Place of Service Codes are a major compliance, reimbursement and quality issue for LTC physician practices

May 9th, 2013 by Rod Baird

I attended the AMDA convention in March and Place of Service (POS) was a consistent but often misunderstood topic in many conversations. The subject is too lengthy for a single post, so let’s begin with the basics.

What is a POS and why is it important? Health insurance transactions (governed by HIPPA) require the identification of service location (POS). The master code set is published by CMS and are available here.

Most physicians and extenders work in easily identified POS locations – an office/clinic, hospital, emergency room, etc. Their EHR/billing applications are programmed once and the POS definition is forgotten.

It’s different in LTC where multiple factors govern the selection of the correct POS code.

Here are the four codes that are most commonly used in LTC:

Place of Service




Skilled Nursing Facility

A facility which primarily provides inpatient skilled nursing care and related services to patients who require medical, nursing or rehabilitative services but does not provide the level of care or treatment available in a hospital.


Nursing Facility

A facility which primarily provides to residents skilled nursing care and related services for the rehabilitation of injured, disabled or sick persons, or, on a regular basis, health-related care services above the level of custodial care to other than mentally retarded individuals.


Custodial Care Facility

A facility which provides room, board and other personal assistance services, generally on a long-term basis, and which does not include a medical component.


Assisted Living Facility

Congregate residential facility with self-contained living units providing assessment of each resident’s needs and on-site support 24 hours a day, 7 days a week, with the capacity to deliver or arrange for services including some health care and other services. (Effective October 1, 2003)

Did you read those definitions carefully? I challenge anyone to walk into a typical LTPAC facility and determine what code applies to a particular patient.

For this blog post, I’m limiting comments to POS 31 vs. 32. The official definitions appear indistinguishable. In the past, they referred to two distinct types of locations:

  • Skilled Nursing Facilities (SNF), which were paid on a “cost reimbursed basis” using a Medicare Cost Report; and
  • Intermediate Care Facilities (ICF), which were usually paid by State Medicaid programs using different (e.g. more conservative) cost reporting rules.

In addition to Medicare patients, those with private payment were usually housed in the SNF until funds ran out and then were transferred to the separate ICF, which was almost always a less desirable physical location with inferior staffing levels. In the 1980s, patient advocates argued this was detrimental to good patient care and often confusing to patients who were shuttled between beds/wings based on their insurance coverage. Subsequently federal and state rules were modified to permit, and encourage, dual certification of beds. The definition of ICF was changed to NF and the language modified. Reading the current definitions, I’m challenged to distinguish the difference. However, there is a very real difference – it’s based on the payor for the patient’s day of care:

  • POS 31 (SNF). The facility receives Medicare Part A payment for the patient’s care. Medicare Part B services not bundled into the facility payment (e.g. physician services) are reimbursed at “facility-based rates.”
  • POS 32 (NF). Medicare Part A is not the payor for the patient’s care. Medicare Part B services are reimbursed at “non-facility” rates.

CPT, POS and fee differentials

A significant number of CPT codes have two fees based on which POS is employed. The assumption is that a facility (by definition a Medicare Part A provider) receives a direct or indirect payment from Medicare for supporting the physician, which logically implies that the physician doesn’t have as many out-of-pocket expenses and should receive less reimbursement. Here is how CMS associates locations with the two fee tables:

  • Facility Fee Schedule, includes hospitals (inpatient, outpatient and emergency department), ambulatory surgical centers (ASCs) and skilled nursing facilities (SNFs); and
  • Non-Facility Fee Schedule, includes all other locations (e.g. nursing facilities).

Many providers and administrators wonder what is the difference: Both POS Codes 31 and 32 pay the same amounts on the E&M fee schedule, so why bother? Until 2004, the payment rates for E&M services in the two locations differed by 15 to 25 percent.

Thanks to Dr. Dennis Stone and other AMDA leaders, the payment for Nursing Home E&M codes since 2005 is identical in both locations. Unfortunately, codes used in behavioral medicine, wound care procedures and podiatry suffer from lower payment rates in POS 31. For example:






Psych diagnostic evaluation




Psych diagnostic evaluation w/medical services




psychotherapy pt&/family 30 min.




psychotherapy pt&/family 45 min.




Debride nail 1-5




Debride nail 6 or more



Since most nursing home beds are dually certified as both SNF and NF, how does a physician/extender select the correct POS code? The only way is by asking the facility who is paying for the patient that day.

While the Medicare reimbursement rates for E&M codes are identical for POS 31 and 32, the rates for nearly all other physician services have a differential. The facility-based payment is lower.

Use of incorrect POS codes is a growing compliance issue. The DHHS OIG focused on this topic for hospitals (physicians using non-facility codes when patient was actually a “registered inpatient”) and CMS issued a special Medlearn Matters® MM7631 which focuses on this problem. How long will it be before CMS begins focusing on physician services improperly billed under POS 32 when the patient was actually a Medicare Part A beneficiary (POS 31)?

LTPAC providers and their offices need to improve their communications with facilities to better determine whether the patient is under a Part A benefit or has switched to Private/Medicaid.

Rod Baird

About Rod Baird

Rod Baird is the Founder and President of Geriatric Practice Management (GPM). Since 1977, he’s led provider and management organizations that deliver care to Medicare/Medicaid beneficiaries. Past programs he’s overseen include home health, personal care, hospice, rehabilitation hospitals, adult and psych daycare, alcohol/drug rehabilitation, industrial medicine and primary care practices. The Centers for Medicare and Medicaid Services (CMS) selected Baird as one of only 73 individuals to serve with its InnovationProgram. His educational background includes a Master’s Degree in Physical Chemistry from the American University, Washington, D.C.

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