Glossary · Reimbursement

No-pay codes (NPI status indicator B/C/E1/E2)

OPPS payment status indicators B, C, E1, and E2 identify procedure codes that Medicare will not pay under the Outpatient Prospective Payment System—each for a distinct regulatory reason ranging from bundled payment to statutory exclusion. Submitting these codes on outpatient hospital claims without understanding their no-pay logic is a leading cause of preventable claim denials in orthopedic practices.

Verified May 8, 2026 · 5 sources ↓

Drawn from NoridianCMSCgsmedicare

Definition

Source · Editorial summary grounded in 5 cited references ↓

Under the Outpatient Prospective Payment System (OPPS), the Centers for Medicare & Medicaid Services assigns every HCPCS and CPT code a payment status indicator (PSI) that governs how—or whether—Medicare will reimburse it on an outpatient bill. Status indicator B marks codes that OPPS does not recognize when submitted on a 12x or 13x type-of-bill; payment may still be available on a different bill type (for example, 75x for a CORF), but not through OPPS directly. Status indicator C designates inpatient-only procedures: if a surgeon performs one of these services in an outpatient or ambulatory surgery center setting and bills it on an outpatient claim, Medicare denies it and holds the beneficiary liable—the patient must be admitted as an inpatient for the service to be covered. These two indicators are especially relevant in orthopedics, where joint replacement and certain complex spinal procedures have historically carried a C indicator until CMS migrates them to the inpatient-only list or removes them.

Status indicators E1 and E2 represent a harder category of non-payment. E1 covers items, codes, and services that fall outside any Medicare outpatient benefit category, are statutorily excluded, or are not considered reasonable and necessary; Medicare will not pay these regardless of which outpatient bill type is submitted. E2 covers codes for which CMS lacks adequate pricing data or claims history to establish a payment rate; these are also non-covered on all outpatient claim types. Neither E1 nor E2 codes can be rescued with a modifier or an alternative bill type on the outpatient side.

These indicators are separate from—and should not be confused with—the Physician Fee Schedule (PFS) status indicators that govern Part B professional claims. On the PFS side, status B means payment is always bundled into another service and no separate relative value units exist, while status C means a Medicare Administrative Contractor prices the code case-by-case (typically after reviewing an operative report). Orthopedic coders must distinguish which system—OPPS or PFS—they are operating in before interpreting any status indicator, because the same letter can signal entirely different payment logic depending on context.

Why it matters

Misreading a status indicator at the point of scheduling or pre-authorization leads directly to non-payment with no straightforward appeal path. An inpatient-only C-indicator procedure billed on an outpatient claim is denied and the beneficiary becomes liable, creating both a patient relations problem and a potential compliance exposure if the practice later tries to collect. Submitting an E1 or E2 code without issuing an Advance Beneficiary Notice—or issuing one incorrectly—can violate Medicare billing rules. In orthopedics, where high-cost joint replacement and complex spinal procedures sit near the OPPS inpatient-only boundary, a single miscoded encounter can represent tens of thousands of dollars in denied revenue and trigger a post-payment audit if the pattern recurs.

Common mistakes

Where people most often go wrong with this concept.

Source · Editorial brief grounded in cited references ↓

Treating OPPS status indicator C as equivalent to PFS status indicator C—they have entirely different meanings: one signals an inpatient-only procedure (OPPS) while the other signals MAC case-by-case pricing (PFS).
Billing a C-indicator procedure in an ambulatory surgery center and expecting OPPS payment, then attempting to rebill outpatient rather than converting to an inpatient admission.
Appending modifier 59 or an anatomic modifier to an E1 or E2 code expecting it to bypass the no-pay status—OPPS non-coverage indicators are not NCCI edits and modifiers do not override them.
Conflating E1 (statutory or benefit-category exclusion) with E2 (insufficient pricing data) and applying the same billing strategy to both, when E2 codes occasionally gain a payment rate in subsequent fee schedule years.
Failing to issue an Advance Beneficiary Notice before rendering a service assigned E1 status, which removes the option to bill the patient if Medicare denies the claim.
Assuming a code's OPPS status indicator is static—CMS updates the OPPS Addendum B annually, and procedures can move on or off the inpatient-only list or change from E2 to a payable indicator after CMS accumulates sufficient claims data.

Related codes

Codes commonly involved when this concept appears in practice.

Modifiers

59 Distinct procedural service KX Medical-policy requirements met

Frequently asked questions

Source · Generated from the editorial pipeline, verified against 5 cited references ↓

01Can modifier 59 override an OPPS E1 or E2 status indicator and allow payment?

