Medicare Compliance & Reimbursement

Tip: Some services are not inherently outpatient.

Part B inpatient billing is not a topic which is top of mind for hospital coders. However, the Centers for Medicare & Medicaid Services (CMS) has offered guidance via the Federal Register when outlining IPPS policies for 2014.

Know When Part B Applies

Part B billing applies in a hospital setting when an inpatient admission is judged as not medically necessary after the patient has been discharged.

“If the inpatient admission is determined as inappropriate while the patient is still in the hospital, then Condition Code 44 (Inpatient admission changed to outpatient) is used and the billing switches over to Part B outpatient,” explains Duane Abbey, President of Abbey & Abbey, Consultants, Inc., in Ames, Ia. “Of course, with Condition Code 44 cases you generally cannot bill for observation because a physician has to order observation and this would occur at the very end of the hospital stay.”

Watch point: The two instances in which a determination can be made for the inappropriateness of an inpatient admission after the fact are when:

1. Federal or RAC audit determines inappropriateness, or

2. The hospital, through a self-audit process, determines inappropriateness.

Check The Timing

If Part B inpatient billing is to occur, the billing must be within the timely filing guidelines for the inpatient admission — that is, one year from the initial claim.

“Unfortunately, a RAC audit may be conducted a year or two or even three after the inpatient services,” Abbey says. “If the RAC determination holds up and the inpatient admission is determined not medically necessary, then there is no recourse in Part B inpatient billing if you’re outside the timely filing guideline.”

“Thus, the main time this billing procedure will be used is if the hospital, through self-audit, determines the inpatient admission as not medically necessary,” Abbey adds.

Part A first: Hospital billers aren’t always sure how to generate claims for the Part B inpatient billing. CMS instructs you to file a Part A claim on a ‘No Pay/Provider Liable’ basis. After the Part A claim denial is in your system, you can file the Part B inpatient claim.

Verify That It’s Not Inherently Outpatient

According to CMS, you can only file Part B inpatient claims for services that are not inherently outpatient. Because of this stipulation, you cannot bill observation services through this process.

“Of course, CMS now must delineate which services require outpatient status,” says Abbey. “Services such as clinic visits and observation require outpatient status. However, services such as PT (physical therapy) and OT (occupational therapy) or clinical laboratory can be provided either on an outpatient basis or an inpatient basis.”

Note: CMS clearly indicates that utilization review staff should always be available to weigh in on cases. Page 50914 of the Federal Register states:

“… changes in patient status from inpatient to outpatient should be few because hospitals should have case management and other staff available at all times to assist the physician in making the appropriate initial admission decision.”

Another complicating factor is those outpatient services that have been included in the inpatient billing through the 3-Day Payment Window. If the inpatient admission is determined as not medically necessary, then the outpatient services that were bundled as related to the inpatient admission must now be separated out for billing.

Example: An outpatient encounter takes place in the window in which laboratory and radiological tests were performed. Within the 3-Day Payment Window all diagnostic services (and certain related therapeutic services) must be bundled into the inpatient billing. When the case is changed from inpatient to outpatient, these services in the window must be rebilled as outpatient.