The hospital world has been all abuzz about the recently announced Centers for Medicare & Medicaid (CMS) policy that will allow hospitals to re-bill under Part B for services provided to Medicare beneficiaries during an inpatient stay that were denied by an auditing agency (a RAC, MAC or CERT, and even an HHS Office of Inspector General audit, according to a CMS representative on the CMS Hospital and Hospital Quality Open Door Forum held on April 2, 2013.

The announcement of the new policy was greeted as good news by hospitals, especially since they now are allowed to re-bill (with certain restrictions) and be paid following either acceptance of a denial or withdrawal of an appeal of a Part A denial. The CMS action was triggered by the many administrative law judge (ALJ) and Medicare Appeals Council rulings directing payment under Part B. In its July memorandum (TDL-12309, released on July 13, 2012), CMS accepted the validity of these rulings (maintaining though that there are in violation of CMS policy) and explained a procedure for compliance with these ALJ decisions.

So, while hospitals have received some relief from CMS policies that restricted payment and punished hospitals for innocent billing errors, we should not forget to examine the effect this ruling will have on Medicare recipients.

CMS Manual Publication 100-20 (Transmittal 1203, March 22, 2013) provides that “any amounts collected from the beneficiary with respect to the Part A claim will be refunded to the beneficiary.” Since the Medicare Part A copayment for an inpatient admission is a flat rate that covers the first 60 days of inpatient care –$1,100 in 2010, $1,132 in 2011, $1,156 in 2012 and $1,184 in 2013 – patients get some good news too, when they find that they are receiving a refund of that copayment (assuming they have paid it).

There’s another possible perk for patients: A denied inpatient claim that had been billed to Part A now will be billed to Part B. According to Pub 100-20, “under the interim policy, the beneficiary’s patient status remains inpatient as of the time of the inpatient admission and is not changed to outpatient, because the beneficiary was formally admitted as an inpatient and there is no provision to change a beneficiary’s status after he or she is discharged from the hospital.” The transmittal goes on to explain that “because the beneficiary’s patient status remains inpatient, rebilling under the ruling does not impact skilled nursing facility (SNF) eligibility.” So the ruling has created a situation that CMS always has tried to avoid: beneficiaries qualifying for coverage for inpatient skilled nursing facility care (paid under Part A) without a three-day inpatient stay qualifying for Part A coverage. This means that when a patient is accepted at a SNF for skilled care following a three-day (or greater) inpatient stay, if the stay is denied and the hospital accepts the denial or withdraws a pending appeal, the SNF will be covered even though the patient didn’t qualify for inpatient care when the hospital re-bills for services on an inpatient Part B bill. However, the ruling does not address whether the SNF will be covered if the hospital is unable to re-bill – if the deadline for appeals expires or if the hospital fails to submit a Part B claim within the 180-day period allowed for re-billing.

But wait – there’s more. Similar to what this development means for hospitals, there’s good news and bad news for Medicare beneficiaries. Let’s not forget that under Part B re-billing, the Medicare beneficiary is responsible for the Part B deductible, the 20 percent copayment (based on allowable Medicare charges for each Part B service), and the cost of self-administered medications provided by the hospital. These charges can amount to even more than the Part A copayment, so patients whose inpatient stay has been denied and re-billed may be shocked to receive a refund check (the Part A copayment) and then get a bill for the Part B services in another envelope. Ouch! And to make things worse – and even more difficult for beneficiaries to comprehend – re-billing under the interim rule can be applied to any case at any level of the appeal process. Recall that RACs can reopen claims that are up to three years old and MACs can reopen claims that are up to nearly six years old (five years following the year in which the service was provided). Plus, the appeal process can go on for two years or longer. The result is that a Part A inpatient stay from five years ago suddenly can become a Part B inpatient stay, and the patient, who thought his or her hospital bill was settled years ago, will have to deal with a new bill. What if that patient has a Medicare supplement policy that ordinarily would cover the deductible and copayments, but the plan has a filing time limit of its own that prevents the patient from receiving reimbursement for these old claims?
Here’s what Transmittal 1203 says: “Note: Beneficiaries will not be held harmless from any out-of-pocket expenses due to the change in payment, but are entitled to refunds of any amount already paid to the hospital.” There’s no mention of refunding to Medicare supplemental insurance plans. They should probably be entitled to refunds as well, but as mentioned above, they may not even accept responsibility for the deductible and copayments on these aged claims.

Since this circumstance could not have been anticipated, contract language may not address how a Medicare supplemental plan will deal with new Part B claims for services that are several years old and have not been denied based on timely filing, something that will only happen for claims filed during the Interim Rule. This is something that beneficiaries will need to know about and try to understand.
By promulgating the interim rule and proposed rule, CMS has raised new questions and challenges for both hospitals and beneficiaries. After consideration of the many comments on the proposed rule that CMS is sure to receive, it likely will address some of these anomalies when the final rule is published.


Download Pub 100-20 at

About the Author

Steven J. Meyerson, MD, is Vice President of Regulations and Education for Accretive PAS®. He is Board Certified in Internal Medicine and Geriatrics. He has recently been the medical director of care management and a compliance leader of a large multi hospital system in Florida. He has distinguished himself by creating innovative service lines and managing education for Accretive PAS®.

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