Reviewing the three-day rule
Last week during the CMS Hospital Open Door Forum, CMS responded to requests for clarification on whether non-diagnostic services that are unrelated to the inpatient admission must be billed separately as outpatient services. To understand the implications of the CMS representative’s response, let’s look at the differences between diagnostic and non-diagnostic outpatient services and related vs. unrelated to the inpatient admission.
Diagnostic services are considered to be packaged into the inpatient payment when they are provided to a patient by the admitting hospital, or by an entity wholly owned or operated by the admitting hospital, within three days prior to and including the date of the patient’s admission. This includes those services provided “under arrangement” by another provider. The Medicare Claims Processing Manual, Chapter 3, Section 40.3, provides a list of the revenue codes, and in some cases HCPCS codes, that identify services as diagnostic. To be correctly apply the three-day rule, hospitals also need to understand the definition of “wholly owned or operated” by the hospital – that is, the hospital is the sole owner or operator of the facility providing the outpatient service and the hospital has exclusive responsibility for implementing that facility’s policies or overseeing that facility’s routine operations. The ownership, revenue codes, and sometimes the HCPCS codes clearly drive the application of the three-day rule for diagnostic services.
Non-diagnostic outpatient services (those not identified by a diagnostic service revenue code) can also be packaged into the inpatient payment using the same definition of “wholly owned and operated” and if the services were provided within three days prior to and including the date of the patient’s admission. However, the difference is that the non-diagnostic services must be related to the admission. In 1998, CMS defined non-diagnostic preadmission services as being related to the admission only when there is an exact match (all digits) between the ICD-9-CM principal diagnosis code for the inpatient stay and the first-listed diagnosis code for the preadmission services. If the services are not related to the admission, the hospital may separately bill the non-diagnostic preadmission services to Part B.
During the Open Door Forum call, the CMS representative responded to the requests for clarification, saying that, “It is mandatory that unrelated services cannot be included in the bill for inpatient admission; however, it’s discretionary to bill them separately as outpatient services.” In addition, the representative stated this rule has not changed since its implementation.
So what does this mean to hospitals? By including unrelated non-diagnostic services on the inpatient claim, the hospital may be inappropriately eligible for an outlier payment. According to CMS, hospitals must distinguish between the related and unrelated services to be included on the inpatient claim. On the other hand, a hospital may choose not to bill Part B for the unrelated non-diagnostic services, since CMS has stated it is discretionary to do so; however, the hospital could be losing revenues for those separately reimbursable services and potentially creating an unforeseen inducement.
Based on this CMS response and that the Region D RAC has recently added the three-day rule to its list of approved issues, hospitals should take the time to review their current procedures on how non-diagnostic services are identified as related or unrelated and what their current processes are for including only the related non-diagnostic services on their inpatient claims. This may be one of those instances where hospitals cannot rely on an automated process alone. Also, hospitals should be aware of potential delays in filing claims for non-diagnostic outpatient services, since the first-listed diagnosis must be compared to the principal diagnosis of the inpatient stay to correctly make the determination to include those services on the inpatient claim.
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Eileen | Mar 9, 2010 | Reply
In NY, the 3 day rule also applies to Medicare patients pending transfer to a Subacute Rehab facility. Physcians will admit their patients, along with the facilities, with the understanding that they need to be hospitalized as an inpatient for 3 days prior to transferring otherwise Medicare will not pay the facility. Lots of times there is no medical rationale for the admission, although families are unable to pay out of back & facilities will not accept patients either. Can you clarify this. Thank you
Eileen
Debbie Mackaman | Mar 9, 2010 | Reply
You may be referring to the “Preceding Inpatient Hospitalization Requirement”. For SNF/swing bed admissions,residents must have been an inpatient in an acute care hospital for a minimum of 3 consecutive days (3 midnights), within the 30 days prior to the SNF/swing admission. Inpatient rehab facilities have similar rules, sometimes based on diagnosis/procedure. However, I am not familiar enough with rehab to be able to answer with any authority on this.
Maureen | Mar 10, 2010 | Reply
Medicare Benefit Policy Manual, Chapter 8, Extended Care Services, covers the “other” three day rule Eileen is asking about – see cms.hhs.gov and type Chapter 8 into the search box- it’ll get you there. Section 20.0 is where the rule starts. This, too will be an audit focus as “convenience” admissions (inpatient admissions based on ANYTHING other than medical necessity)are a definite no-no. Your facility needs to have a plan to identify them and keep them from happening
Dona Bervy | Mar 22, 2010 | Reply
Does the 72 hour rule apply to non-patient laboratory specimens which are tested at the facility that subsequently admits the patient? Or can these tests b billed and paid separately?
Debbie Mackaman | Mar 24, 2010 | Reply
The 3-Day Rule (sometimes referred to as the 72 hr rule) combines diagnostic services performed within 3 days including the day of inpatient admission into the IP claim based on the revenue code and not the Type of Bill (non-pt lab being TOB 14X). The list of diagnostic revenue codes and in some cases, a HCPCS/CPT code are listed in the Claims Processing Manual, Chapter 3, Section 40.3B. The relationship of the entity performing the diagnostic service to the hospital admitting the patient must also be considered. If the diagnostic services are performed at the same facility that the patient is admitted to, those services will be combined if they fall within one of the revenue codes listed (Lab 30X and 31X), regardless if the lab test was for a non-pt (TOB 14x). If the diagnostic services are performed by an entity that is “wholly owned or operated by the hospital”, they would also be combined into the IP admission if they are one of the revenue codes listed.
Judith Lindberg | Apr 1, 2010 | Reply
Could you please provide examples of what would be considered non-diagnostic services when almost every RC is listed on the document as diagnostic (labs, radiology, CCL, etc)? The glaring absences are 450, 636, infusion therapy.
A cardiac cath with an admission 3 days later for chemotherapy would require the cath to be bundled into the inpatient chemo admission. Is that a correct statement?
Debbie Mackaman | Apr 2, 2010 | Reply
Other examples of revenue codes that are non-diagnostic and could be high dollar and/or high volume services would be 36X OR; 370/9 Anesthesia; 38X/39X Blood/Processing & Storage; 45X ER; 51X Clinics; 68X Trauma Response; 71X Recovery; 75X GI; 761 Treatment Room; 762 Observation. The cardiac cath you mentioned above would only be packaged into the IP claim for chemotherapy if the 1st listed diagnosis on the OP claim for the cath was an exact match (up to all 5 digits) to the principal diagnosis on the IP claim. In this scenario, it would be unlikely that these 2 diagnosis codes would match; therefore, the cath would be billed as an OP claim receiving separate reimbursement from the IP.
Madonna Long | Oct 27, 2011 | Reply
I will repost this. Also what about the new rule if you are hospitalized and if you return in 30 days Medicare will not pay.
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