dabbey120dsFor more than 15 years, the three-day pre-admission window (or what CMS is referring to as the three-day payment window) was stable, with explicit guidance as to what services in the window were to be bundled into billing for inpatient admissions. On June 25, 2010, however, the world as it pertained to the window changed. P.L. 111-192 moved more generalized language into the Social Security Act (SSA) itself. At issue was the definition of what services in the window are related to inpatient admissions. The billing for related services must be included in the inpatient billing for the admission, and the hospital processes needed for such bundling can become complex.


Setting aside the issue of what constitutes services being “related,” there are some other subtle issues to consider. While these issues are not new, enforcement by CMS in this area has not been pursued previously. Operationally, for CMS to audit the issues discussed below, comparisons of hospitals’ UB-04 claims and clinics’ 1500 claims would have to be performed. Such activities would demand that a single entity have immediate access to both types of claims, and this is just occurring with the development of the MACs (Medicare Administrative Contractors).


The Trigger


At issue in particular is the unusual trigger associated with the payment window. The trigger applies to any facility wholly owned or operated by the admitting hospital. Presumptively, this involves outpatient facilities (the main facilities are clinics). Provider-based clinics certainly also are included because they are owned and operated by the hospital. This is part of the definition of being provider-based.


The more subtle issue is that this even applies to freestanding clinics owned and/or operated by the hospital. “Freestanding” is an organizational concept, not a physical concept. Basically, the term derives from the provider-based rule. Freestanding clinics only file the professional 1500 claim, generally with a place-of-service (POS) of “11” for physician office.


(Note: For various reasons, CMS is referring to these clinics as “physician practices.” This terminology is somewhat misleading and has nothing to do with physician ownership; the label is used to indicate that only a 1500 claim is being filed. Some insight can be gained relative to terminology from the withdrawn Transmittal 87 issued on May 2, 2008.(1))


To illustrate the challenges in this area, let us consider a simple case study. We will join Sarah, one of our fictitious coding characters, and the Acme Medical Clinic, a freestanding clinic wholly owned and operated by Apex Medical Center. The clinic has basic radiology and physician office laboratory services.


Case Study 1: On Tuesday morning Sarah presents to the Acme clinic with a cough, congestion and a slight fever. A physician performs a thorough workup, including laboratory and radiology. A definitive diagnosis cannot be made. Sarah is given an antibiotic injection and placed on an antibiotic regimen, then sent home to rest. On Thursday evening Sarah is brought to Apex Medical Center by neighbors and is admitted with a diagnosis of pneumonia.


Because Acme is owned and operated by Apex, the three-day payment window applies. The laboratory and radiology tests certainly are diagnostic and should be bundled into the inpatient billing. In addition, as CMS has indicated, the physician should not be paid the full professional fee. In essence, because Sarah was admitted, the physician should be paid for this service as if it was provided in a facility setting. This means that the site-of-service differential should be applied.


Here is the CMS comment from page 42915 of the July 19, 2010 Federal Register:


“In circumstances where the three-day payment window applies to nondiagnostic services related to an inpatient admission furnished in a wholly owned or wholly operated physician practice, we propose that Medicare would make payment under the physician fee schedule for the physicians’ services that are subject to the three-day payment window at the facility rate.”


The site-of-service differential application typically is triggered by the place of service (POS) being something like “22” for “hospital, outpatient.” Because this is a professional claim from a freestanding clinic, though, the POS most likely will be “11” for “physician office.” For the window, something different is needed. Again from page 42915, we have:


“Specifically, we would establish a new Medicare HCPCS modifier that will signal claims processing systems to provide payment at the facility rate.”


CMS continues this discussion, indicating that for those CPT® codes that actually separate the technical component from the professional component and then also list the total component, the appropriate process will be to bundle the technical component.


(Note: Be careful with CMS’s notation. They are using PC as the acronym for professional component and TC as the acronym for technical component. These are not modifiers! There is a “-PC” modifier that is totally unrelated. The professional component modifier is the “-26” modifier.)



(1)You may have difficulty obtaining this transmittal because it was withdrawn shortly after issuance. Contact Dr. Abbey if you need a copy.


Now, a logical question is this: how will staff at Acme, the clinic, know when to use the new modifier to incur the reduction in payment? Here is what CMS proposes, from pages 42915-49216:


“The hospital would be responsible for notifying the practice of related inpatient admissions for a patient who received services in a wholly owned or wholly operated physician practice within the three-day (or when appropriate one-day) payment window prior to the inpatient stay. We would make the new modifier effective for claims with dates of service on or after Jan. 1, 2012, and wholly owned or wholly operated physician practices would receive payment at the facility rate for related nondiagnostic services and receive payment for only the professional component for diagnostic services effective for services furnished on or after Jan. 1, 2012.”


