Health Professional Shortage Area Incentive Payment

The Omnibus Budget Reconciliation Act of 1987 established Medicare’s Incentive
Payment Program, which encouraged primary care physicians to work in underserved rural areas and to improve access to care for Medicare beneficiaries. It paid primary care physicians an incentive payment of five percent for services furnished to Medicare beneficiaries in Federally-designated Health Professional Shortage Areas (HPSA). Effective January 1, 1991, Congress increased the incentive payment to 10 percent and expanded eligibility to include physicians’ services in both rural and urban HPSAs.

Under Section 1833(m) of the Social Security Act, physicians (including psychiatrists) who furnish care in an area that is designated as a geographic-based, primary medical care HPSA and psychiatrists who furnish care in an area that is designated as a geographic-based mental health HPSA are eligible for a 10 percent HPSA incentive payment for outpatient professional services furnished to a Medicare beneficiary. The HPSA incentive payment is available only for the physician’s professional services. If a service is billed with both a professional and a technical component, only the professional component will receive the incentive payment. The incentive payment is based on the paid amount of the claim.

If the service is furnished in an area that is on the CMS list of ZIP codes that are eligible for the HPSA incentive payment, payments are automatically paid on a quarterly basis. The list of eligible ZIP codes is updated annually and is effective for services on or after
January 1 of each calendar year. An area may be eligible for the HPSA incentive payment but the ZIP code may not be on the list because:

1) It does not fall within a designated full county HPSA;
2) It is not considered to fall within the county based on a determination of dominance
made by the U.S. Postal Service;
3) It is partially in a sub-county HPSA; or
4) Services with dates of service on or after January 1, 2009 are provided in a Zip
code area that was designated as of December 31 of the prior year but are not on
the Zip code file.

In these situations, the physician must utilize an AQ modifier to receive payment for claims with dates of service on or after January 1, 2006. If the ZIP code of the place of service is not on the HPSA list for automated payment, eligibility must be verified with the Fiscal Intermediary or A/B Medicare Administrative Contractor before submitting a claim with the AQ modifier.

Where to Find Additional Information About Health Professional Shortage Area Incentive Payments

Additional information about HPSA incentive payments is available as follows: In Chapter 12 of the Medicare Claims Processing Manual (Pub. 100-4): on the CMS website; Eligible ZIP codes: on the CMS website; Qualified HPSAs: on the Web; and Census tract of place of service: on the Web.