Corporate Compliance

Three-day window rule

Compliance Monitor, June 24, 2005

Q: We have an outpatient visit that starts at about 8 p.m. on the 7th and the patient does not go home until 10 a.m. on the 8th. On the 11th, the patient is admitted with the same principal diagnosis as was on the previous outpatient claim.

Obviously, all of the services from the 8th must be combined onto the inpatient bill, but what about the services from the 7th? Should they be combined or allowed to remain separately as an outpatient bill because they occurred four days prior to the inpatient admission? How should we handle these scenarios with outpatient claims that span three and four days prior to an inpatient admission?

A: One of the most prevalent and costly forms of fraud and abuse is billing Medicare Part B for an outpatient service already paid or payable under Medicare Part A, which constitutes the filing of a false claim by the hospital. Short-term acute-care facilities under the Prospective Payment System (PPS) cannot separately bill outpatient diagnostic services provided to a beneficiary within three days of admission for inpatient services that result in an exact match of the diagnosis.

Medicare's "three-day window rule" applies when the beneficiary has Medicare Part A coverage and the services are provided by the admitting hospital, or by an entity wholly owned or operated by the admitting hospital. The window is three days between episodes of care when the principal diagnosis for both the outpatient service and inpatient admission is an exact match. The rule applies from the date of discharge on the first episode of care to the date of admission on the second episode of care.

CMS' Medicare Claims Processing Manual specifically states the rule applies to "outpatient bills for diagnostic services with through dates or last date of service that fall on the day of admission or any of the three days immediately prior to admission to a PPS or excluded hospital" (Section 40.3, p. 105).

Outpatient "diagnostic services provided by the admitting hospital to a beneficiary three days prior to the date of admission are deemed to be inpatient services and included in the inpatient payment" (p. 104). To answer your question more directly, the entire charges from the first episode of care must be combined with the account for the subsequent admission because the services are within the three-day window and the diagnosis is an exact match.

CMS has instructed hospitals to implement billing procedures to avoid submission of outpatient claims for diagnostic services considered included in the DRG for the related inpatient admission. A complete study of the three-day window rule is recommended, as the rule is multifaceted.

The manual also contains a list of the diagnostic services defined by the presence of certain revenue codes and/or HCPCS codes that are affected by this rule, and provides instruction regarding exempt diagnostic services, such as screening mammograms and renal dialysis.

This question was answered by Diana Spaulding, RHIT, coding consultant at Health Information Management Associates, Inc.

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