The three-day payment window policy which formally only applied to hospital payments, will now also apply to hospital-affiliated entities including physician practices, ambulatory surgery centers, or clinical lab facilities which provide Medicare Part B services.  Specifically, the Centers for Medicare and Medicaid Services (“CMS”) has expanded the three-day payment window to cover any hospital-associated entity that provides Medicare Part B billed services.  As of July 1, 2012, these entities will be required to be paid at the facility rate for the controlling hospital, instead of their current rates, if the services provided were both related to the reason for admission and were provided three days prior to the admission.

According to CMS, this new rule makes the “policy pertaining to admission-related non-diagnostic services [to be] more consistent with common billing practices” . 1 Most providers, however, would likely not agree.  Under the rule, lab and diagnostic tests are now included in hospital costs.  However, professional services with a technical component will need to be written off.

According to Amy Nordeng, government affairs counsel for the Medical Group Management Association (MGMA) in Washington, the changes to the policy will cut payments to physicians for qualifying services.  In addition to the changes is the inclusion of a new modifier for qualifying claims:  PD, defined as “diagnostic or related non-diagnostic item or service provided in a wholly owned or wholly operated entity to a  patient who is admitted as an inpatient within three days, or one day” . 2 Although, this modifier became available January 1, 2012, hospitals and practices are not required to begin using it until July 1, 2012.

Aside from reimbursement cuts, these new requirements will create challenges for both administration and billing departments.  For instance, doctors and their affiliated hospitals will need to coordinate their billing practices so that doctors’ claims are held until the affiliated hospital verifies that a patient was not admitted within three days.  This will require coordination with the hospital’s admission’s system and billing system.  Ideally, this could be done electronically, but if the practice is not integrated into the same billing system as the hospital, it will need to be done manually.

In summary, the first step to complying with the new rule is to identify which practices meet the definition of a hospital-affiliated practice.  Next, procedures will need to be developed to adopt billing practices to the three-day payment window.  This will require some type of integration between the practice’s billing system and the hospital’s billing and admission systems.

1. The Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PACMBPRA)(Pub. L. 111-192) “Clarification of 3-Day Payment Window”, 76 Fed. Reg. 73,279 (Nov. 28, 2011).

2. The Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PACMBPRA)(Pub. L. 111-192) “Clarification of 3-Day Payment Window”, 76 Fed. Reg. 73,283 (Nov. 28, 2011).

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Photo of Joseph (Joe) V. Geraci Joseph (Joe) V. Geraci

When Joe began his legal practice as in-house counsel for a psychiatric hospital system, he dealt firsthand with the challenges of healthcare operations that his clients face daily. While physicians, hospitals and health systems focus on healing, Joe sorts through the nuts…

When Joe began his legal practice as in-house counsel for a psychiatric hospital system, he dealt firsthand with the challenges of healthcare operations that his clients face daily. While physicians, hospitals and health systems focus on healing, Joe sorts through the nuts and bolts of hospital operations to help his clients make sense of the industry’s complex regulations. He is board certified in healthcare law by the Texas Board of Legal Specialization and brings this in-depth background to his legal and business solutions.