The “Final” Rule for the 3-Day Payment Window

August 5, 2010 – Houston, Texas

On July 30, 2010, the Centers for Medicare & Medicaid Services issued a hospital inpatient and long-term care prospective payment system final rule for fiscal year 2011, with instructions and comments regarding new legislative provisions under the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010. Much anticipated instruction regarding implementing the 3-Day Payment Window legislative changes were included in this final rule.

Until June 25, 2010, hospitals could bill Part B for non-diagnostic services provided within 3 days of the patient admission including those from the day of admission if they were not related to the inpatient admission. “Relatedness” was historically defined by CMS as a digit-for-digit match between the outpatient primary and the inpatient principle diagnosis codes. CMS now explicitly states that all non-diagnostic services (other than ambulance and maintenance renal dialysis) provided on the date of admission are deemed related to the admission and, therefore, must now be billed with the inpatient stay. Mr. Dave Jupp, Founder and CEO of MCare-Solutions comments, “We are certainly disappointed, as is the entire healthcare industry, that the legislation was changed just as hospitals were beginning to correctly apply the 1998 regulation. This became a source of funding only because CMS began having to pay correctly submitted claims. Hospitals erroneously bundles non-diagnostic, non-related services for more than a decade, thereby saving the government millions, but when they began correctly following the regulations, the government stepped in to change legislation and prevent continued billing [of non-diagnostic outpatient services that were non-related to the inpatient admission].”

“If a hospital believes that outpatient non-diagnostic services provided during the first, second, and third calendar days (first calendar day for a nonsubsection (d) hospital) preceding the date of a beneficiary’s admission are unrelated to the inpatient admission, the hospital may separately bill for the service to Medicare Part B, provided that the hospital can document, and maintain such documentation as part of the beneficiary’s medical record to support its belief that the service is unrelated to the admission. Such separately billed outpatient preadmission services may be subject to subsequent CMS review.”   CMS, 7/30/10.  As summarized by Jerry Swarzman, President of MCare Solutions, Inc., “This interim rule shifts the burden of determining whether an outpatient service provided within the three days of the day of admission, not including the day of admission, is related to an inpatient service to the hospital.  Non-diagnostic outpatient services must be clinically distinct from the inpatient services if they are to be considered non-related and separately billed to Part B.  Consequently, a clinical professional must review outpatient and inpatient records in order to determine if the services were clinically distinct.”

CMS will issue the associated UB04 billing guideline in the near future. Because retrospective reviews are now prohibited under legislation, hospitals should bill to Part B (without the UB04 codes), those non-diagnostic outpatient services believed to be clinically distinct from the inpatient admission. If an FI rejects the claim, it should be resubmitted with the codes once they are released by CMS. Doing so would avoid a potential loss of revenue due to the inability to perform retrospective unbundling. According to Mr. Jupp, “There are numerous circumstances in which outpatient services provided within the 3 day window are clinically distinct from the inpatient admission. Hospitals should work with appropriate advisors to develop defensible criteria to identify those outpatient services provided within three days of the inpatient admission, not including the day of admission, which were clinically distinct and may therefore be billed separately to Part B.”

A link to the final rule is provided here – http://www.ofr.gov/OFRUpload/OFRData/2010-19092_PI.pdf  Instructions related to the 3-Day Payment Window begin on page 949 of 1,877 with Section M, titled, Interim Final Rule with Comment Period: Bundling of Payments for Services Provided to Outpatients Who Later Are Admitted As Inpatients: 3-Day Payment Window.  The following links directly to Section 1886 of the Social Security Laws -  http://www.socialsecurity.gov/OP_Home/ssact/title18/1886.htm

About MCare Solutions, Inc.

MCare was founded in 2005 as the first provider of Transfer DRG reimbursement recovery services for acute care providers. To date, MCare has reviewed and analyzed millions of Transfer DRG discharges and is responsible for more than $75 million in reimbursements to client hospitals. The initial focus of Medicare fee for service accounts has since expanded to include acute care discharges related to Medicare Advantage payers, IME/GME and 3-Day Payment Window reimbursement. MCare now represents more than 300 for-profit and not-for-profit hospitals from Alaska to Florida, including individual community hospitals that range in size from <100 to 1,000-plus beds and regional and national healthcare systems.

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