MO HealthNet Outpatient Hospital Simplified Fee Schedule Payment Method FAQs

Effective for dates of service beginning July 20, 2021, all outpatient hospital services are reimbursed based on the Outpatient Simplified Fee Schedule (OSFS). A complete fee schedule of outpatient hospital procedure codes with the MO HealthNet Division (MHD) allowed amount under the OSFS methodology can be found under Fee Schedules.

For additional information, review the Hospital Provider Manual and the MHD Hospital Program page.

What providers and services use the OSFS payment method?

The OSFS applies to all hospitals enrolled in the MO HealthNet program

Why did MHD change to the OSFS payment method?

MHD's goals for the OSFS payment method include:

  • Implement a sustainable payment method. MHD needed a payment methodology that can be sustained over time, with adaptations as appropriate to promote access to quality care and reduce unnecessary expenditures.
  • Reward efficiency. The previous charge-based method lacked appropriate incentives for hospitals to reduce the cost of care. Under the OSFS method, hospitals will receive a designated fee for each service. If a hospital improves efficiency, it will benefit from savings.
  • Increase fairness. Previously, different hospitals were paid very different amounts for the same or very similar care to similar patients, as payment was based on the charges submitted. With the OSFS methodology, hospitals are paid the same for the same service as the payment is based on the procedure code being billed.
  • Ensure simplicity. The previous method, involving a cost report process to set the outpatient percent and unique billing requirements for payment, was burdensome for both MHD and providers. The OSFS is a fee schedule concept with limited use of complex pricing logic, designed for administrative ease.

Improve purchasing clarity. With the previous method, it was very difficult to understand how much MHD was paying for specific types of outpatient services. MHD aligned its payment methodology with prevailing methodologies used by Medicare, other Medicaid programs and private payers, improving purchasing clarity.

What is the basic approach of the OSFS?

The basic approach is a fee schedule based on Medicare's Ambulatory Payment Classifications (APCs) and Medicare fee schedules. Hospitals must report all outpatient services and associated charges at the claim line level using Current Procedural Terminology (CPT)/Healthcare Common Procedure Coding System (HCPCS) procedure codes appropriate to the services rendered. Reimbursement for the procedure codes billed by the hospital represents the facility charges.

If a claim line has a procedure code and the service is considered covered, the payment for that line will equal the fee times the billed units, up to the MHD maximum units allowed. Payment will be the lower of the provider's charge or the payment as calculated under the OSFS Payment Methodology. Providers should continue to bill up to the maximum number of MHD units allowed. If the billed units exceed the MHD maximum allowed units the claim will be denied. Hospitals may resubmit the claim with the MHD maximum units allowed for the procedure.

The OSFS method is similar but not identical to the APC-based method currently in use by Medicare. The differences reflect both the fact that Medicare payment policy is not always appropriate for Medicaid and MHD's goal is to avoid some of the complexities of the Medicare method.

How does the OSFS methodology work?

Fees for outpatient hospital services covered by MHD are determined by the Current Procedural Terminology (CPT)/Healthcare Common Procedure Coding System (HCPCS) code at the line level and the following hierarchy:

  • The APC relative weight or payment rate assigned to the procedure in the Medicare OPPS Addendum B will be used to calculate the fee for the service.
  • If there is no APC relative weight or APC payment rate established in the Medicare OPPS Addendum B for the procedure, a fee will be calculated using other Medicare fee schedules applicable to the outpatient hospital service and setting (e.g., Physician Fee Schedule, Clinical Laboratory Fee Schedule, Durable Medical Equipment Prosthetics/Orthotics, and Supplies Fee Schedule).
  • For any remaining outpatient hospital services covered by the program, MO HealthNet fee schedules applicable to the service will be used or a fee will be calculated.

In-state federally-deemed critical access hospitals (CAHs) and nominal charge hospitals will receive a policy adjustor of an additional forty percent (40%) applied to the OSFS fee for each billed procedure code covered by MHD. Payment will be the lower of the provider's charge or the payment as calculated under the OSFS Payment Methodology.

How are the Ambulatory Payment Classifications  (APC)-based fees calculated?

APC-based fees are calculated using the Medicare Outpatient Prospective Payment System (OPPS) Addendum B, effective January 1 of each year as updated by Medicare. The fee is calculated using the APC relative weight times the Missouri conversion factor. The Missouri conversion factor is the single statewide conversion factor used to determine the APC-based fees, using a formula based on Medicare OPPS.

The formula consists of sixty percent (60%) of the APC conversion factor multiplied by St. Louis, MO Medicare IPPS wage index value plus the remaining forty percent (40%) of the APC conversion factor, with no wage index adjustment. The resulting amount is multiplied by ninety percent (90%) to derive the OSFS fee.

