A Look at the “Three Day” Rule Expansion

As more cardiologists have moved into hospital employment, their practices are faced with some new regulations and requirements that can be different from those that apply to physicians in private practice. If you need more background on the differences between billing in a private physician practice and a hospital practice, you may find this article helpful. A similar issue that has received recent press is the so-called "three day payment window" rule, scheduled to go into effect on July 1, 2012. The ACC recently submitted a letter to the Centers for Medicare and Medicaid Services (CMS) urging them to delay implementation due to concerns that the implications of the rule have not been fully considered and there is significant confusion on the part of physicians and hospital administrators regarding what is required of them.

The intention of the three day rule is to prevent hospitals, which are paid a fixed price for a patient discharge based on the clinical condition, from unbundling services from an inpatient stay and providing them in the three days prior to the admission so that they are separately paid. For a long time, the understanding was that this was limited primarily to diagnostic services such as imaging and related nondiagnostic services. In recent years, as part of rulemaking for both physicians and hospitals, CMS issued two changes/clarifications with important ramifications for cardiologists.

First, CMS issued a clarification saying that the rule applies not only to services that are billed by the hospital directly but also to the technical component of services provided by physicians in hospital-owned clinics, even if they bill for those technical components under the physician fee schedule (PFS).

Secondly, CMS changed the definition of what services were considered to be related to an inpatient admission. In the past, services were considered to be related only if they had the exact same ICD-9 diagnosis code. This year, CMS indicated that it will change that definition significantly, no longer strictly relying on ICD-9 code but interpreting the requirement more broadly to include related conditions.

What this means for a hospital-owned practice depends on whether it bills for technical components under the PFS or the hospital outpatient prospective payment system (HOPPS). For those that bill under PFS for technical components, when billing for related services in the three days prior to an inpatient stay, they should indicate that the service was provided in a facility ( hospital) rather than outside a facility. They should do so using a new modifier created for this purpose – PD (diagnostic or related nondiagnostic item or service provided in a wholly owned or operated physician office to a patient who is admitted as an inpatient within three days). This reduces the payment for the service. For example, an office visit (99213) has a national non-facility payment rate of $71 and a national facility payment of $49.

For a hospital-owned practice that bills for technical components under HOPPS, they always bill for their services using the facility rate, so there is no change. However, they should not submit a bill under HOPPS for the office visit in the above scenario because the service is again bundled into the inpatient stay.

The implementation problems with this policy are obvious – practices don’t necessarily know when one of their patients will be an inpatient in the hospital. Although CMS indicates that a hospital must notify physicians under this policy, they will have difficulty knowing all physicians the patient may have seen. Since the policy is not limited to planned admissions, a patient could be seen in the office on Monday, be admitted to the hospital through the emergency room on Wednesday and still fall under the policy. Physicians may not know the patient was admitted, and even if they did, bills may have been submitted the same day the patient was seen.

The ACC, along with many other organizations, fought against this new policy as part of the rulemaking process because it was believed to be confusing and hard to implement. Because CMS recognized how confusing it would be, they extended the implantation date from Jan. 1, 2012, to July 1, 2012. However, because the ACC still has the same concerns, we are recommending an additional delay in the implementation.

Because of the complexity of this requirement, the ACC is not recommending a specific solution to practices at this time. Instead, we recommend that hospital-owned practices that could be affected by this policy speak to their hospital compliance, legal, or billing officials to ensure that they are in compliance with this new requirement. E


Note: The following serves as an example and is not intended to be clinically coherent. Please discuss this issue with hospital compliance before implementing any policy.

A patient admitted to the hospital on June 15, 2012, is discharged on June 18, 2012. The discharge diagnosis is heart failure without any major procedures.

How each of these services would be billed under the PFS if provided in a hospital-owned physician practice:

Service Non Facility Facility (PD Modifier) Why billed this way?
Visit to cardiologist on 5/10/12 for heart failure X   More than 3 days before admission
Echocardiogram in office on 6/10/12 X   More than 3 days before admission
Visit to cardiologist on 6/13/12 for heart failure   X Nondiagnostic service in the 3 days prior to admission – related to admission
EKG in office on 6/14/12   X Diagnostic service in the 3 days prior to admission
Visit to psychiatrist on 6/14/12 X   Nondiagnostic service in the 3 days prior to admission – unrelated to admission

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