Health Law Alert: CMS Releases Final Rule on Part B Rebilling, Inpatient Admission Guidelines and Review Criteria

August 09, 2013

On August 2, CMS released the Final Rule (1455-F) regarding Part B rebilling, inpatient admission guidelines and medical review criteria for inpatient stays. The Final Rule will be published on August 19 and will become effective on October 1, 2013. The Final Rule (1) finalizes the "two-midnight" benchmark for inpatient admissions; (2) updates the requirements for inpatient admission orders; (3) expressly prohibits an adjudicator from ordering Part B payments on Part A denials; (4) maintains the one-year filing restriction on submitting claims, with two exceptions for rebilling; and (5) clarifies the types of outpatient services that may not be rebilled under Part B.

1. Although CMS has historically referenced a 24-hour benchmark for inpatient admissions, the Final Rule establishes a "two-midnight" benchmark. The Final Rule notes that "the 24 hours relevant to inpatient admission decisions are those encapsulated by 2 midnights." The ordering physician may consider the time the beneficiary spent receiving outpatient services (observation, emergency department, etc.) to determine whether the two-midnight benchmark is expected to be met. CMS clarified that any outpatient time will not be considered inpatient time, however, but instead may be considered in the decision to admit—and whether the two-midnight benchmark was met. Even more important, the Final Rule implements a presumption in favor of inpatient admission—absent evidence of gaming, abuse or delays—for inpatient admissions passing the two-midnight threshold.

2. CMS also clarified that if the physician's order for the inpatient admission is not in the medical record, the hospital should not submit a claim for Part A payment. CMS declined to adopt the requirement in the Proposed Rule that the inpatient order must be issued by a practitioner responsible for the patient's care, and instead the regulations will require that the admitting physician be "knowledgeable about the patient's hospital course, medical plan of care, and current condition."

3. The Final Rule also limits an adjudicator's scope of review on Part A denials. As outlined in the Proposed Rule, the Final Rule adopts the express prohibition on an adjudicator's authority to order Part B payment on Part A denials. In the Proposed Rule, CMS responded to the increasing number of Administrative Law Judge ("ALJ") remand decisions awarding Part B payment by expressly limiting the ALJ's adjudicatory authority to only the Part A claims billed by the provider. Although many commenters expressed concern to CMS' "clarification" on the ALJ's scope of review, the Final Rule concludes that Part B payment may be granted only when the provider has submitted a Part B claim.

4. While the Final Rule maintains the one-year filing restriction on submitting claims, it allows providers to follow the Part B rebilling timeframes established in the CMS Interim Ruling (1455-R) in two situations. First, a provider may rebill a Part A claim denial for which the Interim Ruling originally applied. Thus, the one-year restriction will not apply to those claims that were denied (1) while the interim ruling was in effect; (2) prior to the effective date of the ruling, where the timeframe to appeal had not expired; or (3) prior to the effective date of the ruling, where the appeal is still pending. Second, a provider may rebill a Part A claim denial to Part B when the Part A claim has an admission date before October 1, 2013 and is denied after September 30, 2013. Thus, the one-year restriction will apply to all Part A denials with admission dates on or after October 1, 2013. These denials must have been on the grounds that although the medical care was reasonable and necessary, the inpatient admission was not. For claims falling under the Part B rebilling timeframes established in the Interim Ruling, the provider will have 180 days from (a) the date of receipt of the dismissal notice (if withdrawing the appeal), (b) the date of receipt of the final or binding decision (if the provider has not withdrawn the appeal), or (c) the issuance of the initial or revised determination on the Part A inpatient claim (if there is no pending appeal and the denial is not subsequently appealed). Note also that the Final Rule allows Part B rebilling when a hospital determines, through self-audit, that an inpatient admission is not reasonable and necessary, so long as the Part B claim is submitted within the one-year filing restriction.

5. Finally, the Final Rule reiterates that a provider may submit a Part B inpatient claim for Part B services that would have been payable had the beneficiary originally been treated as an outpatient instead of an inpatient, except when those services specifically require outpatient status. Accordingly, CMS proposed to exclude several services requiring outpatient status not mentioned in the Interim Ruling, including outpatient PT, OT and SLP services. In the Final Rule, however, CMS acknowledges that these therapy services have long been on the list of payable Part B inpatient services and, in fact, are contemplated by Section 1861(p) of the Social Security Act as services that may be furnished to an individual as an inpatient in a hospital or extended care facility. Thus, these therapy services may be rebilled under Part B after a Part A denial.