Trends and Issues

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March 2002

By Cherilyn G. Murer, JD, CRA

Outpatient rehab departments and rehab agencies should consider using the CORF structure due to its billing and administrative flexibility.

New Ambulatory Payment Classification (APC) codes and provider-based regulations issued by the Centers for Medicare & Medicaid Services (CMS) are both incentives for non-hospital- and hospital-based providers to consider using the comprehensive outpatient rehabilitation facility (CORF) structure for delivery of rehab services.

CORFs vs Rehabilitation Agencies
CORFs have the ability to bill Medicare directly for nursing, psychological services, durable medical equipment, drugs and biologicals, immunizations, and respiratory therapy in addition to social services, physical therapy, occupational therapy, and speech-language pathology.

Effective since November 30, 2001, this advantage over the rehabilitation agency structure is strengthened by new G-codes for respiratory therapy instituted for both CORFs and hospital outpatient departments.

CORFs also enjoy a key medical management advantage over rehabilitation agencies. CMS regulations applied to rehabilitation agencies require physicians to review the patient's plan of care at least every 30 days, whereas a CORF requires a physician to review the plan of care every 60 days, thereby permitting planning for a longer-range, complex care program.

CORFs vs Hospital Outpatient Departments
Because the new Medicare provider-based regulations specifically exclude CORFs from their coverage, for hospital-based venues, the CORF structure now enjoys a considerable administrative advantage over the hospital outpatient department. The new provider-based requirements are applicable to most hospital outpatient departments regardless of location. Recent communications from the CMS Region VI have indicated that all entities or departments, unless specifically exempted from the requirement of obtaining provider-based designation, must meet provider-based requirements and file applications for provider-based designations in order to be reimbursed by Medicare as part of a hospital. Thus, most hospital outpatient departments-even if they are located on the hospital's campus-will now have to comply with the provider-based requirements.

Since the regulations exempt facilities that furnish only physical, occupational, or speech therapy to ambulatory patients as long as the $1,500 annual cap on coverage of physical, occupational, and speech therapy remains suspended from the provider-based requirements, some hospital outpatient departments/facilities will not be required to obtain a provider-based designation if their services are limited to physical therapy, occupational therapy, and/or speech-language pathology. However, any outpatient department providing therapy services other than those specifically excluded, such as respiratory therapy, will have to comply with the provider-based requirements.

The provider-based designation application forms now being developed by CMS will require outpatient departments to prove, among other things, that outpatient departments generally be located on the main hospital campus or within 35 miles of it; that the appropriate reporting relationships exist between the outpatient department staff and the main hospital's administration (this can become very complicated if the outpatient department is run under a management contract); that the medical director of the outpatient department maintains the appropriate reporting relationship with the chief medical officer of the main hospital; that the outpatient department can be separately identified in the main hospital's Medicare cost report; that the patient records of the outpatient department and the main hospital are fully integrated; and that, in its advertising, billing, and correspondence, the outpatient department is presented to the public as part of the main hospital and not as a separate entity. Because CORFs are explicitly excluded from provider-based coverage, they are not subject to these compliance requirements.

Table 1. Key characteristics of CORFs, rehabilitation agencies, and hospital outpatient departments.

Moreover, the new provider-based regulations add a host of new obligations to hospital outpatient departments that do not concern CORFs. These obligations include:

Compliance with the antidumping rules of the Emergency Medical Treatment and Active Labor Act;
Ensuring that physician services are billed with the correct site-of-service indicator, so that applicable site-of-service reductions to physician and practitioner payment amounts can be applied;
Compliance with all the terms of the main hospital's provider agreement;
Ensuring that all patients are treated for billing purposes as hospital outpatients;
In the case of patients admitted to the hospital after receiving treatment in the hospital outpatient department, subjecting the patients' bills to the 3-day window (72-hour rule) applicable to the main hospital's prospective payment system; and
Compliance with all of the main hospital's health and safety rules.

Perhaps most onerously, all off-campus hospital outpatient departments are required to furnish their patients with an advance notice of the patient's Medicare coinsurance liability. According to the regulation, if the exact type of care and extent of service that the patient is to receive are known before the visit-as generally is with physical, occupational, speech, or respiratory therapy-the notice must include the potential amount of the coinsurance liability. Even if the exact type of care and extent of service are not known beforehand, the notice must still explain to patients that they will incur a coinsurance liability that would not have been incurred if the outpatient department were not provider-based.

Cherilyn G. Murer, JD, CRA, is CEO and founder of the Murer Group, a legal-based health care management consulting firm in Joliet, Ill, specializing in strategic analysis and business development. She may be reached at (815) 727-3355 or via the Web: www.murer.com.

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March 2002