CAHs Paid Under Medicare’s Optional Payment Method for Services of ED Practitioners and Outreach Specialists Should Confirm Provider Reassignments on PECOS before January 2026

The Medicare program provides for payment to critical access hospitals (CAHs) of their reasonable cost-based facility services.  It also allows CAHs to elect the Optional Payment Method (Method II) which additionally pays professional services at 115% of the physician fee schedule.  If a CAH elects the Optional Payment Method, physicians and other practitioners (Health Practitioners) providing outpatient services in the CAH can either

• reassign their billing rights to the CAH, or
• retain those rights and file their own claims with the MAC for reimbursement of their professional outpatient services provided at the CAH.

In both cases, payment for the professional fees for outpatient services is made under Part B. 

Apparently, this system left quite a bit of room for error.  The Medicare program should have paid either the CAH or the Health Practitioner for the professional services, but not both.  The Office of Inspector General (OIG) conducted an audit in 2021 and published its findings in September 2022.  OIG identified 20,013 professional services for which Medicare reimbursement was claimed by and paid to both the CAH and the Health Practitioner.  This resulted in payments totaling $1,021,450 to CAHs, and $872,858 to Health Practitioners.  In addition, the OIG found that the affected beneficiaries paid cost sharing for those professional services to both the CAH and the Health Practitioner: a total of $245,148 to CAHs and $293,876 to Health practitioners.

The OIG concluded that in some instances the Health Practitioner had reassigned billing rights to the CAH, so the overpayment was to the Health Practitioner, and in other instances, there had been no reassignment, so the overpayment was to the CAH.  Medicare overpayments to CAHs were determined to be $331,448 on 12,156 improper claims, and overpayments to Health Practitioners were $575,990 on 7,857 improper claims.

The OIG had a number of recommendations, one of which was for the MACs to recoup the overpayments from the CAHs and Health Practitioners.  It also called attention to the obligations of CAHs and Health Practitioners to identify and repay the overpayments as required under the “60-day rule” under the False Claims Act.  The MACs were encouraged to educate both the CAHs and the Health Practitioners on their respective rights and obligations related to Method II payment for CAHs and Health Practitioner reassignment of billing rights to CAHs.  Interestingly, CMS responded to the OIG recommendations stating that it did not consider the identified overpayments to have been significant considering the size of the Medicare program. 

For purposes of this Article, the final OIG recommendation is timely.  The OIG recommended that CMS coordinate with the MACs to develop and implement claim system edits or alternative means to prevent and detect overpayments for outpatient professional services provided in CAHs.  CMS has published a new MLN Booklet entitled “Information for Critical Access Hospitals.  A highlighted box on the first page of the Booklet sets out the changes to Method II instructions:

• Providers assigning their benefits to Method II critical access hospitals (CAHs) can submit their application through PECOS . . .
• We’ll deny CAH claims for professional services if a reassignment application for the provider isn’t in PECOS . . .

Historically, the CAHs generally had the reassigning Health Practitioners complete CMS Form 855R, which it then submitted to the MAC.  In turn, the MAC was to record the reassignment in PECOS.  The Health Practitioner was also required to sign an attestation to the reassignment, which was retained by the CAH.  On page 8 of the Booklet, the new instructions are shown in red:

For physicians or practitioners who elect the optional payment method, a CAH must submit the reassignment application online via PECOS or the paper Form CMS-855I.  The CAH should maintain a copy of the form for its own record.  If a Method II CAH is receiving reassigned benefits, its not necessary to submit a separate online or paper Form CMS-855B.  Physicians and practitioners can reassign benefits directly to the CAH’s Part A enrollment.  We’ll deny a CAH’s claim for professional services if a reassignment isn’t on PECOS. 

In the headline above, we call attention to the need for proper Method II reassignment on PECOS by ED practitioners and outreach medical specialists.  There are obviously additional practitioners providing outpatient services in CAHs who might be asked to reassign their billing rights to the CAH.  CAHs often contract and compensate Health Practitioners for professional outpatient services.  If the contract refers to Form 855R for reassignment, it would benefit from a template update or amendment to clarify with the practitioner that completion of Form 855I will now be required. 

If there is any possibility that a CAH is one of those that submitted a required Form 855R which was not entered on PECOS by the MAC, this would be the time to confirm that that reassignment is currently shown on PECOS in preparation for the January 1, 2026 deadline.