&P billing in SNFs and the current rules.

SNFs were converted from a cost basis reimbursement method to the Prospective Payment System (PPS) as a result of the Balanced Budget Act of 1997 (BBA).

This meant the SNF was paid a daily, per-patient fee based on the anticipated need for service. The SNF was required to provide care for their Medicare Part A patients either with their own resources or through contractual arrangements with outside providers.

From July 1, 1998 until April 1, 2000, getting paid for O&P services in the SNF setting was nothing short of a tremendous headache.

SNFs complained that the cost of a single O&P device could exceed their Medicare reimbursement, thereby leaving no money to cover the cost of other services.

Many SNFs also refused to authorize O&P care. This led to reduced services for SNF patients as well as strained relationships with the O&P community.

CMS quickly realized some high-dollar services far exceeded SNF reimbursement. As a result, CMS issued a directive removing services such as MRI, cardiac catheterization and radiation therapy from SNF PPS and consolidated billing.

AOPA and others went to Congress and argued for the exclusion of O&P devices from PPS. These efforts resulted in a partial victory with the passage of the Balanced Budget Refinement Act of 1999 (BBRA).

Most prosthetic services were removed from SNF PPS, effective April 1, 2000. While AOPA made strong arguments for the exemption of all O&P services, Congress was only willing to exempt those services representing high dollars and low volume.

Congress determined that the cost of orthoses and certain prosthetic supply items such as socks, shrinkers and immediate post-surgical prosthetic services could be reasonably absorbed by the SNF.

While the implementation of the BBRA created significant relief for O&P providers, it also created confusion.

Misunderstandings remained regarding who was responsible for paying for O&P services provided in the SNF.

Many SNF administrators assumed that all O&P services were now exempt.

But, many O&P providers continued to request purchase orders for prosthetic services that should have been billed directly to the DMERC.

And, just when the rules were becoming clear, CMS tweaked them enough to create new confusion about payment for O&P services delivered in a SNF setting.

In February 2005, CMS published a MedLearn Matters article (SE0507) entitled "Prosthetics and Orthotics Ordered in a Hospital or Home Prior to a Skilled Nursing Facility Admission." This article changed one of the most consistent rules regarding date of service for O&P items.

Prior to its release, the date of service was always the date of delivery of the finished device. One exception to this rule was the case involving a custom item that was complete but not delivered due to patient death, cancellation of the order or change in medical condition.

The other exception to this rule—allowed in limited circumstances—was when an item was delivered to a hospital or SNF inpatient under the two-day rule in order to facilitate discharge.

The Medlearn Matters article created several new exemptions to the rules regarding date of service for O&P items.

The article stated that if a custom O&P item was ordered while the patient was in the hospital but could not be delivered until after the patient was transferred to a SNF, then the hospital remained responsible for payment for the device.

In addition, if a custom O&P item was ordered while the patient was at home but could not be delivered until the patient was in a SNF, then the DMERC remained responsible for payment under Medicare Part B.

This seemingly small change created a whole series of new issues and challenges regarding payment for O&P services delivered in the SNF setting.

The biggest problem created by the Medlearn Matters article involves prosthetic devices. Under the old rules, most prosthetic devices delivered in a SNF were billed directly to the DMERC, eliminating the need to negotiate a purchase order.

According to the new rules, if a prosthesis is ordered while the patient is in the hospital but not delivered until after they are transferred to a SNF, then the DMERC is no longer responsible for payment. Instead, the O&P provider has to obtain a purchase order from the hospital for an item that the patient never used while in their facility.

Even armed with the directive from CMS, this is a very difficult negotiation and often results in delayed or refused payments by the hospital.

An advantage of the rule change is that custom orthoses ordered while the patient was at home but not delivered until their admission to a SNF may be billed directly to the DMERC and reimbursed under Medicare Part B.

In this circumstance, the O&P provider does not need to negotiate with the SNF over reasonable payment for services. Services are provided, and the claim is submitted to the DMERC.

Assuming that medical necessity has been adequately documented, the O&P provider will be reimbursed according to the Medicare fee schedule.

AOPA believes that CMS should clarify the date of service to use when an O&P item is ordered prior to SNF admission but not delivered until after the patient has been admitted to a SNF.

AOPA has presented its concerns about the ambiguity of the most recent rules change and will continue to monitor this and other changes to the SNF billing rules.

Joe McTernan is the assistant director of reimbursement services for the American Orthotic & Prosthetic Association (AOPA). AOPA is a not-for-profit trade association providing O&P-specific business services and products for professionals.

Through government relations efforts, AOPA works to influence policies affecting the future of the O&P profession. Questions? Call (471) 431-0876 or visit www.AOPAnet.org.