New three-day payment rule instructions pending from CMS

In addition to providing six months of breathing room for Congress to try yet again to get Medicare physician reimbursements straightened out, the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, which President Obama signed into law on Friday June 25, clarified Medicare policy on the three-day payment rule for hospitals (i.e., how hospital outpatient services provided on the day of an inpatient admission--or the three prior days--are paid).

"The new law clarifies Medicare's policy to be consistent with how hospitals have largely been billing the program as far back as 1991," said the Centers for Medicare and Medicaid Services (CMS) in a statement. "Under this policy, a hospital (or an entity wholly owned or operated by the hospital) includes, in its charges for the inpatient hospital stay, charges for all diagnostic services and non-diagnostic services 'related' to the inpatient stay that are provided during the 3-day payment window." 

Basically, hospitals are required to bundle outpatient diagnostic services (including clinical diagnostic laboratory tests) or other services related to the admission provided during the payment window, according to Section 1886 of the Social Security Act. The new statute expands the definition of "other services related to the admission" effective with all services provided on or after June 25. Previously, those other services had included "non-diagnostic services where there is ... an exact match in the principal diagnosis code for the inpatient stay and the primary code for the outpatient visit," explained CMS officials at the May Hospital and Hospital Quality Open Door Forum. Without that exact match on the diagnosis code, hospitals could bill non-diagnostic services separately to Medicare Part B.

Now, the statute includes under the "other services related to the admission" umbrella "'all services that are not diagnostic services (other than ambulance and maintenance renal dialysis services) for which payment may be made by' Medicare that are provided by a hospital to a patient: (1) on the date of the patient's inpatient admission, or (2) during the 3 days (or in the case of a hospital that is not a subsection (d) hospital, during the 1 day) immediately preceding the date of admission unless 'the hospital demonstrates (in a form and manner, and at a time, specified by the Secretary) that such services are not related to such admission,'" said CMS.

The fiscal intermediaries and Medicare administrative contractors will soon provide instructions to tell hospitals "how to bill for related therapeutic services provided during the 3- or 1-day payment window," said CMS. "Until the instruction is issued, a hospital should include charges for all diagnostic services and all non-diagnostic services that it believes meet the requirements of this provision.  If a hospital believes that a non-diagnostic service is truly distinct from and unrelated to the inpatient stay, the hospital may separately bill for the service provided that it has documentation to support that the service is unrelated to the admission, consistent with the new provision. Such separately billed services may be subject to subsequent review."

For services unrelated to an inpatient stay provided prior to June 25, hospitals can still bill Medicare separately as long as the claim "meets all applicable filing deadlines, and the hospital has supporting documentation that the service is truly unrelated to an inpatient stay," said CMS. The Medicare contractors won't be able to reopen, adjust or make payments when hospitals submit new claims or adjustment claims to separately bill pre-June 25 outpatient non-diagnostic services.

To learn more:
- read the CMS statement
- read Section 1886 of the Social Security Act here
- read Section 102, Clarification of 3-day Payment Window, here