Zip Code Designation Changes – Affecting Reimbursement Rates

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Between the first and second quarter of 2019, a total of 381 Zip Codes received designation changes from the Centers for Medicare and Medicaid services. Of these, 242 changed from a rural designation to a non-rural designation, severely changing the reimbursements.

The large amount of volatility caused by these sudden designation changes is bad for suppliers and bad for beneficiaries. The changes in Zip Code designations that occurred in Iowa and West Virginia will be analyzed as an example. In both states, large areas were made to be non-rural overnight, which slashed reimbursements in Iowa for some product codes by 45.7%. 
[1] West Virginia also saw zip codes changing designation, with reimbursements being slashed for the same product codes by 45.6% [2].

In rural Texas, the Zip Codes that went from rural to non-rural changed oxygen concentrator (E1390) reimbursement from $134.71 (Jan.-Mar.) to $71.73 (Apr. – June), a 53% reduction. A BiPAP machine (E0470) started the first quarter of 2019 at $185.52 to $104.56 starting in April, a 56% decrease in reimbursement. With the E0470 being a capped rental item, the purchase allowable was tremendously affected for these suppliers.

We have asked CMS for more information regarding their handling of DMEPOS Geographic Classification. We asked CMS why are these Zip Codes being changed in the first place? What is CMS doing to mitigate the damage these changes in designations could be causing?

The important takeaways for suppliers servicing rural and non-rural areas are to monitor payments from Medicare. Make sure the billing team that is posting payments are communicating any changes or concerns. Suppliers also need to recognize the updates with Zip Code changes could occur quarterly, noting CMS did not communicate the changes to the Zip Codes. And remember, there are Zip Codes that went from non-rural to rural. While that was a smaller percentage overall, it’s important to monitor the payments.

We will continue to monitor any changes and be sure to communicate to our members. There will be representation from CMS at our Heartland Conference, and they are aware of these concerns.

[1] Percentage difference between the IA Rural and Non-Rural Reimbursements for Product Codes E1390 and E1391, according to the DMEPOS April 2019 CMS Fee Schedule

[2] Percentage difference between the WV Rural and Non-Rural Reimbursements for Product Codes E1390 and E1391, according to the DMEPOS April 2019 CMS Fee Schedule