Three-day Window Rule

Wondering if the 3-day payment window change will affect your practice? The Physician Fee Schedule Final Rule published in November of 2011 described a clarification of the policy as it applies to practices wholly owned or wholly operated by a hospital.  (This is found on pages 654-679 of the Final Rule).

Currently, under the 3-day payment window, a hospital or wholly owned physician practice must include the technical portion of any outpatient diagnostic test and non-diagnostic service on the claim for the hospital, when the service was provided within the 3-day period prior to admission. That is, services that are related to the admission in this period are not submitted to Part B as separate services.  Unrelated diagnostic services without the same ICD-9 code could be submitted to Part B.  (Ambulance services and chronic maintenance of dialysis are excluded from the payment window.)

This rule already applies to hospital owned practices, which provide diagnostic services during the 3-day period prior to a patient’s admission to the hospital.  For 2012, CMS proposed—and decided to—reduce physician payment in wholly owned or operated facilities from the non-facility rate to the facility rate for services provided during the 3-day window prior to a related inpatient admission.  If the wholly owned physician group is considered a department of the hospital and is already billing CMS Part B using place of service outpatient, 22, that group is already receiving the lower facility rate.  There will be no payment change fort those groups.  Certain hospitals are not considered subsection (d) hospitals under IPPS and those hospitals have a 1-day window.

Some physician groups are wholly owned or wholly operated but still submit claims with place of service office, 11.  These groups are not splitting the service between Part A and Part B.  These offices are affected by this rule.  If a hospital wholly owned or operated physician practice is using place of service 11, that group is receiving the higher, non-facility rate.  Starting July 1, 2012 for any patients who have a related admission within the 3-day window, the claim must be submitted with a modifier to identify it.  (Modifier PD).  The reimbursement will be at the lower, facility rate for the physician service.  The policy is effective January 1, 2012, but CMS delayed the implementation until July 1, 2012.   This applies to diagnostic services and nondiagnostic services (that is, professional, physician services) in a wholly owned practice.

Hospital wholly owned or operated physician groups must now identify diagnostic or professional services provided within the 3-day window prior to admission with modifier PD.  Modifier PD: diagnostic or related nondiagnostic item or service provided in a wholly owned or wholly operated entity to a patient who is admitted to an inpatient with 3 days, or 1 day. (1-day for hospitals not considered subsection (d) hospitals under IPPS.

Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs) will not be subject to this rule, even if they are wholly owned and operated by a hospital.  RHCs and FQHCs are paid an all-inclusive rate for their services.  The service is mostly a professional service, with a smaller technical component.  CMS feels that at the current time it would be impossible to distinguish what part of the service is the technical component.  So, for now, neither RHCs nor FQHCs need to comply with this rule.

This rule does not change the billing for provider based entities.  Provider based groups are already billing Medicare as departments of the hospital, using place of service 22.  The reimbursement for the professional component of the service is already at the lower, facility rate.

How does this rule apply to services paid under the global surgery rules? The global surgical package as defined by Medicare includes certain pre-operative services, intra-operative services and post-operative services.  (See Section 40 of Chapter 12 of the Medicare Claims Processing Manual for a complete discussion of this.)  If a service is performed in the three day window in a wholly owned/operated physician office in the 3-day window in the office, it may be subject to this rule.  Remember, if billing as a hospital outpatient department, (POS 22) the practice is already receiving the lower facility rate and this rule doesn’t apply.  If the wholly owned or operated practice is billing using POS office, (11) then this rule applies.  The group must identify office services that are subject to the 3-day window.  For example, a patient receives a wound care service in a wholly owned practice on July 15.  The service has a ten-day global period.  On July 17, the patient’s condition worsens and the surgeon admits the patient to the hospital.  The wound care CPT® code must be submitted with modifier PD.  The surgical care during the post op period is subject to the rules found in the global surgery section.

What if the wound care patient was admitted and had a major surgical procedure?  The major surgical procedure is provided in the hospital and is already paid at the lower facility rate. 

The modifier is not needed for services provided to an inpatient, to a patient in observation status or to a patient in an Ambulatory Surgical Center because surgeries in those locations are already paid at the facility rate.  The concept relates to the office visit provided in the 3-day period prior to admission. 

Diagnostic services provided by a wholly owned entity, which have, both a professional and technical component split are also subject to this rule.  The technical component must be submitted on the inpatient claim.  The technical component must be submitted o the inpatient claim.  Only the professional component should be submitted to Part B.

Does this policy apply to you? Only if you are a physician practice that is wholly owned or wholly operated by a hospital and you are billing with place of service 11, being paid at the higher, non-facility rate.

January 29, 2012

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