OIG Report: Outpatient Services Before/During Inpatient Stays

on Tuesday, 22 August 2017. All News Items | Outpatient Services | OIG | Billing

What’s Your Excuse?

No hospitals want the Office of Inspector General (OIG) to come knocking on their door. If they do, they will likely find at least some billing errors which will likely result in the need to refund payments.  The hospital also has to respond to the OIG findings and give reasons for the errors.  These may often sound like excuses, but if there were improper payments, there was a reason, excuse or not.  Sometimes the dog does eat the homework.  In a recent OIG report concerning outpatient services furnished before or during inpatient stays, hospitals gave the following reasons for incorrect billing.

  • They did not understand Medicare requirements,
  • Clerical errors, and
  • They were not aware the patients were inpatients at other hospitals.

Clerical errors and lack of complete patient information are going to happen.  Your hospital can decrease the likelihood of their occurrence by having well-trained employees and sufficient oversight.  I think CMS will find the lack of understanding of Medicare rules to be the most egregious of the reasons.  It may fall under the “should have known” or “deliberate ignorance” category of excuses.  Lack of understanding of Medicare requirements is shaky ground.  This is why MMP provides this newsletter and our other services – to help educate providers concerning Medicare requirements – so let’s look at outpatient services furnished before or during inpatient stays.

An inpatient admission includes room and board; nursing and social services; diagnostic, therapeutic, and surgical services; drugs, supplies, and equipment; and transportation services.  In fact the only services listed in Chapter One of the Medicare Benefits Manual  as not included in the inpatient admission are post-hospital nursing facility services and the professional services of physicians and other practitioners.  On occasion, inpatients may have to be sent to another facility to receive services not offered at the host (admitting) hospital.  Such services are provided “under arrangements” to the patient – this means:

  • the host hospital includes the charges for the services on their inpatient claim to Medicare and
  • the host hospital pays the other facility for the services.

There should be clear communication between the hospital and other facilities for any “under arrangement” services so that inappropriate billing does not occur.  Inpatients may also go to outpatient departments within the host hospital during their inpatient stay to receive services – these services are included in the inpatient hospitalization and are not separately billable as outpatient services to Medicare.

Medicare has rules that certain outpatient services furnished before an inpatient admission also have to be bundled onto the inpatient claim.  This is known as the three-day payment window rule.  In general, outpatient services furnished within 3 days prior to and including the date of the patient’s admission are deemed to be inpatient services and included in the inpatient payment. For Medicare there are always nuances to the rules, and this one is no different.

  • The rule applies to outpatient services furnished by the admitting hospital, or by an entity wholly owned or wholly operated by the admitting hospital, or by another entity under arrangements with the admitting hospital. This includes the technical portion of services provided at a hospital-owned or hospital-operated physician clinic or practice.
  • The patient must have Part A coverage for the rule to apply.
  • Ambulance services, maintenance renal dialysis services, and Part A services furnished by skilled nursing facilities, home health agencies, and hospices are excluded from the payment window provisions.
  • The 3-day rule applies to IPPS hospitals (hospitals paid under the inpatient prospective payment system). For hospitals and units excluded from IPPS, this provision applies only to services furnished within one day prior to and including the date of the admission (a 1-day rule).
  • It is a 3 day rule and NOT a 72 hour rule. Three days means the 3 calendar days prior to admission – for a patient admitted on a Wednesday, the 3 days would be Sunday, Monday, and Tuesday.
  • Outpatient services furnished more than 3 days prior to admission, even if part of a single, continuous outpatient encounter prior to admission, are not included on the inpatient claim and may be billed separately on an outpatient claim.
  • The rule does not apply to some differently paid entities, such as CAHs, RHCs, and FQHCs. You should read the regulation in Chapter 3, Medicare Claims Processing Manual, section 40.3 for complete information on exclusions.

The 3-day rule is also affected by the type of services provided and whether they are related to the reason for admission or not.  I like to break the rule down into three parts for easier understanding.

  • All outpatient services (diagnostic and non-diagnostic) subject to the rule that are provided on the day of admission must be billed with the inpatient admission.
  • All outpatient diagnostic services provided within the 3- day payment window (or 1-day window for non-IPPS hospitals) must be billed with the inpatient admission.
  • Non-diagnostic services related to the inpatient admission and provided within the payment window must be billed with the inpatient admission.

The billing hospital determines and attests if non-diagnostic services furnished on the first, second, or third day prior to admission are unrelated to the inpatient admission.  Medicare defines unrelated services as services that are clinically distinct or independent from the reason for the beneficiary’s admission.  These “unrelated” services may be billed on a separate outpatient (Part B) claim with a condition code “51” which is the hospital’s attestation the services are unrelated. Documentation in the patient’s medical record must support that the non-diagnostic services provided within the payment window are unrelated to the patient’s inpatient admission.

The section of the Claims Processing Manual referenced above also includes further explanations and definitions of ownership, non-IPPS hospitals, diagnostic services, and more. Providers need to carefully review the guidance in the manual to have a complete understanding of all the requirements for billing outpatient services provided prior to admission.

This advice applies to all Medicare requirements.  It is the provider’s responsibility to be knowledgeable of Medicare rules, regulations, and guidance. Remember, not “knowing” or not “understanding” are not good excuses.

Article by Debbie Rubio

Debbie Rubio, BS, MT (ASCP), is the Manager of Regulatory Affairs and Compliance at Medical Management Plus, Inc.  Debbie has over twenty-seven years of experience in healthcare including nine years as the Clinical Compliance Coordinator at a large multi-facility health system.  In her current position, Debbie monitors, interprets and communicates current and upcoming regulatory and compliance issues as they relate to specific entities concerning Medicare and other payers.  You may contact Debbie at This email address is being protected from spambots. You need JavaScript enabled to view it..

This material was compiled to share information.  MMP, Inc. is not offering legal advice.  Every reasonable effort has been taken to ensure the information is accurate and useful.

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