On Aug. 2, 2013, CMS released the Final Part B Inpatient Billing in Hospitals Rule, which addresses how a provider may rebill a claim under Part B when a Part A inpatient claim is denied for medical necessity, by incorporating its tenets into CMS-1599-F, the Final Inpatient Prospective Payment System (IPPS) Rule for 2014.

The Final Rule for the rebilling of Part A claims under Part B addresses timely filing requirements which affect the hospital’s ability to rebill a claim, beneficiary liability for Part B copayments and self-administered drugs, and the ability for a hospital to “self-audit” (deny) cases and rebill them as appropriate.

But after months of ongoing comments from hospitals and further analysis from CMS, the waters are still murky in determining the when and what of rebilling.

When to Rebill?

For claims with admission dates prior to and including September 30, 2013, a hospital can rebill under Part B when a claim for inpatient services is denied because a Medicare review contractor has determined that “the inpatient admission was not reasonable and necessary and that the beneficiary should have received hospital outpatient services rather than hospital inpatient services.” (2014 IPPS, p50907)

CMS goes on to state: “If, however, a hospital does not bill under Part B in a timely manner, in accordance with section 1866(a)(1)(A)(i) of the Act, the hospital may not charge the beneficiary for the costs related to the Part B items and services furnished, if the beneficiary would otherwise be entitled to have Part B payment made on his or her behalf. Finally, in instances where the beneficiary is not enrolled in Medicare Part B, we encouraged hospitals and beneficiaries to recognize the importance of billing supplemental insurers and pursuing an appeal of the Part A inpatient claim denial, as appropriate.” (p50918)

As more cases that are rebilled, more patients will have additional financial responsibility. Hospitals should ensure there is consistent approach to the billing and rebilling process. Failure to have this could result in patient complaints or investigation into anti-kickback violations.

Hospitals will be permitted to follow the Part B billing timeframes established in the interim Ruling (CMS-1455-NR) after the effective date of the Final Rule, provided “(1) the Part A claim denial was one to which the Ruling originally applied; or (2) the Part A inpatient claim has a date of admission before October 1, 2013, and is denied after September 30, 2013, on the grounds that although the medical care was reasonable and necessary, the inpatient admission was not” (p50935). All other claims must be submitted in accordance with existing timely filing requirements for new claims (i.e., within one year of the date or dates of service).

CMS has declined to provide any exception to the timely filing requirement for claims that are retrospectively denied by a Recovery Auditor more than one year after the date(s) of service.

Hospitals may also rebill pursuant to self-audit, beginning on the effective date of the 2014 IPPS Final Rule (that is, for claims with a date of admission of October 1, 2013, or later). CMS states, “[P]ayment of Part B inpatient services may be made if a hospital determines under § 482.30(d) or § 485.641 after a beneficiary is discharged that the beneficiary’s inpatient admission was not reasonable and necessary, and the beneficiary should have been treated as a hospital outpatient, rather than admitted as an inpatient, provided the beneficiary is enrolled in Medicare Part B and that the hospital submits the Part B inpatient claim by the deadline for timely filing…” (p50914)

CMS emphasizes that the self-audit process should conform to existing utilization review requirements under the Conditions of Participation for Hospitals (p50913). Before submitting the Part B inpatient claim, the hospital must submit a “no pay/provider liable” Part A claim. CMS notes that “[i]f both the ‘no pay/provider-liable’ Part A claim and the Part B claim(s) are submitted simultaneously, the Part A and Part B claims would overlap as duplicates in the processing system” (p50914).

Timeliness is essential for rebilling, but just as important is understanding what services hospitals can—and cannot—rebill under the 2014 IPPS Final Rule. Hospitals can rebill those “Part B inpatient services that would have been reasonable and necessary if the beneficiary had been treated as a hospital outpatient rather than admitted as an inpatient” (p50914). Services that specifically require an outpatient status, such as “observation services, outpatient DSMT, and hospital outpatient visits” are excluded from rebilling (p50912) under Medicare Part B inpatient.

