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August 3, 2012

Clarification of The 3-day Payment Window Policy

On June 25, 2010 the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PACMBPRA) was ratified. Section 102 of this act provides clarification regarding the 3-Day Payment Window. On June 14, 2012, CMS created Frequently Asked Questions (FAQs) for:

Bundling of Payments for Services Provided to Outpatients Who Later Are Admitted as Inpatients: 3-Day Payment Window and the Impacts on Wholly Owned or Wholly Operated Physician Offices.External PDF

What does this mean to you?

Certain non-diagnostic services furnished to Medicare patients in the 3 days preceding an inpatient admission are considered "operating costs of inpatient hospital services." Payment for these services is included in Medicare's payment to the hospital under the Hospital Inpatient Prospective Payment System (IPPS). These services are not paid separately under Part B.

What services provided during this 3-day window are included in the hospital's payment?

  • Under the 3-day payment window, the technical component for all diagnostic services and those direct expenses that otherwise would be paid through non-facility practice expense relative value units for non-diagnostic services related to the inpatient admission, provided by a wholly owned or wholly operated entity within the payment window, are considered hospital costs and must be included on the hospital's bill for the inpatient stay.
  • Medicare will pay the wholly owned or wholly operated entity through the Physician Fee Schedule for the professional component (PC) for service codes with a Technical/Professional Component (TC/PC) split that are provided within the payment window, and at the facility rate (i.e. exclusive of those direct practice expenses that are included in the hospital's charges) for service codes without a TC/PC split.

Implementation of the 3-day Payment Window Policy in Wholly Owned or Wholly Operated Entities

Wholly owned or wholly operated entities are subject to the 3-day (or 1-day) payment window policy when they furnish preadmission diagnostic services to a patient who is later admitted as an inpatient on the same day or within the preceding 3 calendar days (preceding 1 calendar day), or when they furnish preadmission non-diagnostic services to a patient, who is later admitted as an inpatient on the same day or within the preceding 3 calendar days (preceding 1 calendar day) for related medical care.

How should services subject to the 3-day Payment Window be documented and submitted for payment?

  • CMS established HCPCS 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).
  • Submit this modifier with preadmission diagnostic and admission-related non-diagnostic services (physician services) which are subject to the 3-day payment window policy.
  • Wholly owned and wholly operated entities are responsible for managing their billing processes to ensure that they bill for their physician services appropriately when a related inpatient admission has occurred.
  • The hospital is responsible for notifying the entity of an inpatient admission for a patient who received services in a wholly owned or wholly operated entity within the 3-day (or, when appropriate, 1-day) payment window prior to the inpatient stay.
  • The modifier is available for claims with dates of service on or after January 1, 2012.
  • Entities may begin to coordinate their billing practices and claims processing procedures with their hospitals to ensure compliance with the 3-day payment window policy no later than for claims received on or after July 1, 2012.

When the modifier is present on claims for service, Medicare will pay the wholly owned or wholly operated entity for:

  • Only the Professional Component (PC) for CPT/HCPCS codes with a Technical Component (TC)/PC split that are provided in the 3- calendar day (or, 1- calendar day) payment window; and
  • The facility rate for codes without a TC/PC split.

For additional information, please refer to:

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