Effective July 1, 2012 Medicare will pay the facility rate (rather than the usually greater office or non-facility rate) for physicians’ services that are clinically related to an inpatient admission, occur within 72 hours of the admission, and are furnished by a physician practice wholly owned or wholly operated by a hospital. If a service is comprised of both a technical and professional component, Centers for Medicare & Medicaid Services (CMS) will pay only the professional component under the same circumstances. The payment window applies whether or not the inpatient and outpatient diagnoses codes are the same. This “3-day payment window” already applies to diagnostic services, but will soon apply to non-diagnostic services, as well.
CMS announced the expansion of the 3-day payment window in the November 28, 2011 Federal Register. Per CMS, “The 3-day payment window applies to all diagnostic and related non-diagnostic services provided within the window, including drug therapies and imaging services, assuming those services are related to the inpatient admission.” Also included in the rule are “any service that a wholly owned or wholly operated physician practice would bill separately from the global surgical package, such as a separate initial evaluation of a problem by the surgeon to determine the need for surgery or separate diagnostic tests...”
For example, a Medicare patient visits an orthopedist (whose practice is controlled by the hospital system) after a fall, due to pain in the upper leg and hip. She is barely ambulatory and arrives at the office with the assistance of her son. After performing and documenting a history, exam, and medical decision making that meet the requirements of a level III new patient visit (99203), the orthopedist orders an X-ray (e.g., 73510), which is performed in the office. After reviewing the X-ray, the physician sees that the patient has a small fracture in of the hip and will need to be admitted for arthroplasty.
Because the patient is admitted within 72 hours of the visit, the evaluation and mananagement (E/M) service (99203) will be paid at the facility rate (2.2 relative value units, versus 3.09 relative value units in a non-facility setting, or a difference of approximately $31), and the only the professional component of the X-ray will be paid (.09 relative value units, versus .93 RVUs for the global procedure, or a difference of approximately $29).
The 3-day payment window may also apply in the case of complications following an office visit or office procedure. For instance, a pain management physician whose practice is owned by the hospital system gives a joint injection in the office. Two days later, the patient arrives in the emergency room with numbness and some paralysis in the limb, and the patient is admitted. The injection and any related E/M that may have performed two days earlier will be paid at the facility RVU rate rather than at the office (non-facility) rate.
Call on Modifier PD to Identify Services Provided Within the Window
CMS has introduced a new HCPCS modifier (PD 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 3 days, or 1 day), which is to be appended to identify claims for related services provided within 72 hours of an inpatient admission.
The introduction of modifier PD, and the expansion of the 3-day payment window to non-diagnostic services, adds an administrative layer of complexity to medical billing and coding for both the hospital and the practices it owns and/or controls. Claims provided by any physician practice owned or controlled by a hospital will have to be held for at least three days prior to submission: The practice does not want to submit a claim without modifier PD, only to find out later that the patient was admitted within 72 hours of receiving the service.
Per CMS’s instruction, it is not up to the physician practice to determine when to apply modifier PD; rather “the hospital will be responsible for notifying the practice of related inpatient admissions for a patient who received services in a wholly owned or wholly operated physician practice within the 3-day (or, when appropriate, 1-day) payment window prior to the inpatient stay.”
Initially, CMS was to begin enforcing the use of modifier PD on Jan. 1, 2012. Because processes and workflow changes will be needed to effectively implement proper and accurate use of modifier PD, CMS has delayed the required implementation until July 1, 2012; however, the PD modifier is available for use as of Jan. 1, and CMS recommends that practices “should begin to append the modifier to claims subject to the 3-day payment window at that time.”
Exceptions to the 3-Day Rule
There are two minor exceptions to the 3-day window payment rule:
- The 3-day payment window for non-diagnostic services does not apply to either rural healthcare (RHC) or federally qualified healthcare centers (FQHC). These organizations must follow the 72-hour rule for diagnostic services, however, if they are owned and/or controlled by a hospital.
- When the decision for surgery is made within the 72 hours prior to the surgery (i.e., when modifier 57 Decision for surgery is properly applied to an E/M service code), the physician services do receive payment based on non-facility fees.
If non-diagnostic services are not clinically related to an inpatient admission within 72 hours, the hospital or wholly owned or wholly operated physician practice should document the reason those services are not clinically related in the beneficiary’s medical record. In such a case, the practice would receive the full non-facility payment for the services provided. The payment may have to be appealed to demonstrate to CMS that the admission was not a related admission.
In a Nutshell...
If you are a hospital wholly-owned or controlled practice, the following applies:
- Claims will need to be held for three days to determine if any patients receiving services were admitted to the hospital for a “clinically related service” during that time (the diagnosis does not have to be the same for the physician service and the admitting diagnosis).
- For any patients where the above condition applies, the practice must apply the PD modifier for all service by July 1, 2012. The modifier is available as of Jan. 1, 2012.
- It is the responsibility of the hospital to notify the practice of all patients admitted within 72 hours of a physician service, and the reason for the admission.
- Reimbursement for these services will be paid at the Professional Component if the procedure is broken into the two parts of Professional Component and Technical Component. If the procedure does not break out into PC and TC, it will be paid at the Facility rate, not the Non-facility (office) rate, even though the place of service was the office (POS 11).
- If you are in a RHC or FQHC, no changes are taking place
- If the service was a “decision for surgery,” the 3-day payment window does not apply.
Note: For additional information on the 3-Day Rule, see MLN Matters MM7502.
About the Author: Barbara J. Cobuzzi, MBA, CPC, CENTC, CPC-H, CPC-P, CPC-I, CHCC, is President CRN Healthcare Solutions and Senior Coder and Auditor for The Coding Network. She is consulting editor for Otolaryngology Coding Alert and has spoken, taught and consulted widely on coding, reimbursement, compliance and healthcare-related topics nationally.