CMS Changes To 72-Hour Rule For Wholly Owned Or Operated Hospital Entities

Effective July 1, 2012, when a physician furnishes services to a beneficiary in a wholly owned or operated hospital entity (including a physician practice) and the beneficiary is later admitted to the hospital as an inpatient within three days of receiving such services, the Medicare three-day payment window policy will apply to all diagnostic services furnished, and any non-diagnostic services that are clinically related to the inpatient admission, regardless of whether the reported inpatient and outpatient diagnosis codes are the same.

Effective July 1, 2012, when a physician furnishes services to a beneficiary in an entity that is wholly owned or wholly operated by a hospital (including a physician practice) and the beneficiary is later admitted to the hospital as an inpatient within three days of receiving such services, the Medicare three-day payment window policy will apply to all diagnostic services furnished, and any non-diagnostic services that are clinically related to the inpatient admission, regardless of whether the reported inpatient and outpatient diagnosis codes are the same. In such cases, Medicare will make payment for the preadmission services under the physician fee schedule at the facility rate. The change does not affect how provider-based physician practices currently bill Medicare for professional physician and non-physician practitioner services or the longstanding requirement that all diagnostic services furnished during the three-day payment window be included on the hospital claim for the inpatient admission.

The Centers for Medicare & Medicaid Services (CMS) is relying on the 1998 Inpatient Prospective Payment System (IPPS) final rule's definition of "wholly-owned" and "wholly-operated," specifically, "An entity is wholly owned by the hospital if the hospital is the sole owner of the entity. An entity is wholly operated by a hospital if the hospital has exclusive responsibility for conducting and overseeing the entity's routine operations, regardless of whether the hospital also has policymaking authority over the entity." CMS previously stated "an outpatient service is related to the admission if it is clinically associated with the reason for a patient's inpatient admission," but is refraining from further defining admission-related non-diagnostic services, as the determination requires knowledge of the specific clinical circumstances surrounding a patient's inpatient admission that can only be determined on a...