December 13, 2019

December 12, 2019

Subscribe to Latest Legal News and Analysis

December 11, 2019

Subscribe to Latest Legal News and Analysis

December 10, 2019

Subscribe to Latest Legal News and Analysis

CMS Changes to 72-Hour Rule for Wholly Owned or Operated Hospital Entities

Effective July 1, 2012, when a physician furnishes services to a beneficiary in a wholly owned or operated hospital entity (including a physician practice) and the beneficiary is later admitted to the hospital as an inpatient within three days of receiving such services, the Medicare three-day payment window policy will apply to all diagnostic services furnished, and any non-diagnostic services that are clinically related to the inpatient admission, regardless of whether the reported inpatient and outpatient diagnosis codes are the same.

Effective July 1, 2012, when a physician furnishes services to a beneficiary in an entity that is wholly owned or wholly operated by a hospital (including a physician practice) and the beneficiary is later admitted to the hospital as an inpatient within three days of receiving such services, the Medicare three-day payment window policy will apply to all diagnostic services furnished, and any non-diagnostic services that are clinically related to the inpatient admission, regardless of whether the reported inpatient and outpatient diagnosis codes are the same.  In such cases, Medicare will make payment for the preadmission services under the physician fee schedule at the facility rate.  The change does not affect how provider-based physician practices currently bill Medicare for professional physician and non-physician practitioner services or the longstanding requirement that all diagnostic services furnished during the three-day payment window be included on the hospital claim for the inpatient admission.

The Centers for Medicare & Medicaid Services (CMS) is relying on the 1998 Inpatient Prospective Payment System (IPPS) final rule’s definition of “wholly-owned” and “wholly-operated," specifically, “An entity is wholly owned by the hospital if the hospital is the sole owner of the entity.  An entity is wholly operated by a hospital if the hospital has exclusive responsibility for conducting and overseeing the entity’s routine operations, regardless of whether the hospital also has policymaking authority over the entity.”  CMS previously stated “an outpatient service is related to the admission if it is clinically associated with the reason for a patient’s inpatient admission,” but is refraining from further defining admission-related non-diagnostic services, as the determination requires knowledge of the specific clinical circumstances surrounding a patient’s inpatient admission that can only be determined on a case-by-case basis.

Prior to the June 25, 2010, enactment of the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PACMBPRA), the payment window policy for preadmission non-diagnostic services was rarely applied in the wholly owned or operated context because the policy required an exact match between the principal ICD-9 CM diagnosis codes for the outpatient services and inpatient admission.  Because the policy applied only in such narrow circumstances, CMS did not provide further guidance to wholly owned or operated entities on how non-diagnostic services are to be included on hospital bills when the three-day payment window applied.  However, the statutory change to the payment window policy made by PACMBPRA significantly broadened the definition of non-diagnostic services subject to the payment window to include any non-diagnostic service that is clinically related to the reason for a patient’s inpatient admission, regardless of whether the inpatient and outpatient diagnoses are the same.

CMS extended the effective date from January 1, 2012, to July 1, 2012, in order to permit hospitals and their wholly owned or operated entities to develop internal claims processing procedures to ensure hospital/entity coordination when billing services subject to the payment window.  It is important for hospitals and wholly owned or operated entities to develop such procedures in order to minimize the risk of overpayments or filing a false claim.  A new Medicare HCPCS modifier PD is available to wholly or wholly operated entities and may be appended to Part B claims lines to identify preadmission services that are subject to the three-day payment window (the modifier will be formally implemented on July 1, 2012).  The PD modifier will signal claims processing systems to provide payment only for the PC for CPT/HCPCS codes with a TC/PC split and to pay services without a PC/TC split at the facility rate when they are provided in the three-day payment window.  The facility rate will be paid for codes without a TC/PC split to avoid duplicate payment for the technical resources required to provide the services.  In addition, the technical costs of diagnostic and related non-diagnostic services of the wholly owned or operated entity subject to the three-day payment window shall be included on the hospital’s inpatient claim for the related inpatient admission and reflected appropriately on the hospital cost report.

© 2019 McDermott Will & Emery

TRENDING LEGAL ANALYSIS


About this Author

Partner

Daniel H. Melvin is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm's Chicago office.  Daniel focuses his practice on counseling clients on Federal health care program fraud and abuse, Stark law, and Medicare reimbursement issues. 

312-984-6935
Monica Wallace, regulatory counseling lawyer, administrative attorney, McDermott Will Emery, law firm
Associate

Monica A. Wallace is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.  She focuses her practice on complex regulatory and transactional counseling to health care organizations such as health systems, hospitals, physician groups, integrated delivery systems, durable medical equipment prosthetics and orthotics suppliers, home health agencies, and other health care providers. Monica’s regulatory practice focuses on the Anti-Kickback and Stark laws; Medicare and Medicaid reimbursement and billing; legal assessments and compliance programs; and other general regulatory matters including licensure, survey/certification, and accreditation. Her transactional practice includes mergers, acquisitions and affiliations; divestitures; hospital/physician joint ventures; and corporate reorganization.

312-984-7757
Kerrin Slattery, McDermott, Healthcare Attorney
Partner

Kerrin B. Slattery maintains a diverse transactional practice focused on the representation of hospitals and health systems, as well as other health industry providers and investors across the country.

Kerrin has significant experience in all aspects of health industry transactions, including mergers, acquisitions, affiliations, joint ventures and system restructurings involving nonprofit hospitals and health systems, academic medical centers, post-acute providers, large medical groups and other health care providers. She also advises health industry clients on...

312-984-7685