Corporate Compliance

Hospital Billing from A to Z: 3- and 1-day rules

Medicare Insider, December 30, 2014

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“Under the Inpatient Prospective Payment system (IPPS), Medicare reimburses hospitals a predetermined amount for inpatient hospital services based on a beneficiary’s illness and the respective classification under a diagnosis-related group (DRG).
The 3-day rule, sometimes referred to as the 72-hour rule, requires all diagnostic or outpatient services rendered during the DRG payment window (the day of and three calendar days prior to the inpatient admission) to be bundled with the inpatient services for Medicare billing. Although sometimes referred to as the 72-hour rule, the actual look-back period may be longer than 72 hours. These services are bundled based on diagnostic criteria. The Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PACMBPRA) broadened the definition of related outpatient nondiagnostic services, subject to the payment window, by including all outpatient nondiagnostic services clinically related to a patient’s admission regardless of whether the outpatient and inpatient diagnoses were the same. Charges related to preadmission services within the three-day window may not be billed separately from the covered inpatient services that follow because payment for them is included in the DRG payment for inpatient stay under Medicare Part A. This also includes the technical component of all outpatient diagnostic services and related nondiagnostic services for other wholly owned and/or operated entities.
Hospitals, related physicians, and other healthcare providers that are wholly owned and/or operated entities that submit claims for a technical outpatient service in addition to an inpatient admission are effectively submitting duplicate claims for an outpatient service.
The applicable payment window for hospitals excluded from Medicare IPPS is one day.
Hospitals exempt from the 3-day rule but subject to the 1-day rule include inpatient psychiatric hospitals and units, inpatient rehabilitation facilities and units, long-term care hospitals, children’s hospitals, and cancer hospitals.
The 3-day (or 1-day) payment window does not apply in the following circumstances:
  • The hospital and the physician’s office or other Part B entity are both owned by a third party, such as a health system
  • The hospital is not the sole or 100% owner of the entity
Refer to 3-day Rule: What Should Be Combined? For additional information.”


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