January 31, 2011 | | Comments 9
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Inpatient-only procedures and the three-day rule

CMS has clarified that outpatient procedures that meet preadmission packaging requirements and occur on the day of admission or the three days before admission are to be coded on the inpatient claim with ICD-9 procedure codes.  But what about inpatient-only procedures provided on an outpatient basis (i.e., before the inpatient order is written)? (Note that there is an exception allowing for orders immediately after the procedure for inpatient-only procedures provided on an emergency basis and for procedures which were scheduled outpatient procedures that convert mid-procedure to an inpatient-only procedure.)

If this guidance is followed, the inpatient-only procedure is coded with an ICD-9 procedure code on the inpatient claim and it will generate a surgical DRG payment based on the procedure.  This conflicts, however, with long standing CMS policy of non-coverage of inpatient-only procedures provided on an outpatient basis.  So which policy should be followed?

For those of you who have attended the Medicare Boot Camp, Hospital Version, recall we always address coverage first and once you establish you have a covered service, you then move on to how it is billed and paid.  With that framework in mind, the fact that the procedure was provided on an outpatient basis means it is not covered, so you do not get to the question of inclusion on the inpatient claim under the three-day rule.

However, this answer concerned me a bit because there is virtually NO difference in the care received by the patient in this case and a patient who had an inpatient order before the procedure was started.  For inpatients and outpatients, the surgical suite is generally the same and the location after leaving recovery is what is different.  If the patient leaves recovery, with an order for inpatient care written after the procedure, they will go to a bed on the inpatient floor for the exact same care they would have received if the order had been written prior to the procedure.

Knowing there are significant dollars at stake if the provider has to simply write off the procedure under the non-coverage policy, I posed this scenario to Dr. Hecker, the Medical Director for Noridian Administrative Services, the MAC for jurisdiction 3.  She confirmed that the non-coverage policy supersedes any billing requirements under the three day rule.  Specifically, the non-covered inpatient only procedure provided on an outpatient basis should not be billed on the inpatient claim because it would allow the non-covered procedure to be paid.

Dr. Hecker is always well reasoned in her responses and verifies her answers before responding if there’s any question.  However, she does represent the Noridian jurisdiction so readers from other jurisdications may wish to confirm this with their MACs.   However, because coverage always comes before billing and payment, use caution if instructed to bill these non-covered procedures on the inpatient claim as this appears to contradict CMS coverage policy, as indicated by Dr. Hecker.

Lastly, I would like to caution providers to consider these situations carefully.  In many cases, the fact that an inpatient-only procedure was provided on an outpatient basis may not be known until the time of billing, when it hits edits in the outpatient billing modules.  If the claim was already coded according to the three-day rule coding parameters and submitted only on an inpatient claim, there may be no edit to make the provide aware that this situation occurred, resulting in an inadvertent compliance problem.  Therefore, caution should be used to educate coders, as well as billers, about application of this rule for procedures occurring before the inpatient order is written.

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Kimberly Hoy About the Author:

Kimberly Anderwood Hoy is director of Medicare and compliance for HCPro, Inc.

As a hospital compliance officer, Kimberly regularly provided research and guidance on coding, billing, and reimbursement issues for a wide range of hospital services. She has a particular expertise in charge description master operation, development, and maintenance. She has experience conducting billing compliance audits and internal investigations. Kimberly also has had primary responsibility for HIPAA privacy regulation compliance, including risk assessment, program development, implementation of policies and procedures, and ongoing operations.

As In-House Legal Counsel, Kimberly had oversight of expense contracting and regulatory compliance, including federal and state laws and regulations. Kimberly regularly provided legal advice on such complex topics as consents, EMTALA, Stark, anti-kickback and anti-inducement laws, physician recruiting, and tax exemption regulations.

Kimberly has served as a speaker at compliance-related conferences in the areas of compliance program effectiveness and physician education. Kimberly is an active member of the American and California Bar Associations, the American Health Lawyers Association and the Health Care Compliance Association.

Kimberly earned her Juris Doctor degree from the University of Montana School of Law, where she received the Corpus Juris Secundum Award for Excellence in Contracts. She also holds a Bachelor of Arts degree in Philosophy from Yale University.

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  1. Now, I am really confused. First let me address a question I have about the preceding comment about not writing a status order for the patient until post procedure. I thought one HAD to have a status order PRIOR to surgery for the patient because the status could only be changed AFTER surgery for a qualifying reason. So what if the procedure was an IP ONLY procedure but there was no clinical issue that changed?

