Proposed Changes to Part B Inpatient Billing Open for Comment

The Centers for Medicare & Medicaid Services is proposing changes to Part B inpatient billing in hospitals.

CMS issued a notice of ruling March 13, that establishes a policy revising the current policy on Part B billing following the denial of a Part A inpatient hospital claim that a Medicare review contractor has deemed to be not reasonable or necessary.

The revisions are intended as an interim measure until CMS can finalize an official policy to address the issues raised by the Administrative Law Judge and Medicare Appeals Council decisions going forward.

This temporary ruling is effective until CMS finalizes the accompanying proposed rule, which proposes a permanent policy that would apply on a prospective basis. Specifically, CMS is proposing the following:

When a Part A claim for inpatient hospital services is denied because the inpatient admission was deemed not to be reasonable or necessary, or when a hospital determines under § 482.30(d) or § 485.641 after a beneficiary is discharged that his or her inpatient admission was not reasonable and necessary, the hospital may be paid for all the Part B services (except for services that specifically require an outpatient status) that would have been reasonable and necessary had the beneficiary been treated as a hospital outpatient rather than admitted as an inpatient, if the beneficiary is enrolled in Medicare Part B.

While the CMS ruling acquiesces to the current ALJ and Appeals Council rulings to award Part B payment as timely if the original Part A claim was timely, the proposed rule would reverse this ruling and require inpatient Part B claims be filed within the one-year timely filing period.

Providers have an opportunity comment to CMS on the impact of this policy and the operational difficulty that it may present. In the meantime, they may avail themselves of the CMS ruling before it is superseded by a final rule that again requires inpatient Part B claims to be submitted within timely filing.

If CMS does not extend the timely filing provisions of this ruling when it issues a final rule, it may circumvent CMS's objective. With no relief from timely filing, providers may post discharge utilization reviews and elect to bill close cases as outpatient first, rather than risk losing all payment after a later denial of the inpatient that can't be re-billed, according to Kimberly Hoy, JD, CPC, director of Medicare and compliance for HCPro, Inc., in Danvers, MA.

"If they don't fix the timely filing issues, they are simply moving the problem from conservative decisions to keep patients outpatient while in the hospital to conservative decisions to bill patients' care as outpatient following post discharge review. And CMS will not have accomplished their goal of reducing inappropriate outpatient cases that could and should have been inpatient cases," Hoy says.

Hoy adds that close reviews after discharge will be of the utmost importance because under the proposed rule, timely filing is still in place, and some post-payment reviews—especially Recovery Auditors—go back three years, which is prior to the one-year timely filing.

"If this goes through, providers won't be able to just wait for post-payment denials and rebill as they would under the ruling; they will have to be on top of their utilization review (UR) processes to take advantage of this."

On the other hand, these new instructions may provide some financial relief for facilities receiving Part A stay denials, says Valerie A. Rinkle, MPA, vice president of Revenue Integrity Informatics with HRAA, in Plantation, FL.

"CMS has provided needed relief with this ruling and proposed rule, which allows hospitals to receive legitimate Part B payment for medically necessary services provided to patients during a Part A stay found post discharge to not meet the narrow medical necessity requirements for Part A coverage," she says.

"Hospitals will need to make a decision after each Medicare contractor (RAC or MAC) denial of a Part A stay to either appeal or accept the denial and rebill under these new instructions."

It is important for providers to be aware of the fact that CMS is soliciting comments on the patient liability issues their instructions create. Providers should take particular notice of the issues around non-covered self-administered drugs and the fact that the Part B liability could exceed the patient's original Part A deductible liability, says Rinkle.

"I encourage hospitals to provide comment to CMS on any ideas to limit patient liability and exposure because we all know this is often a patient and public relations concern," she says.

View the notice of ruling.
View the proposed rule.
Submit comments on Regulations.gov.