Exactly how you are going to establish this communication link is a great question to ask. CMS also goes on to discuss possible interfaces with the global surgical package (GSP) under the MPFS. A physician at one of these owned and operated clinics might perform a surgical service involving a post-operative period that overlaps the three-day payment window. From page 42916 we have:


Under the three-day payment window policy, the practice expense portion of the initial surgery and any pre- and post-operative visits associated with the surgery (both those subject to the global surgery rules and separate diagnostic procedures) should be included on the hospital’s Part A claim for the inpatient admission. The wholly owned or wholly operated physician practice would bill for the surgery performed for the inpatient as well as for the initial surgical procedure performed in the physician practice that started the global period. The wholly owned or wholly operated physician practice would apply the HCPCS modifier that CMS would pursue to implement the three-day payment window to each of these services HCPCS code. Medicare would pay the physician practice for the initial surgical procedure and the related procedure following inpatient admission at the facility rate.”


Also, the enrollment process – that is, the wonderful CMS Form 855 – also will need updating, at least for the clinic and most likely for the hospital as well.


Now, there is yet another aspect of this whole situation that CMS does not address. In order to set the stage, assume that there are both physicians and non-physician practitioners at the Acme Medical Clinic. Because this is a freestanding clinic, when there is a physician and an NP providing services jointly, the physician files the claims for the services of the NP. This incident-to billing is allowed for freestanding clinics (i.e. physician practices). This way there is a 100 percent payment under the MPFS instead of the 85 percent payment that would exist if the NP actually filed the claim.


Case Study 2: Sarah presents to the Acme clinic on Monday morning with a cough, congestion and slight fever. She is an established patient, and the NP examines her and performs a workup. An injection is provided and a course of antibiotics is prescribed. The NP consults with the physician, but the physician does not see Sarah. Sarah is sent home, and on Thursday evening she is brought to Apex Medical Center by neighbors, where she is admitted with an eventual diagnosis of pneumonia.


While the logical analysis of this situation is a bit convoluted, keep in mind that if the services in Case Study 2 are analyzed as being provided in a facility setting (i.e., applying the three-day payment window), then the only services the physician can bill for are those that the physician performed personally. Any services incident to those of the physician but not performed by the physician are paid on the facility side.(2)


1. (Note: We are using the same basic phrase for two very different concepts: incident-to billing and incident-to services.)


Incident-to billing only can occur in freestanding clinics when the physician is supervising the services of subordinate staff. Incident-to services appear in the SSA(3) in the section where hospital payment is addressed. Hospitals are paid for all services that are incident to those of a physician.


It appears that the NP services, the full professional services, should be bundled into the hospital inpatient billing. Thus not only would the site-of-service differential apply, but the whole payment for the NP services, which are incident to those of a physician, would be obviated in lieu of bundling into the inpatient billing and the subsequent inpatient payment.


Note that if the NP was billing for the services, then the normal site-of-service differential would apply. Also, if the E/M services are provided jointly (i.e. physician sees patient), then the physician can bill for the service even if they are incident-to.




(2) See the rather infamous Transmittal 1776, issued Oct. 25, 2002.

(3) See the following sections of the SSA: §1861(s)(2)(B) and §1861(s)(2)(A)




From a compliance perspective, the three-day window – whether you call it a payment window or pre-admission window – is simply a mess! While we will have to wait for the final rules and regulations, this is an area that the RACs undoubtedly will address at some point. Note that all this complexity rests on top of the whole issue that the concept of related services is still ambiguous, and it still is left to the hospital to justify that services are not related.


(Note: The deadline for filing comments for the July 19, 2011 Federal Register is Aug. 30, 2011. If you have comments, questions and/or concerns, be certain to make your comment.


About the Author


Duane C. Abbey, Ph.D., CFP, is an educator, author and management consultant working in the healthcare field. He is President of Abbey & Abbey Consultants, Inc., which specializes in healthcare consulting and related areas. His firm is based in Ames, Iowa. Dr. Abbey earned his graduate degrees at the University of Notre Dame and Iowa State University.


Contact the Author




To comment on this article please go to editor@racmonitor.com


Utilizing PEPPER Data to Support Your Compliance Efforts

Share This Article