Medicare Compliance & Reimbursement

The three-day payment window applies if the hospital wholly owns or operates the practice.

You need to be certain that your facility’s compliant with the changes to the three-day payment window which Medicare implemented in 2012. If you want to ascertain whether or not you’re handling the situation correctly, read on.

The basics: If a Medicare patient has services furnished in a facility wholly owned or operated by a hospital and then gets admitted to that hospital within the three-day window, those prior services may be required to be bundled into the patient’s hospital stay. There are really two parts to the window, says Duane Abbey, Ph.D., president of Abbey and Abbey Consultants, Inc., in Ames, IA.: the three dates of service prior to the date of admission and the hours on the date of admission before the actual admission.

"For the three days prior to the admission, all diagnostic services must be bundled, but only related therapeutic services must be bundled," Abbey explains. All services during the hours before actual admission on the date of admission must be bundled.

History: While the three-day payment window has been in place for years, a major change involving the definition of "related diagnostic services" was made starting in July 2010. "Additionally, CMS has realized that associated issues needed clarification," Abbey adds. "These were effective July 1, 2012, and can impact facilities more than in the past."

Here’s why: If a physician in a practice that is not provider-based, but is still owned or operated by a hospital, treats a patient who is subsequently admitted to the hospital within the next three days, the physician should collect for his services at the reduced facility rate instead of the full physician rate. This applies even if the physician practice is not located at the same site as the hospital — as long as the hospital wholly owns or operates the practice, the three-day payment window applies.

Double Check for Modifier Inclusion

CMS established a modifier to report in conjunction with claims that fall under the three-day window parameters. When applicable, physicians should append modifier PD (Diagnostic or related non-diagnostic item or service provided in a wholly owned or operated entity to a patient who is admitted as an inpatient within 3 days) to the claim to alert payers that the service is subject to the three-day payment window.

The physician’s payment will be reduced by site-of-service differential contained in the MPFS (Medicare Physician Fee Schedule).

Careful: While the PD modifier addresses correct coding and billing for the physician in the wholly owned or operated clinic, Abbey says there is a larger issue for the admitting hospital: the charges and costs for these services must be transferred to the hospital through proper billing and cost report preparation.

"Ordinarily, clinics that are not provider-based will not have a split fee schedule (i.e., facility component versus professional component)," he says. "Thus, the amount that the hospital will need to add to the inpatient billing for these clinic services must be generated by some other means. Likewise, cost reporting personnel will have to develop some rationale for the costs associated with these bundled clinic services."