Health Information Management

Know how inpatient coders can ensure compliance

JustCoding News: Inpatient, March 14, 2012

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The three-day payment window requires hospitals to include the following information on inpatient claims:

  • All outpatient services provided on the date of admission.
  • Any outpatient diagnostic services provided within three days of admission.
  • Any nondiagnostic services that are clinically related to the admission. If a hospital believes nondiagnostic services are unrelated, it may separately bill the services to Medicare Part B with condition code 51 on the claim, provided it can produce documentation supporting its position.

What should inpatient coders remember about these requirements? Although it may seem counterintuitive, inpatient coders need to be aware of certain outpatient services that they may need to include on inpatient claims, says Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro, Inc., in Danvers, MA.

All outpatient diagnostic services that occur within three days of admission should include a revenue code and charge on inpatient claims. Billers typically review claims for the revenue codes and charges assigned. Inpatient coders, however, should convert CPT® codes for surgical/invasive procedures to ICD-9-CM procedure codes when reporting them on an inpatient claim. All outpatient services reported on an inpatient claim must include a corresponding diagnosis code to support medical necessity. This code may or may not match the principal diagnosis for the admission, says Mackaman.

For example, a patient presents to the ED for a laboratory test and EKG for a cardiac condition. The next day, the patient is admitted to the hospital for pneumonia. The laboratory test and EKG are diagnostic services, and they occur within three days of the admission; inpatient coders must include diagnosis codes for both the cardiac condition and the pneumonia on the inpatient claim, says Mackaman. Billers should include a revenue code and charge for each of the outpatient services on the inpatient claim, she explains.

"The diagnosis code [for the cardiac condition] has nothing to do with the pneumonia, but it's going to have to go on that inpatient record to back up the medical necessity of those outpatient charges that were moved onto the inpatient claim," she says. In some cases, these secondary diagnoses related to the outpatient services may even be CCs or MCCs, she says.

Inpatient coders should also note that converting CPT codes to ICD-9-CM procedure codes may change the DRG, says Mackaman. For example, a patient undergoes debridement in the ED and is then admitted to the hospital within three days for an infection at the wound site. No other procedures were performed during the inpatient stay. The hospital must move the debridement CPT code to the inpatient claim and convert it to an ICD-9-CM procedure code. This will change the DRG from a medical to a surgical one, she says.

Don't make assumptions

Separately billing nondiagnostic services unrelated to an admission requires the documentation to clearly reflect that the services are unrelated, says Mackaman. When this is the case, hospitals should report condition code 51 on the outpatient claim, she says.

Inpatient coders may need to alert billers to assign this condition code. For example, a patient has a laceration repair in the ED and is admitted for pneumonia two days later. Clearly, the laceration repair is unrelated, says Mackaman. Assuming inpatient and outpatient coding occurs separately, an inpatient coder should notify a biller to report condition code 51 on the outpatient claim for the laceration repair so these charges are not bundled into the payment for the pneumonia admission, she says.

However, determining when the outpatient services should be separated isn't always easy, says Marion G. Kruse, RN, MBA, director of FTI Consulting in Atlanta. Most outpatient nondiagnostic services are related to the admission. Many hospitals continue to err on the side of caution and do not separately bill these services.

"Usually it's a pretty obvious progression to an inpatient admission," Kruse says. Finding nondiagnostic services clinically unrelated to an admission is often like "looking for a needle in a haystack," she says. "Hospitals probably miss more opportunities than anything else."

Mounting pressure from external auditors doesn't make things any easier, says Kruse. "Unless [hospitals] can absolutely show that [separately billing] is the right thing to do, they're not going to do it," she says. "In the end, they're just going to have to spend a ton of money fighting to get it back from the [recovery auditor]."

However, hospitals that assume all outpatient nondiagnostic services are related run the risk of receiving overpayments or triggering outliers, says Mackaman.

"They may include charges on the inpatient record that should not be there so the inpatient coder inadvertently assigns codes that may have an impact on the DRG assignment," she says. Hospitals that assume all services are unrelated risk receiving APC payments for services that should be paid as part of the DRG, she says.

Instead, inpatient coders should carefully review documentation and enlist the help of the attending physician or physician advisor, or consult with a clinical documentation improvement specialist to obtain clarification when necessary, says Mackaman.

Note changes for freestanding clinics

The three-day payment rule applies to services furnished by a hospital or an entity wholly owned and operated by a hospital. It applies to entities when a hospital is the sole owner or has exclusive responsibility for conducting and overseeing routine operations.

Freestanding clinics that satisfy the definition of a wholly owned and operated entity (i.e., a hospital has exclusive responsibility for conducting and overseeing the entity's routine operations) are subject to the three-day payment window. Inpatient claims must include all diagnostic services and the technical component (TC) portion of nondiagnostic services rendered at the clinic the day of admission as well as the following:

  • The costs/charges of the TC portion of all diagnostic services rendered at the clinic within three days of admission to the hospital
  • The costs/charges of the TC portion of clinically related nondiagnostic services rendered at the clinic within three days of admission to the hospital

CMS' 2012 Medicare Physician Fee Schedule (MPFS) final rule published in the Federal Register November 28, 2011, offers guidance for separately billing for services provided in freestanding clinics.

The MPFS final rule states that freestanding clinics should report new modifier -PD to identify clinic services that fall within the three-day payment window and that are related to the hospital admission. Clinic coders or billers should append this modifier to any clinic services billed on a 1500 claim form that fit this description. This includes the professional and TC portions of the code. Only the professional component portion of the code will be paid under the MPFS, with the place of service reported as the hospital rather than the clinic. Regardless of whether the CPT code has a technical/professional component split, hospital billers must move the charges associated with the TC portion of the code to the inpatient claim. The TC portion will be reimbursed as part of the inpatient DRG.

As of presstime, CMS had not provided guidance for splitting clinic charges reported on inpatient claims.
What should inpatient coders remember about modifier -PD? Inpatient coders won't directly assign the modifier, but they must be aware of charges, including those from freestanding clinics, on inpatient claims to ensure proper diagnosis and procedure code assignment, says Mackaman.

Editor's note: This article was published in the February issue of Briefings on Coding Compliance Strategies. E-mail your questions to Contributing Editor Lisa Eramo at

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