Medicare's Three-Day Payment Window, Demystified

James Carroll, February 25, 2011

CMS's three-day payment window rule has perplexed providers nationwide since it was adopted in 1990.The confusion became so heated that last year Congress stepped in and enacted a clarification in the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010.  

Kimberly Hoy, JD, CPC, director of Medicare and Compliance at HCPro, Inc. breaks down the government's payment rule, which is the topic of a whitepaper she recently authored.

Why all the confusion?

The three-day rule defines certain preadmission services as inpatient operating costs, which means they are bundled and billed on the inpatient claim and payment is made as part of the applicable DRG payment for the case. CMS guidance on the rule was fairly clear and hadn't changed since 1998, but seemingly unknown to CMS, some of its contractors were misapplying the rule, according to Hoy.

"Fiscal intermediaries and Medicare administrative contractors were giving out wrong information and had edits in place that did not allow correctly billed items to process for payment," she says. "Items were denied that should have been paid according to CMS guidance, which confused providers and caused them to misunderstand the rule."

As a result, recovery audit contractors (RACs) took advantage of this, and found areas where providers were susceptible and pursued those areas. Providers felt these RAC audits were unfair, because they were following the rule as they had been instructed by their contractors.

So what, at this point, are providers to do?

Hoy outlines the ins and outs out of the three-day payment window and provides guidance to implement the recent provisions and avoid compliance risk in a new whitepaper: Master The Intricacies of the Three-Day Payment Window: A Comprehensive Guide to Accurately Operationalize the Rule."

James Carroll James Carroll is associate editor for the HCPro Revenue Cycle Institute.
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