For APCs with no assigned relative weight, ninety percent (90%) of the Medicare APC payment rate is used as the fee.

How does the OSFS compare with Medicare?
  • Coverage policies. Medicare and Medicaid (MO HealthNet) cover a wide range of hospital outpatient services. However, there are a few instances where coverage policy differs between the two payers. For CPT/HCPCS not priced or not covered by Medicare, MHD will determine coverage and develop fees as needed. MO HealthNet coverage policies will continue to apply under the OSFS method.
  • Payment levels. MHD set the payment level at 90% of the Medicare fee.
  • Special treatment for some hospital types. Medicare has special payment provisions for children's hospitals, cancer hospitals, rural hospitals, and critical access hospitals. MHD uses the same payment method for all hospitals. In-state federally-deemed critical access hospitals and nominal charge hospitals will receive a policy adjustor of an additional forty percent (40%) applied to the OSFS fee for each billed procedure code covered by MHD.
  • Integrated Outpatient Code Editor (I/OCE). MHD does not use the Medicare I/OCE. However, claims continue to be subject to standard edits (e.g., eligibility, enrolled provider, timely filing) and other edits (e.g., covered services, maximum service units).
  • Packaged services. Some services may be "bundled" or packaged; that is, the fee will be zero because payment is considered packaged into the payment for other services on the claim. Packaging applies to any services considered always packaged under Medicare's Ambulatory Payment Classifications (APC) methodology.
  • Conditional packaging. Under Medicare, some procedure codes are sometimes paid and sometimes packaged, depending on what other codes are submitted on the claim. Conditional packaging is not used at this time.
  • Composite APCs and Comprehensive APCs (C-APCs). Medicare uses composite APCs to make packaged payments for certain services. Implementation of these pricing techniques are complex and, for several APCs, geared specifically to the Medicare program. Composite APC and C-APC logic is not used under the OSFS method at this time.
  • Modifier pricing. Modifiers that continue to be required include EP to indicate Early Periodic Screening, Diagnostic and Treatment (EPSDT) and SL for administration of Vaccines for Children (VFC)-covered vaccines.

Quality reporting. Medicare reduces payments to hospitals that do not report outpatient quality data. MHD has no similar program.

What billing and coding practices are important for hospitals to follow?

There are several billing requirements that are important under the OSFS payment method.

  • Procedure code billing. Payment is based on the procedure code billed by the hospital at the line-level of the outpatient claim.
  • Procedure code units. Procedure codes pay the fee times the number of units billed, unless the billed units exceed the allowed units. Hospitals are asked to pay attention to billed units, which must be appropriate for the specific CPT/HCPCS code description. Special attention should be paid to therapy and observation codes.
  • Same-day billing. Hospitals are expected to bill all outpatient services provided on the same day to the same patient on the same outpatient claim.
  • Span date billing. Hospitals may continue to bill multiple dates of service on one claim listing each specific date of service at the line level.
  • Visit levels. In billing for emergency room and clinic visits (e.g., 99281-99285), hospitals are expected to follow the same guidelines as they do for Medicare. Similarly, for clinic visits (e.g., 99202-99205 and 99211-99215), hospitals should bill G0463 Hospital Outpatient Clinic Visit.
  • National Correct Coding Initiative (NCCI). NCCI is an initiative of the Centers for Medicare and Medicaid Services (CMS) to ensure that CPT/HCPCS codes are billed in appropriate combinations. NCCI edits associated with procedures and modifiers continue to be applied under the OSFS method.
  • Dental services. With the OSFS payment method, MHD will accept certain Current Dental Terminology© (CDT) codes (also known as D-codes) for dental services on the hospital claim form. These D-codes are identified on the OSFS and priced by MHD for payment in the outpatient hospital setting.
  • Observation care. Continue to report observation using HCPCS G0378 (Hospital observation services, per hour). Report the number of hours in the "units" field. One hour equals one unit of service.
  • Dialysis. The technical component of dialysis provided in hospital-based dialysis clinics may be billed on the institutional claim using procedure code 90999 (Dialysis procedure).
  • Telehealth. Hospitals may continue to bill for distant site services provided in their facilities. With the OSFS payment method, the distant site service must be reported on the institutional claim form with the CPT/HCPCS for the service and modifier GT (Interactive telecommunication). Hospitals should not bill a separate line with zero billed charges.
  • Discounting multiple procedures. Effective July 1, 2024, MHD applies multiple procedure discounting when two (2) or more services are billed on the same date of service. Procedure codes considered for discounting are identified as "Procedure or Service, Multiple Procedure Reduction Applies" under Medicare OPPS Addendum D1. Multiple procedure reduction under the OSFS excludes CDT dental procedures. If the multiple procedure claim line with the highest allowed amount has more than one (1) unit, the first unit is priced at one hundred percent (100%) of the maximum allowed amount with all other units on the line priced at fifty percent (50%) of the maximum allowed amount. If the multiple procedure claim line with the highest allowed amount has only one (1) unit it is priced at one hundred percent (100%) of the maximum allowed amount. The second and subsequent covered procedures are priced at fifty percent (50%) of the maximum allowed amount.
  • Modifier 50 Bilateral procedure billing. Hospitals are instructed to bill the bilateral procedure only once with modifier 50. Bill the procedure/modifier on one line for one (1) unit of service. MHD recognizes modifier 50 for procedure codes on the Medicare National Physician Fee Schedule Relative Value File (PFS RVU) with a '1' in the column called BILAT SURG. Effective July 1, 2024, these procedures may be subject to a payment adjustment when billed with modifier 50 and performed bilaterally on both sides of the body at the same operative session. Claim lines appropriately billed with these bilateral procedures and modifier 50 are priced at one hundred and fifty percent (150%) of the maximum allowed amount for the single code.
  • Modifier 52 Reduced services billing. Mo HealthNet recognizes modifier 52 for outpatient hospital services (effective January 1, 2024). Claims will no longer deny with hospitals use modifier 52. Hospitals should use modifier 52 when reporting a partially reduced service or procedure reduced, at the physician's discretion, due to special circumstances. Bill the procedure code with the corresponding charges that should reflect the reduced service. 
     
