On December 3, 2020, the Centers for Medicare and Medicaid Services (CMS) re-issued certain FAQs to assist providers in avoiding incorrect billing for outpatient services provided within 3 days before, on the date of, or during the admission. CMS originally issued the FAQs in 2012. CMC re-issued the FAQs, with some minor clarifications and stylistic changes, in follow-up to a May 2020 Office of Inspector General (OIG) Report that found that Medicare made $11.7 million in overpayments for nonphysician outpatient services provided shortly before or during inpatient stays. The FAQs are available here.

Under Medicare, most nonphysician outpatient services (i.e., emergency room services, observation services, laboratory tests, x-rays and other radiology services) provided within 3 days before the date of admission, on the date of admission, or during the hospital stay are included in the IPPS payment.[1] The OIG Report found that incorrect payments were made because pre-payment edits were not designed to identify all potentially incorrect claims. Medicare incorrectly paid outpatient providers for services that either should have been furnished directly by the hospital or billed through the hospital under arrangements, including surgical procedures, various medicine services and procedures, E&M services, radiology and laboratory services, injections, and orthotics and prosthetic services. These incorrect payments are overpayments that must be returned in accordance with the 60-day rule.

The FAQs provide guidance on the following questions:

  • What is the 3-Day Payment Window?
  • How Does Section 102 of the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 Change the Way a Physicians’ Practice, or Any Other Part B Entity that a Hospital Wholly Owns or Wholly Operates, Bills and Receives Payment for Medicare Services Subject to the 3-Day Window?
  • Which Services Does Medicare Consider “Diagnostic”?
  • What Type of Hospital Inpatient Admissions Would Be Subject to a 1-Day Payment Window?
  • Are Critical Access Hospitals (CAHs) Subject to the Payment Window?
  • Does the 3-Day Window (or 1-Day Window) include the 72 Hours (or 24 Hours) Directly Preceding the Inpatient Hospital Admission?
  • What Type of Information About Medicare’s 3-Day (or 1-Day) Payment Window Did CMS Publish in CR7502?
  • Does CR7502 Provide Any Specific Billing Instructions for Hospitals?
  • How Do I Know if My Physician Practice, or Other Part B Entity, Meets the Statutory Requirements of Hospital Wholly Owned or Wholly Operated?
  • When Would the 3-Day (or 1-Day) Payment Window Not Apply?
  • Will CMS Make a Determination as to Whether a Specific Entity Meets the Definition of Wholly Owned or Wholly Operated?
  • Who Makes the Determination as to Whether a Specific Entity Meets (or Doesn’t Meet) the Definition of Wholly Owned or Wholly Operated?
  • If a Hospital Has Recently Purchased My Physician Practice, Should I Update My Ownership Status with Medicare?
  • What If the Determination of Wholly Owned or Wholly Operated of a Specific Arrangement is Still Unclear (After Review by My Legal Counsel)?
  • How Will a Wholly Owned or Wholly Operated Entity Know When a Beneficiary Has Been Admitted as a Hospital Inpatient?
  • Do the ICD-10 Diagnosis Codes for the Inpatient Admission and Outpatient Non-Diagnostic Service Need to be an Exact Match to be Considered Related?
  • Will CMS Furnish a List of Non-Diagnostic Service Codes That They Will Consider “Related to” an Inpatient Admission?
  • Who is Responsible for Making the Determination as to Whether a Non-Diagnostic Service is (or Isn’t) Related to the Beneficiary’s Inpatient Admission?
  • How Does the 3-Day Payment Window Affect Wholly Owned or Wholly Operated Physician Practices (or Other Part B Entities)?
  • How Will a Wholly Owned or Wholly Operated Physician Practice or Other Part B Entity Identify Services Subject to the 3-Day (or 1-Day) Payment Window on Their Claims?
  • When is the Effective Date for Modifier PD?
  • What If the Hospital Determines That Non-Diagnostic Outpatient Service(s) Furnished Within the Payment Window Aren’t Related to the Inpatient Admission?
  • Should I Use Condition Code 51 to Identify Unrelated Non-Diagnostic Services Furnished in a Wholly Owned or Wholly Operated Physician Practice (or Other Part B Entity)?
  • Does CMS Consider All Non-Diagnostic Services Furnished on the Date of Admission to be Related to the Inpatient Admission?
  • What if a Diagnostic Service is Unrelated to the Inpatient Hospital Admission?
  • How Should a Wholly Owned or Wholly Operated Physician Practice Bill for Diagnostic Services Subject to the Payment Window?
  • Should the Wholly Owned or Wholly Operated Physician Practice Bill for the Technical Component of a Diagnostic Service?
  • Should an Ambulatory Surgical Center (ASC) Use the Modifier PD?
  • If a Wholly Owned or Wholly Operated Physician Practice Furnishes a Related Outpatient Evaluation and Management (E/M) Visit Within the Payment Window, Does the Admitting Hospital Include Any Costs Associated with the Outpatient Visit with the Outpatient Bill?
  • Should I Use the Modifier PD to Identify Outpatient Physician Practitioner Services, Subject to the Payment Window, That Are Performed in the Hospital?
  • Must I Append Modifier PD to Services I Provide to an Inpatient?
  • Are Rural Health Clinics (RHCs) or Federally Qualified Health Centers (FQHCs) Subject to the 3-Day (or 1-Day) Payment Window Policy?
  • Do I Append Modifier PD to “Incident To” Services?
  • How Does the Presence of the Modifier PD Affect Medicare Payment for Non-Diagnostic Services?
  • Should I Append the Modifier PD to Global Surgical Services Furnished Within the Payment Window?
  • Would There Be Circumstances in Which the Pre- and Post-Operative Services Included with the Global Surgical Package Are Also Subject to the 3-Day Payment Window Policy?
  • When Would the Actual Outpatient Surgery and the Pre- and Post-Operative Services Furnished During the Global Surgery Time Frame Not Be Subject to the Payment Window Policy?
  • Should a Wholly Owned or Wholly Operated Physician Practice Bill for Both the Inpatient Surgical Procedure and Initial Related Surgical Procedure Performed in the Wholly Owned or Wholly Operated Physician Office That Started the Global Period Under the 3-Day Payment Window Policy?
  • What Part B Services Aren’t Subject to the 3-Day (or 1-Day) Payment Window?
  • Should I Apply the Modifier PD to Outpatient Services Related to the Inpatient Admission When There’s No Part A Coverage for the Inpatient Stay?
  • Should the Wholly Owned or Wholly Operated Physician Practice (or Other Part B Entity) Modify Its Actual Charge for a Related Non-Diagnostic Service to Accommodate a Facility Payment (Instead of a Non-Facility Payment)?

We are available to assist with any additional questions you may have regarding the OIG Report and the FAQs.

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[1] Section 1886(a)(4) of the Social Security Act.