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IPPS Proposed Changes Clarify Three-Day Rule

James Carroll, for HealthLeaders Media, May 16, 2011

Last month CMS released the inpatient prospective payment system proposed rule for 2012, which contains a vast assortment of inpatient proposals and clarifications for finance and accounting departments, coders and billers, and quality departments, among others. This is the first in a series of three IPPS-related articles covering three of the most significant clarifications. We begin with CMS' three-day payment window rule.

The three-day rule, which was significantly amended in 2010, defines certain preadmission services as inpatient operating costs, meaning they are bundled and billed as part of the inpatient claim and payment is made as part of the applicable DRG payment for the case. While it sounds clear, the rule was widely misunderstood by providers leading to last year's clarifying amendments.

The most recent clarification in the IPPS proposed rule deals with guidance given by CMS in an October 2010 hospital open door forum conference call. During the call, a listener questioned whether different taxpayer identification numbers will have any bearing on whether a physician practice group is wholly owned, and if the three-day payment window applies.

A CMS representative responded that the rule only applies to the technical component services in provider based facilities, but not to freestanding (non-provider based) physician offices wholly owned or operated by a hospital. However this information contradicted prior guidance given in a 1998 clarification of the payment window published in the Federal Register.

In the January hospital open door forum, CMS seemed to have corrected this apparent error, indicating the payment window applied generally to technical services at any physician office wholly owned or operated by a hospital.

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