By Dorsey Griffith
Contributing Writer  

As more NPs play ever-larger roles in the health care workforce, and particularly as 103 practice gets underway, understanding Medicare billing becomes increasingly important for nurse practitioners in California.

In many practice settings, NPs rarely deal with billing for their services; indirect billing, in which supervising physicians bill for care provided by advanced practice providers (APPs), is still common, especially in states with restrictive NP scope of practice laws.

Connections spoke with Aaron J. Wright, RN, MSN, FNP-C, about the basics of Medicare billing, which is one part of the onboarding he provides to all new APPs at UC Davis Health in Sacramento.

Wright said he was hired as the health system’s first Ambulatory Advanced Practice director because of the explosion in the numbers of APPs working throughout the university health system – which quadrupled in the past six years – and the associated need for centralized onboarding leadership for these providers.

Billing and coding are one of many topics he covers, which also include credentialing and privileging, educational and other provider resources. A similar APP onboarding program is provided to APPs who work in the inpatient setting. Wright acknowledged that there are likely some differences in how health systems bill for services provided by APPs and cautioned that the information he provides is specific to UC Davis Health.

To bill Medicare, providers, including physicians and APPs, use evaluation and management codes, or E&M codes, the process by which patient encounters are translated into CPT codes (the uniform medical coding language) for certain categories of care. In a system that uses a Funds Flow method, each CPT code carries a work RVU (relative value unit), which varies depending on the medical specialty and is used to factor an APP’s department compensation.

At UC Davis Health, if an APP provides the service, they bill for that service under their own provider number, even if a physician also saw the patient – as long as the APP did the substantive portion of the work, Wright said. (APPs are reimbursed at 85% of what physicians are paid by Medicare for the same service).

“It doesn’t make sense for two people to screw in the same lightbulb,” he said. “We provide team-based care.” A neurologist may see the patient for the initial consultation, but an APP is likely to manage subsequent visits.

Individual Medicare billing, he said, helps foster legitimacy for APPs and allows researchers to document the type, quality and volume of medical services provided.

“If you are trying to build sustainable roles for APPs, you want to be able to show as much as possible that we are capable of independent practice,” he said. “We are not permanent trainees.”

Wright noted that while Medicare and Medi-Cal accept claims for APP patient encounters, not all private insurers do, a problem he said demands a solution, especially as 103 NPs enter the system.

In onboarding new APPs, Wright said he emphasizes the importance of documentation, especially the timing of the patient visit.

“If you spend 30 minutes with an established patient in your practice, you must be clear in documenting the total time you spent, including the prep work, time with the patient, time writing prescriptions and notes and closing the encounter. There are clear Medicare time-based billing rules built into our electronic health record that help the provider decide how to code the encounter.”

For example, he said a 30-minute visit would be a level 4 encounter. He added that new patient and established patient visits are coded differently, as are medical procedures. Also included in the billing document is information about the patient – the physical exam, assessment and treatment plan.

At UC Davis Health, documentation is completed in the electronic record and routed to the billing and coding department, which validates it or kicks it back to the provider if there is an error. The billing department also converses with the payor if issues crop up. Provider self-coding is progressively becoming integrated into UC Davis Health.

As he counsels the new APPs, Wright said he doesn’t go into the nuances of various payors but stressed that any NP who intends to work independently should know the fundamentals of billing practices and how they can represent their value to a health system.

“APPs who plan to be independent will need to know the ins and outs of billing and coding and how to navigate those relationships with insurers – whether Medicare or Medi-Cal or private payers,” he said. “If you want to hang your own shingle, you should want to know a lot about billing procedures.”

Indirect vs. Direct Medicare Billing

Medicare pays 85% of the physician fee rate for services billed by NPs but pays the full 100% of that rate when a supervising physician bills for the same services provided by NPs. This practice, known as indirect or incident-to billing, is controversial. A study published in Health Affairs in 2021 found that eliminating indirect billing for NPs and PAs would have saved Medicare more than $194 million in 2018. In 2016, more than 40% of NP visits for established patients in the office setting were billed incident to a supervising physician according to MedPAC.

In addition to cost savings, many argue that indirect billing is outdated because it does not reflect changing rules allowing NPs and PAs to be paid directly. Others point out that it obscures information about who is providing care, which complicates research into NP productivity and the quality of the care they provide. The Medicare Payment Advisory Commission (MedPAC), a nonpartisan legislative branch agency that advises Congress on Medicare, has recommended changes to require APRNs and PAs to bill Medicare directly.

Larry deGhetaldi, MD, a family physician who served as chair of the California Department of Managed Health Care’s finance committee, said the decision to pay NPs and PAs just 85% of what a physician makes for the same service was made under the assumption that NPs and PAs manage patients with lower acuity. But NPs today are taking on more high-acuity primary care patients, particularly in rural areas where physicians are less likely to serve, and should be paid 100% of the claim.

“It’s likely that by distributing NPs throughout the state to raise the rate of primary care in California, we will diminish current gaps in care between rural and urban California, providing better access, better quality and lower mortality,” he said. “If rural in-person primary care services, offered increasingly by NPs, could be supported clinically for the NP and the patient by closely linked specialists, rural patients will receive care that equals the quality of care currently provided urban Californians.”