The Centers for Medicare and Medicaid Services (CMS) released a compliance reminder regarding, “Non-Physician Outpatient Services Provided Before or During Inpatient Stays: Bill Correctly” in their October 14, 2021, Medicare Learning Network (MLN) news. Understanding this particular CMS policy, one needs to review the language:

Medicare’s 3-day (or 1-day) payment window applies to outpatient services that hospitals and hospital wholly owned or wholly operated Part B entities furnish to Medicare beneficiaries. The statute requires that hospitals bundle the technical component of all outpatient diagnostic services and related non-diagnostic services (for example, therapeutic) with the claim for an inpatient stay when services are furnished to a Medicare beneficiary in the 3 days (or, in the case of a hospital that is not a subsection (d) hospital, during the 1 day) preceding an inpatient admission in compliance with Section 1886 of the Social Security Act.

As a notice to providers about the billing compliance of these services CMS directed readers to the December 2020 MLN. This particular CMS MLN titled “FAQs on the 3-day Payment Window for Services Provided to Outpatients who Later are Admitted as Inpatients”, is number 20024, and was published on December 3, 2020. The fourteen (14) page FAQ provides a variety of key questions and answers on this compliance subject, the following are three of the FAQs:

Which Services Does Medicare Consider “Diagnostic”?

As discussed in the “Medicare Benefit Policy Manual”, Chapter 6, Section 20.4.1, http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c06.pdf, a service is “diagnostic” if it’s an exam or procedure to which you subject the patient, or which you perform on materials derived from a hospital outpatient, to get information to aid in your assessment of a medical condition or to identify a disease. Among these examinations and tests are diagnostic laboratory services such as hematology and chemistry, diagnostic x-rays, isotope studies, EKGs, pulmonary function studies, thyroid function tests, psychological tests, and other tests you give to determine the nature and severity of an ailment or injury.

Are Critical Access Hospitals (CAHs) Subject to the Payment Window?

If the admitting hospital is a CAH, the payment window policy doesn’t apply. However, if the admitting hospital is a short stay acute hospital paid under the inpatient prospective payment system (IPPS) and the wholly owned or wholly operated outpatient entity is a CAH, the outpatient CAH services are subject to the payment window. The CAH services are also subject to the payment window if the admitting hospital is a psychiatric hospital, inpatient rehabilitation hospital, long-term care hospital, children’s hospital, or cancer hospital.

Does the 3-Day Window (or 1-Day Window) Include the 72 Hours (or 24 Hours) Directly Preceding the Inpatient Hospital Admission?

The 3-day payment window applies to services you provide on the date of admission and the 3 calendar days preceding the date of admission that will include the 72-hour time period that immediately precedes the time of admission but may be longer than 72 hours because it’s a calendar day policy. The 1-day payment window applies to the date of admission and the entire calendar day preceding the date of admission and will include the 24-hour period that immediately preceded the time of admission but may be longer than 24 hours.

CMS MLN Matters Number SE20024 FAQ document is available at: https://www.cms.gov/files/document/SE20024.pdf

That December 2020 MLN also references the Office of Inspector General (OIG) May 2020 report titled, “Medicare Made $11.7 Million in Overpayments for Nonphysician Outpatient Services Provided Shortly

Before or During Inpatient Stays.” The OIG conducted an audit on inpatient hospital claims form 2016 and 2017 in which they used beneficiary information and service dates to identify outpatient claims that overlapped with the inpatient claims for nonphysician outpatient services provided within 3 days before the date of admission, on the date of admission, or during IPPS stays. The OIG audit found Medicare made $11.7 million in incorrect payments to hospital outpatient providers. These payment errors occurred because the Common Working File (CWF) edits were not designed to accurately identify all potentially incorrect claims according to the OIG. Recommendations and corrective action was provided to CMS from the OIG and included improvements to the CWF edits to accurately identify and prevent incorrect payments for nonphysician outpatient services provided within 3 days before the date of admission, on the date of admission, or during IPPS stays. In addition, the OIG recommended that the Medicare contractors to:

(1) recover the portion of $11.7 million in identified overpayments (for claims within the 4- year reopening period) resulting from the 40,984 incorrectly billed services;

(2) instruct the outpatient providers to refund the portion of the $2,785,607 in deductible and coinsurance amounts (for claims within the 4-year reopening period) that may have been incorrectly collected from beneficiaries or from someone on their behalf;

(3) notify the appropriate providers so that the providers can exercise reasonable diligence to identify, report, and return any overpayments in accordance with the 60-day rule and identify any of those returned overpayments as having been made in accordance with this recommendation; and

(4) educate outpatient providers on how to correctly bill nonphysician outpatient services provided within 3 days before the date of admission, on the date of admission, or during IPPS stays.

The OIG report from May 2020 can be accessed at: Medicare Made $11.7 Million in Overpayments for Nonphysician Outpatient Services Provided Shortly Before or During Inpatient Stays, A-01-17-00508 (hhs.gov)

CMS does offer these additional resources on this topic to help providers:

  • Medicare Benefit Policy Manual, Chapter 6 (PDF), Section 20.4
  • Medicare Claims Processing Manual, Chapter 12 (PDF), Sections 90.7, 90.7.1
  • CY 2012 Medicare Physician Fee Schedule Final Rule

There is a lot of history with the pre-admit 3-Day Payment Window compliance, dating back to the late 1990’s. Although a compliance topic with longevity providers and others need to stay diligent and proactive.

Reimbursement Management Consultants (RMC) can provide assistance with medical coding support, auditing, education, compliance consulting, and HCC/risk adjustment services. RMC is a woman-owned, US-based and operated company which specializes in a variety of medical coding and auditing services. Contact us here.

Written by Gloryanne Bryant, RHIA, CDIP, CCS, CCDS, AHIMA Approved ICD-10-CM/PCS Trainer