Can I bill a line on the outpatient hospital claim with a revenue code only and no CPT/HCPCS code?

Yes, it is acceptable to bill a line with only a revenue code when there is no CPT/HCPCS code for the service. No payment will be made for that line, and the line will be denied as it is considered packaged, i.e., the service is part of another procedure and not paid separately.

Do hospitals have to buy software to submit claims under the OSFS payment method?

No. Providers do not have to buy software to submit claims under the OSFS payment method.

Is commercial Ambulatory Payment Classifications (APC) software applicable to the OSFS payment method?

Commercially available APC software is intended for use in submitting and analyzing Medicare claims. Because of the differences between Medicare and Medicaid (MO HealthNet), the software will not be completely accurate in emulating MO HealthNet's OSFS payment method.

Does the OSFS payment method affect the MHD prior authorization process?

The OSFS payment method has no impact on MHD prior authorization policy. Refer to Section 2.35 in the Hospital Provider Manual for more information

Are National Drug Codes (NDCs) required under the OSFS payment method?

Yes. Current edits to require NDC codes continue to be in place.

Are OSFS payments subject to cost settlement after cost reports have been submitted?

No. Payment for covered services will be the lower of the provider's charge or the payment as calculated under the OSFS methodology. Payment under the OSFS methodology is final, without cost settlement.

What assistance is available to educate and keep hospitals informed about the OSFS payment method?
  • FAQ: MHD provides updates to these questions and answers document on a periodic basis.
  • Hospital Provider Manual: Information regarding outpatient hospital services and the OSFS is available to providers in the Hospital Manual posted on MHD's Provider Manuals Website.
  • Fee Schedule: Effective July 1, 2023, The Outpatient Simplified Fee Schedule is posted on MHD's Fee Schedules Website. To navigate the site, users must agree to the licensure terms and conditions, select "Download" or "Full Search," and select "Outpatient Hospital."
Who can I contact for more information on the OSFS?

Provider Communications can assist providers with questions about proper claim filing, claims resolution or disposition, participant eligibility, and verification. Contact Provider Communications via eMOMED or (573) 751-2896.

Managed Care Inquiries
If providers cannot resolve a Managed Care issue directly with a health plan, contact a Managed Care Liaison by completing a Managed Care Provider Request for Information and submit it to MHD.MCCommunications@dss.mo.gov. 

 

Jamie Purnell, Assistant Deputy Director, Clinical Services, MHD
Email: Jamie.Purnell@dss.mo.gov

Fatimah Jennings, Clinical Services Manager, MHD
Email: Fatimah.Jennings@dss.mo.gov

Roxanna Halderman, Program Specialist, Hospital Program, MHD
Email: Roxanna.M.Halderman@dss.mo.gov

Christina Jenks, Director of Hospital Policy and Reimbursement, Hospital Reimbursement Unit, MHD
Email: Christina.Jenks@dss.mo.gov

Melissa Massman, Hospital Policy and Reimbursement Manager, Hospital Reimbursement Unit, MHD
Email: Melissa.Massman@dss.mo.gov

 

For additional MHD contact information, review the Provider Resource Guide. 

Revised October 2024