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Hospital Outpatient Prospective Payment System: J1 Status Indicator Explained

August 1, 2017 by Catherine Montgomery

kit-1704526_640.pngLate last year, the Division of Workers Comp (DWC) drastically changed the reimbursement calculations used for Hospital Outpatient Departments and Ambulatory Surgical Centers (ASCs). Effective for dates of service on or after 12/15/2016, the DWC amended the Official Medical Fee Schedule for outpatient and ASCs to conform to Medicare’s reimbursement methodology.

Like most things in workers’ comp, the amended OMFS regulations to calculate reimbursements are startlingly complex. We’ll spend some time reviewing the details of these new reimbursement calculations on the blog in the coming weeks. Today, we’ll explore reimbursement when a HCPCS is assigned a J1 status indicator.

First, some background. Effective for dates of service on or after 12/15/2016, the DWC adopted two Medicare Addendums:

  1. Addendum B.-Final OPPS Payment by HCPCS Code - This addendum lists every HCPCS code and its associated Status Indicator.
  2. Addendum D1.--OPPS Payment Status Indicators - This adopted addendum lists the twenty six (26) Status Indicators and their associated reimbursement rules.

The Status Indicator assigned to a HCPCS in Addendum D1 determines whether the HCPCS is reimbursable.

For example, a Status Indicator C means that the HCPCS is not payable if performed in either an outpatient hospital or ASC setting. Status Indicator N means there is no separate payment, because reimbursement is packaged into the payment for other services.

Status Indicator C

Inpatient Procedures

Not paid under OPPS. Admit patient. Bill as inpatient.

Status Indicator N

Items and Services Packaged into APC Rates

Paid under OPPS; payment is packaged into payment for other services. Therefore, there is no separate APC payment.

Status Indicator T means that the HCPCS is reimbursable. When multiple codes appear on a single bill which are assigned Status Indicator T, the reimbursement is the full amount for the procedure with the highest APC payment rate; any remaining billed HCPCS assigned the Status Indicator T are reimbursed 50% of the calculated reimbursement.

Status Indicator T

Procedure or Service, Multiple Procedure Reduction Applies

Paid under OPPS; separate APC payment.


Status Indicator
J1 represents a far more complex reimbursement calculation. If a HCPCS is assigned a J1, then all other HCPCS on the bill are considered packaged in the J1 payment and no reimbursement is due. Per the status indicator definition there are exceptions as noted below.

Status Indicator J1

Hospital Part B services paid through a comprehensive APC

Paid under OPPS; all covered Part B services on the claim are packaged with the primary "J1" service for the claim, except services with OPPS SI=F,G, H, L and U; ambulance services; diagnostic and screening mammography; all preventive services; and certain Part B inpatient services.


The J1 status indicator was first adopted by Medicare in 2015. At the time of adoption, Medicare explained that if a HCPCS is assigned a J1 status indicator, the HCPCS represents a primary service and no other services are warranted. The J1 status indicator can be viewed as the outpatient version of the diagnosis-related group (DRG) payment system, with one payment to cover all services provided during an outpatient encounter.

Medicare’s reasoning for the adoption of a single primary code is if a patient comes to the hospital to have their gallbladder removed or have a pacemaker placed, why should they get a bill for every individual service? So, generally, if a bill contains a HCPCS with a status indicator of J1, no other HCPCS are payable since payment for the other services are considered packaged in the payment of the primary HCPCS assigned the J1 status.

Since December, Medicare has amended Addendum B a whopping three times. The DWC, correspondingly, updated the OMFS for Hospital Outpatient and ASC fee schedule three times by adopting each of Medicare’s three amended Addendum Bs. Remember, Addendum B lists every HCPCS code and its associated Status Indicator.

The statistics below show how the adoption of Addendum B increased the count of HCPCS assigned a J1 while decreasing the count of HCPCS assigned a T Status Indicator. These changes to Addendum B since December demonstrate Medicare’s ever-intensifying move toward bundling payments for services instead of paying “per piece.”

Effective Date of Service

Count of HCPCS assigned Status Indicator J1

Count of HCPCS assigned Status Indicator T

12/15/2016

866

2,819

6/1/2017

2,737

1,018

7/1/2017

2,741

1,018


Our Work Comp Wizard software, which is the foundational tool of all DaisyBill products, automatically calculates reimbursements for the Outpatient / ASC Fee Schedule – along with six other fee schedules – using the most recent Medicare files and DWC reimbursement formulas. Work Comp Wizard subscriptions are just $49 per month, come with a free three-day trial, and are cancellable at any time. You can learn more on our website.

In the meantime, stay tuned – we’ll be back later this week with more on outpatient and ASC reimbursement.

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