New Law Effects IPPS Billing Policy for Outpatient Services

Effective for services furnished on or after June 25, hospitals must include on a Medicare claim for a beneficiary’s inpatient stay the diagnoses, procedures, and charges for all preadmission outpatient diagnostic and nondiagnostic services that occur up to three days preceding the inpatient admission.

Section 102 of the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 pertains to Medicare policy for payment of outpatient services provided on either the date of the patient’s admission or during the three calendar days immediately preceding the inpatient admission to a hospital subject to the Inpatient Prospective Patient System (IPPS) or one day immediately preceding the inpatient admission to a hospital not subject to the IPPS.

Certified Inpatient Coder CIC

Interim Billing Procedures

The Centers for Medicare & Medicaid Services (CMS) has yet to issue updates to regulations and billing policies in Pub. 100-4 of the Medicare Claims Processing Manual to reflect the new statute’s provisions. To serve as notification, CMS issued a memorandum, which includes general instructions for appropriate billing.

For purposes of the Present on Admission Indicator (POA), even if the outpatient services are bundled with the inpatient claim, hospitals are to code any conditions the patient has at the time of the order to admit as an inpatient as POA regardless of whether the patient had the condition at the time of being registered as a hospital outpatient.

In combining the diagnoses, procedures, and charges for the outpatient services on the inpatient bill, a hospital must convert CPT® codes to ICD-9-CM codes and must only include outpatient diagnostic and admission-related nondiagnostic services that span the period of the payment window.

If a hospital believes that outpatient nondiagnostic services provided during the first, second, and third calendar days (first calendar day for a hospital not subject to the IPPS) preceding the date of a beneficiary’s inpatient admission are truly unrelated to the inpatient admission, the hospital may separately bill for the service to Part B. To support the claim, the hospital must document, and maintain such documentation as part of the beneficiary’s medical record. Note, however, that separately billed outpatient preadmission services may be subject to subsequent review.

Outpatient services furnished to a beneficiary more than three days for a hospital subject to the IPPS or one day for a hospital not subject to the IPPS preceding the beneficiary’s admission date to the hospital are not part of the payment window and must not be bundled on the inpatient bill with other outpatient services that were furnished during the span of the three-day (or one-day) payment window, even when all of the outpatient services were furnished during a single, continuous outpatient encounter. Instead, the outpatient services that were furnished prior to the span of the payment window may be separately billed to Part B.

Hospitals may continue to bill Medicare separately for outpatient nondiagnostic services furnished prior to June 25, provided that: 1) the services are not related to an inpatient stay; 2) such services were not previously included on a Medicare claim; and 3) the claim meets all applicable filing deadlines.

More information regarding the three-day payment and the memorandum is available on the CMS website.


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