UB04 PPS Code Code 02: HIPPS (Health Insurance Prospective Payment System)

Overview

The code helps payers identify which payment system applies to the claim and ensures that the correct rate calculation logic is applied during claims processing. ^[1]

When to Use

Code 02 should be used in Field 71 when the claim involves services reimbursed under a prospective payment system that requires a HIPPS code. This typically applies to the following care settings and scenarios:

• Home Health Services: When billing for home health episodes under Medicare Part A or certain Medicaid home health programs, where the payment is determined by a HIPPS code derived from the OASIS assessment.
• Skilled Nursing Facility (SNF) Stays: For Medicare Part A SNF stays where payment is based on a HIPPS code calculated from the MDS (Minimum Data Set) assessment.
• Inpatient Rehabilitation Facility (IRF) Stays: When billing for IRF services where payment is determined by a HIPPS code from the IRF-PAI assessment.
• Long-Term Care Hospital (LTCH) Stays: For certain LTCH claims where HIPPS codes are used for payment determination.

Providers must ensure that the HIPPS code entered in Field 72 corresponds to the correct assessment and reflects the patient's clinical condition and resource needs. The code should only be used when the payer specifically requires HIPPS-based billing and when the provider has completed the necessary patient assessment instrument (OASIS, MDS, IRF-PAI, etc.). ^[1]

Step-by-Step Claim Example

Scenario: A home health agency is billing Medicare for a 60-day episode of care for a patient with diabetes and hypertension. The agency completed the OASIS assessment and calculated a HIPPS code of 1AB11.

Step 1: Complete Patient and Provider Information

• Fill in Fields 1-13 with provider name, address, tax ID, patient demographics, and statement covers period (e.g., 01/01/2025 - 02/28/2025).

Step 2: Enter Service Line Details in FL 42-49

• Revenue Code (FL 42): 0023 (Home Health Visit - Skilled Nursing)
• HCPCS/Rates (FL 44): G0151 (Home health visit, skilled nursing)
• Service Units (FL 46): 8 visits
• Total Charges (FL 47): $1,200.00

Step 3: Complete Field 71 (PPS Code)

• Enter "02" in Field 71 to indicate HIPPS-based payment.

Step 4: Complete Field 72 (PPS Code)

• Enter the HIPPS code "1AB11" in Field 72. This code was generated from the OASIS assessment and reflects the patient's clinical severity and functional status.

Step 5: Complete Remaining Fields

• Fill in Field 50 (Payer Name) as "Medicare Part A"
• Fill in Field 51 (Health Plan ID) with the appropriate Medicare contractor number
• Complete Fields 53-81 as required

Step 6: Submit the Claim

• The claim is submitted electronically or on paper. The payer's system reads Code 02 in Field 71 and uses the HIPPS code in Field 72 to calculate the episode payment amount.

Common Mistakes & Audit Red Flags

Common Mistakes:

1. Using Code 02 when HIPPS is not required: Some payers may not accept HIPPS codes for certain service types. Always verify payer-specific requirements before using Code 02.
2. Mismatched HIPPS code: Entering a HIPPS code in Field 72 that does not correspond to the patient's assessment data or the services billed.
3. Missing or incorrect assessment: Submitting a HIPPS code without completing the required patient assessment (OASIS, MDS, IRF-PAI) or using an outdated assessment.
4. Incorrect code format: HIPPS codes are alphanumeric (e.g., 1AB11) and must be entered exactly as generated by the assessment software. Any deviation can cause claim rejection.

Audit Red Flags:

1. Inconsistent service patterns: Claims with HIPPS codes that suggest high resource use but show low service volume or short visit durations.
2. Frequent code changes: Multiple claims for the same patient with different HIPPS codes without corresponding changes in clinical condition.
3. High outlier payments: Claims with HIPPS codes that generate outlier payments should be carefully documented to justify the additional resource use.
4. Missing supporting documentation: Auditors will expect to see the completed assessment instrument (OASIS, MDS, etc.) that generated the HIPPS code. Failure to produce this documentation can result in recoupment of payments.

Providers should maintain thorough documentation of all assessments and ensure that HIPPS codes are accurately calculated and entered. Regular internal audits can help identify and correct errors before claims are submitted. ^[1]

Related Codes/Fields

Field/Code	Description	Relationship to Code 02
Field 71	PPS Code	The field where Code 02 is entered to indicate HIPPS-based payment
Field 72	PPS Code (Value)	Contains the actual HIPPS code (e.g., 1AB11) that corresponds to Code 02
Field 42	Revenue Code	Revenue codes (e.g., 0023 for home health) that are billed under the HIPPS payment system
Field 44	HCPCS/Rates	Procedure codes that may be required alongside HIPPS codes for certain payers
Field 50	Payer Name	Identifies the payer (e.g., Medicare) that requires HIPPS-based billing
Code 01	Medicare Per Diem	Alternative PPS code used for per diem payment systems, not HIPPS-based
Code 03	State Defined	Used for state-specific PPS systems that are not HIPPS-based
Code 04	Other	Used for PPS systems not covered by codes 01-03

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References

[1] Maryland Medicaid (Code 02) — https://health.maryland.gov/mmcp/provider/Documents/ffs-billing/UB04-Hospital-Billing-Instructions%20%281%29.pdf