Change in Method
Outpatient Services: Standard Payment Method (Method I) or Election of Optional Payment Method (Method II)
Standard Payment Method – Reasonable Cost-Based Facility Services, With Billing Medicare Administrative Contractor (MAC) for Professional Services
Under Section 1834(g)(1) of the Act, a CAH is paid under the Standard Payment Method unless it elects to be paid under the Optional Payment Method. For cost reporting periods beginning on or after January 1, 2004, under the Standard Payment Method, payments for outpatient CAH facility services are made at 101 percent of reasonable costs.
Payment for professional medical services furnished in a CAH to registered CAH outpatients is made by the MAC under the Medicare Physician Fee Schedule (PFS), as is the case when such professional services are furnished in a hospital outpatient department. For purposes of CAH payment, professional medical services are defined as services furnished by a physician or other quailed practitioner.
Optional Payment Method – Reasonable Cost-Based Facility Services Plus 115 Percent Fee Schedule Payment for Professional Services:
Under Section 184 (g)(2) of the Act, a CAH may elect the Optional Payment Method, under which it bills the MAC for both facility services and professional services furnished to its outpatients by a physician or practitioner who has reassigned his or her billing rights to the CAH. However, even if a CAH makes this election, each physician or practitioner who furnishes professional services to CAH outpatients can choose to either:
- Reassign his or her billing rights to the CAH, agree to be included under the Optional Payment Method, attest in writing that he or she will not bill the MAC for professional services furnished in the CAH outpatient department, and look to the CAH for payment for professional services, or
- File claims for his or her professional services with the MAC for standard payment under the Medicare PFS.
For each physician or practitioner who agrees to be included under the Optional Payment Method and reassigns benefits accordingly, the CAH must forward a copy of a completed Form CMS-855R/Medicare Enrollment Application for Reassignment of Medicare Benefits to the MAC and keep the original on file. This attestation will remain at the CAH. Once the Optional Payment Method is elected, it will remain in effect until the CAH submits a termination request to the MAC. A CAH is no longer required to make an annual election to be paid under the Optional Payment Method in a subsequent year. If a CAH elects to terminate its Optional Payment Method, the termination request must be submitted in writing to the MAC at least 30 days prior to the start of the next cost reporting period.
The Optional Payment Method election applies to all CAH professional services furnished in the CAH outpatient department by the physicians and practitioners who:
- Agree to be included under the Optional Payment Method by reassigning their billing rights to the CAH;
- Complete Form CMS-855R; and
- Attest in writing that they will not bill the MAC for their outpatient professional services.
This information can be found:
Form CMS-855R at http://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/Downloads/cms855r.pdf
on the CMS website. To find MAC contact information, visit http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Review-Contractor-Directory-Interactive-Map
on the CMS website.
Reviewed: 12.02.22
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