    The second question I have is: what if the patient has an IP only procedure but ends up going home later the same day? Do they HAVE to stay the night for the hospital to be paid? I thought you could still bill it as IP???

  2. Kimberly Hoy

    I would definitely recommend that you have the status order before the surgery. For the purposes of inpatient only procedures this is vital for compliance, or you have a non – covered surgery. There are two scenarios to think about here. First, if the patient is having a procedure for which you know they are going to be an inpatient or an inpatient only procedure, the order for inpatient should be before the procedure. Second, if the patient is having a procedure that could be done on an outpatient basis but may end up an inpatient, then they may be outpatient until it is determined in recovery whether they need to be admitted as an inpatient . If in recovery it is determined they need to be inpatient, the order for inpatient is written at that time and the outpatient surgery would be coded on the inpatient claim under the three day rule. If it can’t be determined whether the patient needs to be inpatient, that is an appropriate scenario for observation so the physician can gather more information and determine if the patient may need to be admitted or can be discharged home after a bit longer period as an outpatient.

    Note that if the patient is admitted for an inpatient only procedure and is able to leave the same day due to their condition, then the provider is still paid the DRG payment. This is an example of an appropriate one day stay. Although one day stays do draw additional scrutiny, there is nothing inherently wrong with a one day stay as long as the patient qualified for inpatient admission at the time of admission.

    Regarding Joint Commission approving or not approving something, remember they are a private company that has been authorized to accredit that a provider meets the Medicare Conditions of Participation to participate in the Mediare program. These are minimum standards to participate in the program and often higher standards are required for coverage of particular items or services, in order for them to be billed and paid by the Medicare program. CMS has repeatedly said that an order for inpatient status starts the inpatient stay and that services before that order are considered outpatient services, with VERY few exceptions. Therefore I think it is dangerous from a compliance perspective to wait until after the procedure to write the inpatient order, even if this does meet Joint Commission standards.

  3. What about this scenario. Patient presents to the ER with chest pain. Physician writes assign observation order and patient is sent directly the cath lab. In addition to cardiac cath, IABP (intra aortic balloon pump) is also performed (inpatient only) which is not scheduled.

    Following procedure, the patient is transferred directly to another acute care hospital for intervention that can not be peformed at our facility. No inpatient order is written because intent was not to admit to our facility.

    During coding, edit that claim is denied as inpatient only procedure was performed as out patient.

    How do we correctly and compliantly code and bill this account. Since there was no way for the physician to know preoperatively that patient would require IABP, how would we process this claim. Should the whole claim be denied because of the inpatient only procedure.

    Can denial be appealed.

  4. Another question – am I correct in thinking that even if the IP-only procedure is non-covered, we can bill all the medically necessary services after the IP order on an IP claim? If so, how would the claim be coded, since you no longer have a procedure but you provided post-procedure care?

  5. We have a particulary challenging situation with our OR population. Nearly all of our surgical patients come to our hospital via the Ambulatory Surgiery Unit. In our electronic medical record, the physician orders are “pended” prior to the patient coming – usually after they are seen at the Patient Testing Center or from the physician’s office. These orders are not usually released until the patient has already had their procedure and is in the PACU. One of our problems is in actually “seeing” the order that is pended to determine if the patient is listed as an inpatient or as an ambulatory patient prior to the actual procedure being performed. We usually don’t see the actual status until the patient is in PACU or coming to the floor. Do you have any recommendations with how to handle situations like these?

  6. Is there ever any reason to bill a claim that has an IP only procedure as an OP claim because you did not have an IP order prior to discharge other than in the case of the patient dying post procedure before an IP order could be written (emergency surgery)? Did you ever answer Theresa Sullivan’s and Sandra McCune’s questions? If not, could you do that and my question would be answered.

  7. Michael Iarrobino

    Hi all – Thank you for continuing the discussion. I did receive a response from Kimberly Hoy that I am posting verbatim here. I also want to note that we are not always able to respond to questions posed in the comments; we do our best but there are a lot of demands on our bloggers’ time, so we appreciate your patience.

    Here are Kimberly’s thoughts:

    Regarding Theresa Sullivan’s question, CMS addressed this in two open door forums in 2007. In the November 8, 2007 Open Door Forum, CMS indicated that it may be appropriate to write the inpatient order after the procedure “…in the case where something unexpected happened in the surgery that something was done that was not a planned procedure because of circumstances emerging during the surgical procedure itself, that might be similar to an emergency situation where it was unexpected and unanticipated and driven by the consequences of what was going on in that clinical encounter.”

