Medicare Part B 101 Manual

Medicare Part B 101 Manual

Health Professional Shortage Area

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What is a HPSA?

HPSAs are rural and urban areas that are determined to be medically underserved by the Shortage Designation Branch of the HRSA.

The HRSA determines whether an area is relatively physician underserved by analyzing the ratio of primary care physicians practicing in an area to the patient population served. The HRSA designates several different types of HPSAs, including:

  1. Geographic-based HPSAs for areas with shortages of primary care physicians, dentists or psychiatrists, and
  2. Population-based HPSAs for underserved populations within an area

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What is the HPSA Incentive Bonus?

Under current law, Medicare pays a bonus to physicians for providing healthcare services only in certain types of HPSAs. Federal law for Medicare bonus payments recognizes geographic based primary medical care, and (effective for claims with dates of service of 7/1/2004, and after) mental health HPSAs as eligible areas for receiving the bonus payment. The incentive amount is ten percent of the payment amount for covered services on assigned and unassigned claims. The incentive payment is made on a quarterly basis in a separate check, and is accompanied by a list of the claims for which the incentive payment was applied instead of a standard remittance advice.

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Who is Eligible for the Incentive Bonus?

Physicians, including psychiatrists, are eligible to receive a ten percent bonus if they furnish services in primary medical care HPSAs. Psychiatrists furnishing services in mental health HPSAs are also eligible to receive the bonus. If an area is designated as both a mental health HPSA and a primary care HPSA, only one bonus payment will apply to a single service. The bonus is based on the actual place of service and not where the physician’s office is located or where the patient resides.

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How is the Bonus Billed?

Physicians will automatically receive the HPSA incentive bonus when eligible services are provided in ZIP codes that:

  • fall entirely in a county designated as a full county HPSA; or
  • fall entirely within county, through a USPS determination of dominance; or
  • fall entirely within partial county HPSA.

If the services are provided in ZIP code areas that do not fall entirely within a full county HPSA or partial county HPSA, the modifier AQ needs to be indicated on the claim to receive the bonus. Services submitted with the modifier will be subject to post-payment review by the Medicare carriers.

The following are the specific instances in which a modifier would be needed:

  • Physician providing services in ZIP code areas that do not fall entirely within a designated full county HPSA bonus area
  • Physician providing services in a ZIP code area that falls partially within a full county HPSA but is not considered to be in that county based on the USPS dominance decision
  • Physician providing services in a ZIP code area that falls partially within a non-full county HPSA
  • Physician providing services in a ZIP code area that was not included in the automated file of HPSA areas based on the date of the data run used to create the file

To obtain the incentive payment, the following information must be indicated on the claim:

  1. In Item 24D of the CMS-1500 claim form (or equivalent record field for electronic transmissions), the following modifier must be used immediately following the procedure code if the service was provided in an area that is not fully designated as HPSA eligible: AQ Physician providing service in an unlisted Health Professional Shortage Area (HPSA)
  2. In Item 32 of the CMS-1500 claim form, the street address where the services were rendered must be indicated. If it is in a fully HPSA eligible ZIP code the bonus will be paid automatically, with no need for a modifier.

Note: Do not use a Post Office Box for an address or just indicate “Office.” A street address including a ZIP code must be given in order to process a claim for the HPSA incentive payment. Refer to claim filing instructions in the CMS-1500 Claim Form section of this manual for further clarification.

Also, because the HPSA incentive payment is only provided for physician services, procedures that could otherwise be billed as a global service (such as an X-ray), when performed in a HPSA must be reported on separate lines on the claim. On one line report the technical component only and on another line, report the professional component. The technical component charge is excluded from consideration for the incentive payment.

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What Else You Should Know

There is no administrative or judicial review regarding the identification of a county or area; the assignment of a physician to a county; the assignment of a specialty of any physician; and/or the assignment of a postal ZIP code to a county or other area. HPSA bonus payments are not subject to the formal appeals process.

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To Learn More

The CMS IOM Publication 100-04, Medicare Claims Processing Manual, Chapter 12 (Physicians/Nonphysician Practitioners), Section 90 (Physicians Practicing in Special Settings), Subsection 90.4 (Billing and Payment in a Health Professional Shortage Areas [HPSAs]).

For shortage designation inquiries, call HRSA at 877-464-4772 or visit the HRSA website.

Visit the CMS website to keep up to date on changes to the process. ZIP code listings can be found at Physician Bonuses.

Reviewed 10/10/2023