However, services such as emergency department visits and outpatient observation may be eligible for Medicare Part B outpatient rebilling if the appropriate orders have been issued. For example, in the scenario where a beneficiary comes into the emergency room, is stabilized, placed in observation, and is then subsequently determined to be appropriate for an inpatient admission, but following discharge during a utilization review it is determined that inpatient admission was not appropriate, it is possible that the emergency room visit and the observation hours may be rebilled on a Part B outpatient claim.

Post-Discharge Rebilling

In the event of a post-discharge rebilling, please note that the beneficiary’s status does not change after discharge. CMS noted, “As we stated in the Ruling (78 FR 16617), ‘the beneficiary’s patient status remains inpatient as of the time of 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 she/he is discharged from the hospital. The beneficiary is considered an outpatient for services billed on the Part B outpatient claim, and is considered an inpatient for services billed on the Part B inpatient claim.’’’ (p50916)


That being said, the rebilling may have an impact on beneficiary financial liability, and CMS has addressed this possibility by stating that “[w]e believe that the CoP rules for beneficiary notification and physician involvement in hospital utilization review decisions are important for maintaining beneficiary rights…” (p50913). “The Part B inpatient billing policy finalized in this rule would not change CMS’ longstanding policy regarding the financial liability of the beneficiary or the SNF in situations where the inpatient hospital stay is subsequently denied after SNF admission. Under this policy, the three-day inpatient hospital stay which qualifies a beneficiary for ‘post-hospital’ SNF benefits need not actually be Medicare-covered, as long as it is medically necessary.” (p50921)

A big question that comes up in post-discharge rebilling is whether or not a hospital must bill first, before rebilling. The answer is yes. In order to bill for Part B services after determining that an inpatient hospital admission was not reasonable and necessary, the hospital must first submit a “no pay/provider liable” Part A claim. For more information, please consult CMS’ recently released MLN Matters SE1333, Temporary Instructions for Implementation of Final Rule 1599-F for Part A to Part B Billing of Denied Hospital Inpatient Claims.

Rebilling and Condition Code 44

Part B rebilling does not replace Condition Code 44. As quoted above, rebilling subsequent to self-audit may only be utilized when the hospital determines after discharge that the beneficiary should have been treated as an outpatient. The use of Condition Code 44 (CC44), on the other hand, requires that the determination regarding the necessity of the inpatient admission be made prior to discharge. To properly utilize CC44, CMS requires the following:

  1. Status change prior to discharge/release, with beneficiary notification of status prior to discharge;
  2. No inpatient claim submitted;
  3. Practitioner(s) responsible for patient’s care and UR committee concur with decision; and
  4. Concurrence documented in medical record.

CMS has stated that the use of both Part B rebilling subsequent to self-audit and the use of Condition Code 44 should be “increasingly rare” and that “[u]se of Condition Code 44 or Part B inpatient billing pursuant to hospital self-audit is not intended to serve as a substitute for adequate staffing of utilization management personnel or for continued education of physicians and hospital staff about each hospital’s existing policies and admission protocols” (p50914). The use of CC44 presents a better opportunity for involvement of both the physician and the beneficiary in the care of the beneficiary and to make sure the admission status is correct prior to discharge with proper notification to the beneficiary.

About the Author

Dr. Ralph Wuebker serves as Chief Medical Officer of Executive Health Resources (EHR). In this role, Dr. Wuebker provides clinical leadership within EHR and works closely with hospital leaders to ensure strong utilization review and compliance programs. Additionally, Dr. Wuebker oversees EHR’s Audit, Compliance and Education (ACE) physician team, which is focused on providing on-site education for physicians, case managers, and hospital administrative personnel and on helping hospitals identify potential compliance vulnerabilities through ongoing internal audit.

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