Medicare Facility vs. Non-Facility Rates: What They Mean
Ever thought about how you would get reimbursed? How does the payer, whether Medicare, Medicaid, or other commercial health insurance companies, set your reimbursement rates? Medicare has decided reimbursement rates for two categories: facility and non-facility.
In today’s blog, we compare facility vs. non-facility rates, so you understand how you get reimbursed and can claim immediately if the payer pays less than you deserve.
What is Facility vs. Non-Facility in Medicare?
In medical billing and the Medicare Physician Fee Schedule (MPFS), facility vs. non-facility rate refers to where the patient receives care, which directly affects reimbursement rates (how much the physician gets paid).
What are Facility vs. Non-Facility Settings
In Medicare, facility vs. non-facility settings refers to where the service is delivered.
Facility settings include;
- Hospital.
- On-campus hospital setting.
- Emergency departments.
- Urgent care facility centers.
- inpatient/outpatient hospital departments.
- Ambulatory Surgery Centers (ASC).
- Skilled nursing facilities.
Non-Facility settings include;
- Private physician’s office.
- Private clinics.
- Patient’s home.
- Walk-in urgent care clinic.
How Place of Service (POS) Codes Decide the Rate
Place of service (POS) codes indicate where the healthcare service was delivered, such as a physician’s office, private clinic, or ambulatory surgery center. The service location can affect reimbursement because Medicare and commercial payers may apply different payment policies and rates depending on the setting.
For example, a patient’s evaluation and diagnostic service delivered in a facility setting has a different rate than the same service performed in a hospital outpatient department because Medicare reimburses the facility and professional components differently.
Here’s how POS codes can directly affect the reimbursement rate;
- Medicare may apply different rates depending on whether the service is performed in a facility or non-facility setting.
- For many services and treatments, reimbursement also depends on whether the provider bills for professional, technical, or global service.
- Commercial insurers may use contracted rates and setting-specific policies to determine reimbursement.
- An incorrect POS code can trigger claim edits, payment adjustments, or denials when the reported setting conflicts with the service or payer rules.
Why are Facility Rates Lower than Non-Facility Rates?
Facility rates are generally lower than non-facility rates for many services under the Medicare Physician Fee Schedule (MPFS) because the physician or practitioner does not bear the practice expense overhead.
In a physician’s office, the practice may be responsible for expenses such as equipment, supplies, clinical staff, and office overhead. In a hospital outpatient department or ambulatory surgery center, the facility generally covers many of these resources through its own billing and payment arrangements. As a result, Medicare typically pays a lower professional rate for many services performed in facility settings.
However, this does not mean that the total cost of care is always lower in a facility. A hospital or other eligible facility may receive a separate payment for its services, depending on the setting and applicable payment rules.
The exact reimbursement depends on the CPT or HCPCS code, applicable fee schedule, service location, and payer requirements. Some services may also have separate professional and technical components.
One Wrong POS = Inaccurate Reimbursement Rate
One wrong POS code leads to an inaccurate reimbursement rate. Outsource your medical coding to a specialized RCM company and receive accurate reimbursements timely and efficiently.
Frequently Asked Questions
What is the difference between facility and non-facility in Medicare?
Facility and non-facility rates under the Medicare Physician Fee Schedule reflect differences in the practice expenses associated with providing a service. Facility rates generally apply when a physician provides an eligible service in settings such as a hospital outpatient department, while non-facility rates generally apply to eligible services provided in an office setting. The applicable rate depends on the service and Medicare payment rules.
Is POS 22 facility or non-facility?
POS 22 is a facility code because it refers to on-campus outpatient hospital services; the service or treatment is performed in an affiliated hospital setting area near the hospital.
Is POS 11 facility or non-facility?
POS 11 is a non-facility code because it refers to outpatient care delivered at the physician’s private clinic, office, or independent group practice, where the patient arrives, receives care, and leaves on the same date of service.
Is POS 21 facility or non-facility?
POS 21 is a facility code because it refers to inpatient hospital services, meaning the patient arrives for care and is admitted to the hospital for at least a one-night stay.
Why is the facility rate lower?
Facility rates are lower because they split the bill into two categories: professional and technical. The professional bill charges the physician’s fee, while the technical one charges the hospital’s equipment, staff salaries, and supplies. So, the insurer pays the facility separately for equipment, while physicians receive reimbursement only for their services.
What happens if I bill the wrong POS code?
Billing the wrong POS code can cause claim rejections, payment adjustments, reimbursement delays, or compliance issues. Medicare and other payers use POS codes to identify where a service was provided and apply relevant billing and payment policies. Providers should verify the actual service location, correct any inaccurate POS information, and follow the payer’s claim correction or appeal process when necessary.
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