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Layer 2 reads digits 3-4 of the CCN to determine the facility type, then resolves the applicable Medicare payment system, required billing form, and type of bill (TOB) codes. This determines how you bill — not just what you bill.

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How it works

The facility type code maps to a provider category, which in turn determines which prospective payment system applies and which claim form to use.

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Request

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Response

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Facility type ranges

The facility type code (CCN digits 3-4) determines the provider category:

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Payment systems

Each facility type has a different Medicare payment methodology:

IPPS / OPPS

Short-term hospitals use MS-DRG (inpatient) or APC (outpatient) payment groups. The most common facility type.

Cost-based (CAH)

Critical Access Hospitals are reimbursed at 101% of reasonable costs — no DRG grouping.

HH PPS

Home health uses the Patient-Driven Groupings Model (PDGM) with 30-day payment periods and 432 case-mix groups.

SNF PPS

Skilled nursing uses the Patient-Driven Payment Model (PDPM) with consolidated billing — the SNF is responsible for almost all Part A and B services.

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Billing form rules

Almost all facility types use the UB-04 / 837I for institutional claims. The CMS-1500 / 837P is used for professional claims billed by individual physicians, regardless of where the service was performed.

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Type of bill codes

The TOB code is a 4-digit code on the UB-04 that identifies the type of facility, type of care, and billing frequency:

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Common TOB codes

Using the wrong TOB code is one of the most common reasons for claim rejections. Always use the TOB returned by the L2 layer for your facility type — don’t assume based on the service alone.