Understanding 3-Day Payment Window for Outpatient Billing

Understanding 3-Day Payment Window for Outpatient Billing

What is 3-Day Payment Window?

Medicare’s 3-day (or 1-day) payment window applies to outpatient services that hospitals and hospital wholly owned or wholly operated Part B entities furnish to Medicare beneficiaries. The statute requires that hospitals bundle the technical component of all outpatient diagnostic services and related non-diagnostic services (for example, therapeutic) with the claim for an inpatient stay when services are furnished to a Medicare beneficiary in the 3 days (or, in the case of a hospital that is not a subsection (d) hospital, during the 1 day) preceding an inpatient admission in compliance with Section 1886 of the Social Security Act.

Defining Wholly Owned or Wholly Operated

In general, if a hospital has direct ownership or control over another entity’s operations, then services that other entity provides are subject to the payment window policy. However, if a third organization owns or operates both the hospital and the entity, then the payment window provision doesn’t apply. Given the multitude of possible business and financial arrangements that may exist between a hospital and a physician practice or other Part B entity, CMS won’t make individual determinations as to whether a specific physician practice or other Part B entity is wholly owned or wholly operated by an admitting hospital.

Defining Diagnostic Services

Non-diagnostic services include any non-diagnostic service that’s clinically related to the reason for a patient’s inpatient admission, regardless of whether the inpatient and outpatient diagnoses are the same. A service is “diagnostic” if it’s an exam or procedure to which you subject the patient, or which you perform on materials derived from a hospital outpatient, to get information to aid in your assessment of a medical condition or to identify a disease. Among these examinations and tests are diagnostic laboratory services such as hematology and chemistry, diagnostic x-rays, isotope studies, EKGs, pulmonary function studies, thyroid function tests, psychological tests, and other tests you give to determine the nature and severity of an ailment or injury.

Hospital subject to 1-Day Payment Window

The hospital and hospital units subject to the 1-day payment window policy (instead of the 3-day payment window) are:

  • Psychiatric hospitals and units
  • Inpatient rehabilitation hospitals and units
  • Long-term care hospitals
  • Children’s hospitals
  • Cancer hospitals

A wholly owned or wholly operated physician practice (or other Part B entity) of the aforementioned hospitals would also be subject to a 1-day payment window when they furnish diagnostic services and related non-diagnostic services within 1 calendar day preceding an inpatient admission. If the admitting hospital is a Critical Access Hospitals (CAHs), the payment window policy doesn’t apply. However, if the admitting hospital is a short stay acute hospital paid under the Inpatient Prospective Payment System (IPPS) and the wholly owned or wholly operated outpatient entity is a CAH, the outpatient CAH services are subject to the payment window.

When would the 3-Day (or 1-Day) payment window not apply?

The 3-day (or 1-day) payment window doesn’t apply in the circumstances described below:

  • If the hospital and the physician office or other Part B entity are both owned by a third party, such as a health system; and
  • If the hospital isn’t the sole or 100 percent owner of the entity, for example, if the hospital has a financial or administrative partner, or if physicians or other practitioners have an ownership interest in the hospital, physician practice or Part B entity. We provide several examples of arrangements where an entity is not wholly owned or wholly operated by the hospital.

We shared basic information on 3-day payment window so when it will be useful while billing outpatients services which later are shifted as inpatients services. For detailed information on 3-day payment window and better understanding of all involved terminologies, you can refer to CMS’s document “FAQs on the 3-Day Payment Window for Services Provided to Outpatients Who Later Are Admitted as Inpatients”.

Medisys Data Solutions is a leading medical billing company providing assistance in medical billing and coding functions for various medical specialities. We shared basic information on 3-day payment window for reference only, you can refer to above mentioned CMS document for detailed understanding. If you are looking for any assistance in outpatient billing, contact us at info@medisysdata.com / 302-261-9187

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