Provider-based billing rules for hospital departments

What does provider-based status mean?

Provider-based status means Medicare treats a facility as part of a hospital for payment instead of as a separate office. The test is 42 CFR 413.65, which defines the hospital as the main provider and the facility as a department of a provider, a remote location of a hospital, a satellite facility or a provider-based entity. Section 413.65(b)(1) adds that a facility does not get the status just because it or the hospital believes it has it.

The default runs the other way for physician-office-type sites. Under 413.65(b)(4), a facility off the hospital campus that is used for physician services of the kind ordinarily furnished in offices is presumed to be free-standing unless CMS determines it has provider-based status. A free-standing facility is one not integrated with any main provider as a department, remote location, satellite facility or provider-based entity.

What are the requirements for provider-based status?

Every department must meet four tests in 413.65(d). An off-campus department must also meet three more in 413.65(e). The hospital proves it with an attestation (413.65(b)(3)): on-campus facilities attest to the (d) tests and the hospital's outpatient obligations, off-campus facilities attest to (d) and (e), and the hospital keeps documentation of the basis for each attestation.

While CMS reviews a complete attestation, 413.65(k) lets the hospital bill and be paid as provider-based from the day it submits the attestation, until CMS decides the requirements are not met.

What is the difference between on-campus and off-campus?

The regulation defines campus as the physical area immediately adjacent to the provider's main buildings, other areas and structures within 250 yards of the main buildings, and any other areas the CMS regional office decides in an individual case are part of the campus (413.65(a)(2)). A department outside that area is off-campus, with the extra tests above and the written-notice duty in the next section.

Billing follows the line. On-campus departments need no off-campus modifier. Off-campus departments that are not dedicated emergency departments report PO or PN, which is where payment splits into the excepted and nonexcepted groups covered by site-neutral payment.

What does the hospital take on by billing a department as provider-based?

Section 413.65(g) lists the obligations. The hospital must treat every Medicare patient in the department as a hospital outpatient for billing purposes and not treat some as office patients (g)(5). Physician services must be billed with the correct site-of-service so physician payment can be set (g)(2). A dedicated emergency department, on or off campus, and every on-campus department must follow the antidumping rules (g)(1), as the EMTALA and billing page explains.

Section 413.65(g)(7) adds a patient notice. When a Medicare patient is treated in a non-emergency off-campus department and will owe coinsurance for both the outpatient visit and the physician service, the hospital must give written notice before the service. The notice states the potential liability or, if the care needed is not known, explains the coinsurance, gives an estimate based on typical charges, and says the actual amount depends on services furnished.

How are provider-based departments billed?

The hospital bills the facility fee on the UB-04 institutional claim, and the physician or practitioner bills the professional fee on the CMS-1500 with a place of service that tells Medicare it is a hospital setting. The place of service list defines POS 19 as off-campus outpatient hospital and POS 22 as on-campus outpatient hospital. See the CMS-1500 vs UB-04 page for the two forms.

Chapter 12, section 20.4.2 of the Claims Processing Manual says the facility rate under the physician fee schedule is paid for POS 19 and 22, regardless of where the face-to-face encounter occurred, and POS 23 for the emergency room is also a facility rate. An office, POS 11, is paid at the nonfacility rate.

Modifier PO goes on every HCPCS code for outpatient items and services in an excepted off-campus department, and PN on each line for nonexcepted items and services, including separately payable drugs, clinical lab tests and therapy (Claims Processing Manual, chapter 4, sections 20.6.11 and 20.6.12). One claim can carry both, PO on excepted lines and PN on nonexcepted lines, but never both on one line. Neither modifier goes on a dedicated emergency department or on a department within 250 yards of the hospital or a remote location.

A provider-based clinic therefore generates two bills when a hospital-employed or contracted physician sees the patient and bills separately, which is why the correct POS matters to the incident-to and place of service rules.

How does PO versus PN change the payment?

Excepted items and services are those furnished on or after January 1, 2017 by a dedicated emergency department, or by an excepted off-campus department that has not impermissibly relocated or changed ownership (42 CFR 419.48). Payment for items and services that do not qualify is generally made under the physician fee schedule (419.48(c)). PN triggers that lower rate, as established by section 603 of the Bipartisan Budget Act of 2015.

PO departments are paid under OPPS, with two exceptions that apply a physician-fee-schedule-equivalent rate. For the clinic visit code G0463, the equivalent rate has been 40 percent of the OPPS rate since 2020. For CY 2026, CMS extended the same method to codes assigned to the drug administration APCs, with no phase-in, and exempted rural sole community hospitals (90 FR 53448).

What happens if CMS finds a department was not provider-based?

If a hospital treated a facility as provider-based without a determination and CMS finds it did not meet the tests, 413.65(j) has CMS issue written notice, adjust future payments to what a free-standing facility would receive, and recover the difference for all cost reporting periods still open to reopening. The notice asks the hospital to say in writing within 30 days whether it will seek a determination or enroll the site as free-standing. If it does, and files a complete request within 90 days, payment can continue at the adjusted amounts for up to 6 months.

For claim-level denials, the 120-day redetermination deadline and the other levels are on the Medicare appeal levels page, and a billing error that produced an overpayment is covered by the 60-day overpayment rule. For the cost-based hospitals next door, see critical access hospital billing. If your off-campus claims keep missing PO or PN, our hospital and facility billing team can help.