CMS Final Rule Adopts Proposal for "Inpatient Part B" Billing

09 August 2013 American Health Lawyers Association Publication
Authors: Donald H. Romano

American Health Lawyers Association

On August 2, the Centers for Medicare & Medicaid Services (CMS) issued the advance copy of the Fiscal Year 2014 Inpatient Prospective Payment System Final Rule (CMS 1599-F) which, among other things, adopts the proposal that CMS issued earlier this year with respect to hospital billing under Part B following a denial of a short stay under Part A. The Final Rule provides that when a recovery audit contractor (RAC) or other Medicare contractor denies a short stay under Part A on medical necessity grounds, the hospital may rebill under Part B for all services that would have been considered reasonable and necessary had the patient been treated as an outpatient, but must do so within 12 months of the date of services. The Rule thus effectively prohibits hospitals from rebilling under Part B in the vast majority of cases, because it will be very rare for a RAC or other contractor to reopen the claim within one year of the admission. The Final Rule will be published in the Federal Register on August 19.

CMS noted that more than 300 commenters on the Part B Inpatient Billing Proposed Rule objected to the proposal that claims for billed Part B inpatient services be rejected as untimely when those Part B claims are filed later than one calendar year after the date of service, and that only one commenter supported the proposal. CMS declined to exercise its authority to create an exception to the timely filing limit because it said that hospitals have the ability to avoid being disadvantaged by the one-year timely filing limit and by any subsequent RAC audit if they bill correctly by following Medicare's guidelines for hospital inpatient admissions.

CMS stated that, in order to assist hospitals in making those patient status (inpatient versus outpatient) determinations and to make the billing process as fair as possible for hospitals, it has revised the hospital inpatient admissions guidelines and external medical review criteria for those admissions. It believes its guidance and review criteria should reduce the volume of short-stay denials. However, CMS estimates that the effect of the 12-month timely filing limitation will be to reduce payments to hospitals in the total amount of approximately $4.5 billion for years 2014-2017 (prior to offsets from successful appeals by hospitals of the Part A denials and prior to application of the more favorable provisions of CMS Ruling 1455-R, discussed below). The Final Rule also adopts the proposal that if a hospital is able to, and chooses to rebill under Part B, it is not permitted to simultaneously appeal the denial of payment under
Part A.

At the same time that CMS issued the Proposed Rule on Part B Inpatient billing, it also issued CMS Ruling 1455-R.1 This Ruling permitted hospitals to rebill under Part B within 180 days following the revised determination denying the stay under Part A, or if the denial was appealed, within 180 days of the final appeal determination or decision denying payment under Part A. Although the Ruling stated that it would remain in effect only until a final rule on Part B Inpatient billing was issued, the Final Rule provides that hospitals are permitted to follow the timeframes for rebilling under Part B that were established in the Ruling after the effective date of the Final Rule (October 1) provided: (1) the Part A claim denial was one to which the Ruling originally applied; or (2) the Part A inpatient claim has a date of admission before October 1 and is denied after September 30 on the grounds that although the medical care was reasonable and necessary, the inpatient admission was not. 

Access the Final Rule.

Access CMS' press release on the Final Rule.

Copyright 2013, American Health Lawyers Association, Washington, D.C. Reprint permission granted.

1For a more detailed discussion, please see the article "Hospital Billing Under Medicare Part B Following a Denial Under Part A," by D. Romano and K. Kraschel, published in The RAP Sheet, Vol. 16, Issue No. 2 (June 2013).

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