After a series of implementation delays, and not very much information released from Medicare, there are still many questions lingering as the ‘penalty phase’ for the Appropriate Use Criteria mandate gets closer.

Although there are still many ‘unknowns’, particularly the exact start date of the program, the 2022 Medicare Physician Fee Schedule (MPFS) final rule did include new details on processing claims under the mandate.

To review on the basics of Medicare’s Appropriate Use Criteria mandate, see our previous article HERE.

What do we know?

The Centers for Medicare/Medicaid Services (CMS) is building a series of system edits specific to the AUC program that will be used during the penalty phase of the program when claim reimbursement will rely on compliance to the program.

Once the penalty phase begins; CMS intends to use these edits to provide feedback rather than initially denying due to missing or incorrect documentation.  Although this process is not abundantly clear from the information provided through rulemaking, CMS did share details on the measures they will take to ensure only claims applicable to the AUC mandate would be subjected to these system edits.

For practitioner claims, CMS -1500 and the electronic equivalent, CMS will look at place of service (POS) codes to confirm the encounter was done in an applicable setting.  Specifically, AUC claims-processing edits will be directed towards the following POS codes:

·         11 – Office

·         15 – Mobile Unit

·         19 – Off Campus Outpatient Hospital

·         22 – On Campus Outpatient Hospital

·         23 – Emergency Room

·         24 – Ambulatory Surgical Center

For institutional claims, CMS -1450, CMS will limit system edits to claims billed with 13x for outpatient settings.  Critical Access Hospitals (CAH), which bill outpatient claims with 85x, will bypass the system edits with this approach.  However, CMS did note that they will also explore using the CMS Certification Number (CCN) as an alternative for excluding CAH claims based on stakeholder comments submitted on the proposed rule.

In terms of split billing when CAHs are involved, CMS addresses the limitations of their current approach within the rule: …”there currently is not a systems-based way for us to recognize that the TC of the service was furnished by a CAH, if a physician or practitioner submits a claim for the PC of an advanced imaging service for which the TC was performed as an outpatient CAH service”…

CMS’s solution is to create a new Modifier which will be used when a claim is not subject to AUC requirements due to the applicable payment systems provisions of the rule which limits the mandate to claims paid for by the Medicare Fee Schedule, Hospital Outpatient Prospective Payment System, and Ambulatory Surgical Center Payment System.

What is still unknown?

More details related to the operational billing process under the AUC mandate are expected to come from CMS before the program transitions to the ‘penalty phase’, which will either be January 1st, 2023 or the January 1st following the end of the COVID-19 public health emergency. These details, particularly the new modifier created for CAH, are likely to be released through rulemaking for the 2023 fee schedule.

Additionally, CMS has yet to fully release the final strategy and timeline for identifying outlier ordering physicians who will become subject to prior authorization requirements due to lack of compliance with the mandate.  The original plan would have CMS identifying ordering providers out of compliance as soon as 2023 or 2024, but there have not been comments on how the expanded operations and testing year impacts that timeline.

As always, ADVOCATE will continue to keep you informed on the issues impacting medical groups as they develop.


Kayley Jaquet

Manager, Regulatory Affairs