New trends in fragment billing: Non-facility companies billing for facility-bundled services

When one receives surgery, it is common to receive a separate invoice from the physician and the facility. The physician bills for performing the surgery, and the facility bills for providing the products and services necessary for the surgery to be performed. The latter is known as a “facility fee,” which often includes the operating room, drugs, diagnostic tests, scalpels, electrodes, etc.

When billing for New Jersey Personal Injury Protection (“PIP”) benefits, both the facility and the physician use the Current Procedural Terminology (“CPT”) codes, developed by the American Medical Association.  In PIP, these CPT codes have explicit fee-scheduled amounts, as determined by the New Jersey Department of Banking and Insurance (“DOBI”). DOBI requires facilities to bill CPT codes only.  DOBI also prohibits facilities from fragment-billing or “unbundling” the CPT codes by billing the itemized products and service, listed in N.J.A.C. 11:3-29.5. This is different from non-PIP billing, where facilities often use Revenue Codes to additionally bill for specific accommodations, ancillary services, unique billing and arrangements relevant and additional to a procedure. 

Recently there has been a rise in companies independent from the facility billing PIP insurance carriers for products and service that are fragmented from the facility fee.  These companies maintain unique Tax ID numbers and at times even a separate business address from the facility. However, the products and services, such as intermittent limb compression devices and COVID testing, are provided on the same day as the surgery and performed at the facility itself.

With regard to intermittent limb compression devices, we have noticed instances where the facility’s durable medical (“DME”) equipment company supplies an intermittent limb compression device to the facility, which the facility staff then provides to its patients regularly during surgery to prevent pulmonary embolisms and blood clots. However, the facility does not bill its PIP insurance carrier codes E0676 or E0673 in addition to the correct CPT code, as it is clearly prohibited from doing so.  Instead, the DME supplier bills the patient’s PIP carrier directly in hopes of obviating the PIP regulations’ prohibition. 

With regard to COVID testing, we are seeing instances where a laboratory company maintains the same exact address as the facility but a different legal identity. This company then bills for independent COVID testing that is performed at the facility, by the facility staff, and on the same day as the surgery so that the surgery can move forward. However, the laboratory bills CPTs 87635, 86328 86769 or 99072 to the patient’s PIP insurance carrier directly, again hoping to avoid the prohibition on fragment billing.

Providers are using these new strategies in the hopes that PIP insurance carriers overlook the very language of N.J.A.C. 11:3-29.5:

11:3-29.5 Outpatient surgical facility fees

(a) [Ambulatory Surgical Center or “ASC”] facility fees are listed in Appendix, Exhibit 1, by CPT code. Codes that do not have an amount in the ASC facility fee column are not reimbursable if performed in an ASC. The ASC facility fee include services that would be covered if the services were furnished in a hospital on an inpatient or outpatient basis, including:

  1. Use of operating and recovery rooms, patient preparation areas, waiting rooms, and other areas used by the patient or offered for use to persons accompanying the patient;
  2. All services and procedures in connection with covered procedures furnished by nurses, technical personnel and others involved in the patient’s care;
  3. Drugs, biologicals, surgical dressings, supplies, splints, casts, appliances, and equipment;
  4. Diagnostic and therapeutic items and service…
  5. Administrative, recordkeeping, and housekeeping items and services;
  6. Blood, blood plasma, platelets, etc.;
  7. Anesthesia materials, including the anesthetic itself…and
  8. Implantable DME and prosthetics.

(b) [Hospital Outpatient Surgical Facility or “HOSF”] fees are listed on subchapter Appendix, Exhibit 7 by CPT code. The hospital outpatient surgical facility fee is the maximum that can be reimbursed for outpatient procedures performed in an HOSF. The hospital outpatient facility fees in Appendix Exhibit 7 include services that would be covered if furnished in a hospital on an inpatient basis, including those set forth in (a) 1 through (8) above.

As one case see, it is the products and services to which the prohibition against fragment billing applies. Nothing in the PIP regulations restricts the application of the fragment billing prohibition to a facility only. Any vendor that provides these products and services is also impermissibly fragment billing the facility fee.


PIP insurance carriers should be mindful of billing from independent companies for services provided on the same day as a surgical procedure. The best way for a PIP carrier to avoid paying a double recovery is to take extra care in considering, when it reviews bills for such products and services, whether they are properly part of the facility fee.