    This comment was in response to a question from a listener and was not exactly clear, but CMS provided a follow-up on the next Open Door Forum on December 20, 2007, in which Dan Schroeder, from the Hospital & Ambulatory Policy Group, Division of Acute Care, stated:

    This is just a real brief follow-up to what we talked about in the last Open Door Forum. We are continuing to work on our series of questions and answers to address the questions that came up last time. We are again going to reiterate that backdating or retroactively editing admission orders to add missing data or alter confusing orders is never permissible under Medicare. However, as mentioned in the last follow-up, there are certain circumstances where a procedure may be performed on a non-inpatient and then at the conclusion of that procedure an inpatient order may be completed, and this would not be considered to be backdated or retroactive. Again, we are continuing to work on some language for questions and answers. If you have any specific questions, I would encourage you to contact me directly, and I can either tell you if your question will be addressed in the question and answers or if we need further discussion to answer you directly. My e-mail address is daniel.schroder@cms.hhs.gov

    I have never seen the series of question and answers that Mr. Schroder mentions so I’m not sure if they were ever published, however he is still in the Division of Acute Care with the same address if readers would like to follow-up

    I believe, based on this information, it would be appropriate to complete the inpatient order at the conclusion of a procedure in a situation like that in the question posed by Ms. Sullivan (i.e. cardiac cath that resulted in an inpatient only procedure such as IABP that was unanticipated). However, if it is only discovered during coding and the order wasn’t written at the conclusion of the procedure, you would not be able to back date an order and treat this case as an inpatient. With no order for inpatient care, the case would be considered outpatient and because the procedure is on the inpatient only list, the procedure would not be covered unless it qualified for one of the exceptions to the inpatient only rule.

    The first of those exceptions is mentioned in Ms. Blackburn’s post regarding emergency procedures, which, if the patient dies, can be billed with CA modifier. CMS instructs that if the patient survives the patient should be admitted after the procedure, even if the patient is to be transferred to another hospital. For more information, please see the rule finalizing the modifier CA at 67 Fed. Reg. 66797. This addresses another part of Ms. Sullivan’s question regarding transferring the patient to another facility.

    The other exception I call the “separate procedure” exception and is addressed in the special processing conditions in the OCE. If an inpatient only procedure “on the separate procedure list” is billed with another surgical procedure with status indicator “T”, the inpatient only procedure line is rejected and the claim is processed for payment. The separate procedure list is only available in the OCE data files, available for purchase from the National Technical Information Service. Therefore, in response to Ms. Blackburn, there is a reason to bill an inpatient only procedure if you have also provided a status indicator “T” procedure. The inpatient only procedure may be on the separate procedure list and the claim may process for payment.

    Note: the transcripts for the open door forum calls are available through the MedicareFind service, about which you can read more at http://www.medicarefind.com/Purchase.aspx.

  8. Kimberly Hoy

    Just an update to the above post regarding inpatient only procedures on an outpatient basis during the three day payment window. The original post was based on comments from a MAC Medical Director and CMS has now published national guidance in the claims processing manual reiterating the same guidance. Specifically, CMS has added section 10.12 and updated section 180.7 in Chapter 4 of the Claims Processing Manual.

    One note: There appears to be an error in the billing instructions. The billing instructions indicate you should bill the non-covered inpatient only procedure on a 110 TOB and any covered procedures during the “same outpatient encounter” on a 11X TOB. These are inpatient TOBs, which would presumably be inappropriate here. The non-coverage of the inpatient only procedure is based on having been provided on an outpatient basis, therefore, it seems inappropriate to bill on a 110 inpatient TOB. And the covered outpatient services, if unrelated to the subsequent inpatient admission, would have to be on an outpatient claim in order for the OCE to group and pay the claim properly. Presumably this would be a 13X TOB. CMS may issue a correct, however, in the mean time I would encourage providers to contact their contractor before using these bill types to avoid inappropriate payment.

  9. I am hoping you can help with an issue i am having with cognitive therapy after a stroke. The patient was in a rehab facility for 10 days and then went home. He started a cognitive therapy class 3 days a week. The rehab facility has billed it as “in patient” therapy, thus not subject to a copay and only covered 70% by my insurance company. The facility charged a $50 copay for every visit while still billing as an impatient. Now after thinking i had covered the cost with the copays, i am faced with thousands of dollars in bills. The therapy class is a group therapy that runs for several hours. My insurance company will cover if they change the code to outpatient but the rehab facility refuses. Do I have any recourse?

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