No. OPPS status indicators E1 and E2 reflect Medicare's determination that the service either falls outside a covered benefit category or lacks a payable rate. They are not NCCI bundling edits, so NCCI-associated modifiers such as 59, XE, XS, XP, or XU have no effect on payment. The denial stands regardless of what modifier is appended.

02What happens if an orthopedic surgeon performs a C-indicator (inpatient-only) procedure in an outpatient hospital setting?

Medicare denies the outpatient claim and holds the beneficiary liable for the cost. The correct course of action is to admit the patient as an inpatient before the procedure. If the error is discovered post-service, the provider may need to pursue a same-day admission conversion, subject to MAC guidance and documentation requirements.

03Are OPPS payment status indicators the same as Physician Fee Schedule status indicators?

No, and confusing them is a common billing error. OPPS indicators govern outpatient hospital and ASC claims, while PFS indicators govern Part B professional claims. The letter B under OPPS means the code is not recognized by that payment system; the letter B under the PFS means payment is always bundled into another service. Always confirm which payment system applies before interpreting the indicator.

04How often do OPPS status indicators change, and how should a practice track updates?

CMS updates OPPS Addendum B at least annually through the final OPPS rule, typically effective January 1. Mid-year updates can also occur. Practices should subscribe to CMS Addendum A and B update notifications and build a pre-submission claim scrubbing step that references the current year's indicator file rather than relying on prior-year tables.

05Can an ABN shift liability to the patient for an E1-status service?

A properly issued Advance Beneficiary Notice can allow the provider to collect from the patient when Medicare denies an E1-coded service as not reasonable and necessary. However, for services that are statutorily excluded from the Medicare benefit (a subset of E1), an ABN is not required but is still advisable to document that the patient was informed. The specific reason for the E1 designation determines ABN requirements.

06Which joint replacement procedures are commonly affected by the inpatient-only C indicator?

CMS has periodically moved total hip and total knee arthroplasty procedures on and off the inpatient-only list. As of recent OPPS rulemaking, many lower-extremity arthroplasties are no longer inpatient-only, but complex revision procedures and certain high-acuity cases may still carry restrictions. Coders should verify each procedure code's current OPPS indicator each January and after any mid-year Addendum B update.

Sources & references

Editorial content was developed using the following public sources. Last verified May 8, 2026.

Mira AI Scribe

When Mira detects a procedure code flagged in real time against the current OPPS Addendum B, it surfaces the payment status indicator alongside the code suggestion so the ordering or billing team can act before claim submission. For C-indicator (inpatient-only) procedures, Mira flags that outpatient billing will result in denial and prompts documentation review to determine whether an inpatient admission order is appropriate; this is particularly relevant for complex lower-extremity joint arthroplasties and high-acuity spinal procedures near the inpatient-only boundary. For E1-indicator codes, Mira prompts the user to confirm whether an Advance Beneficiary Notice has been issued or whether an alternative payable code better describes the service. For E2-indicator codes, Mira notes that no current OPPS payment rate exists and recommends verifying whether the code has transitioned to a payable indicator in the current fee schedule year before billing. Mira does not append modifiers to E1 or E2 codes automatically, because modifier use does not override OPPS non-coverage status indicators. On the professional fee schedule side, when a PFS status B code appears in a note, Mira flags that no separate reimbursement is available and suppresses it from the primary claim line to prevent a zero-pay submission from inflating denial metrics.

See Mira's approach

OPPS (Outpatient Prospective Payment System) is the Medicare payment framework under which hospital outpatient department services—including most orthopedic procedures performed in that setting—are reimbursed through pre-determined rates assigned to Ambulatory Payment Classifications (APCs).

Advance Beneficiary Notice (ABN) Billing

An Advance Beneficiary Notice of Noncoverage (ABN) is a written notice providers and suppliers must deliver to Original Medicare (Part B) beneficiaries before furnishing an item or service that Medicare is expected to deny, transferring potential financial liability to the patient when properly executed.

Bundling Coding

Bundling is the payer rule that treats two or more CPT codes as a single reimbursable unit, paying only the primary code when the secondary procedure is considered an inherent or integral part of it. Billing the bundled codes separately without proper justification constitutes unbundling, a compliance violation.

APC (Ambulatory Payment Classification) Reimbursement

An Ambulatory Payment Classification (APC) is a Medicare prospective payment grouping used under the Outpatient Prospective Payment System (OPPS) that bundles outpatient hospital services with similar clinical intensity and resource cost into a single, fixed reimbursement rate.