Hospital-owned practices may take an unexpected hit in revenue under a new Medicare rule that bundles certain physician service fees into hospital payments. The so-called “payment window” rule (sometimes referred to as 3-day/1-day window rule) requires a hospital (or an entity that is wholly owned or wholly operated by the hospital) to include on the claim for a beneficiary’s inpatient stay, the diagnoses, procedures, and charges for all outpatient diagnostic services and admission-related outpatient nondiagnostic services that are furnished to the beneficiary during the three days before admission to a hospital, or one day preceding admission to a “non-subsection (d) hospital,” (a hospital not paid under the IPPS: psychiatric hospitals and units, inpatient rehabilitation hospitals and units, long-term care hospitals, children’s hospitals, and cancer hospitals). Historically, this has only involved technical fees, not professional services.   

In a notice to Medicare providers, CMS has clarified that the payment window, as modified by the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 enacted in June, includes outpatient services that are otherwise billable under Part B, such as physician services, if they are related to the admission.  An outpatient service is related to the admission if it is clinically associated with the reason for a patient’s inpatient admission, and is no longer limited to diagnostic services. The rule took effect on June 25, 2010.

A hospital is considered the sole (whole) operator of an entity if the hospital has exclusive responsibility for conducting or overseeing the entity’s routine operations, regardless of whether the hospital also has policymaking authority over the entity.   This means practices managed by a hospital may be affected even if they are not technically “owned” by the hospital.

If you believe your services are unrelated to the admission, the hospital can submit an attestation. The general rule is that services rendered during the window period preceding the date of a beneficiary’s inpatient admission are presumed to be related to the admission, and thus, must be billed with the inpatient stay, unless the hospital attests to specific nondiagnostic services as being unrelated to the hospital claim. Such services are covered by Part B, and may be separately billed to Part B.

IMPORTANT: If your practice is hospital-owned or managed and your compensation formula is based on collections, you could lose credit for services that would previously have been separately billable under Part B, such as professional interpretation of diagnostic testing preceding hospitalization.  Keep this in mind when renegotiating your contract, and check to see if your contract includes a reopener triggered by changes in reimbursement methods.