CMS Announces Revised Policy on Part B Billing Following the Denial of a Part A Inpatient Hospital Claim

On March 13, 2013, the Centers for Medicare & Medicaid Services (“CMS”) released a Proposed Rule and Administrator’s Ruling that provide for significant revisions to Medicare’s Part B payment policy when a Part A hospital inpatient claim is denied as not medically necessary because the care was not provided in the appropriate setting. CMS’s Administrator’s Ruling (CMS-1455-R) was issued to address the significant number of pending appeals of Part A hospital inpatient reasonable and necessary denials while the new Proposed Rule entitled, Medicare Program; Part B Inpatient Billing in Hospitals, (CMS-1455-P), which proposes a permanent policy that would apply on a prospective basis, goes through notice and comment rulemaking. As a result, the Part A to Part B Rebilling Demonstration Program has been terminated.

CMS’s Interim Ruling and Proposed Rule differ in many important aspects from the Medicare Appeals Council’s longstanding position articulated in In re: O’Connor Hosp., that hospitals are entitled to full Part B payment, including observation and underlying services, following a denial of Part A reimbursement and that any Part B payment is subject to the rules governing administrative finality and will not be time-barred. For example, although the Interim Ruling and Proposed Rule would allow a hospital to submit a Part B claim for more services than just the limited number of ancillary medical and other health services listed in Chapter 6, Section 10 of the Medicare Benefit Policy Manual (“MBPM”), services that require an outpatient status, such as observation services, will not be reimbursed for the time period the beneficiary spent in the hospital as an inpatient.

In addition, although the Interim Ruling explicitly waives the potential timeliness of filing requirements with regard to the billing of a Part B claim following the denial of a Part A claim and provides hospitals with 180 days from the denial to bill for an outpatient stay, the Proposed Rule, should it become final it its current form, would deny Part B claims if filed more than 12 months after the date of service. Accordingly, if a RAC waits 12 months to deny a claim or should 12 months elapse from the date of service while a hospital is in the appeals process, the hospital will be left empty-handed.

Last but certainly not least, CMS’s Interim Ruling also establishes a standard process for handling pending appeals and billing for the additional Part B inpatient services that became effective as of yesterday. This ruling significantly limits the authority of Administrative Law Judges (ALJs) and the Medicare Appeals Council when reviewing these and other, similar cases, by stating that the only issue before the adjudicator is the appropriateness of the Part A claim and prohibits the Appeals Council or ALJ from ordering full Part B payment, including observation and underlying care.

Wachler & Associates will continue to monitor the developments of CMS’s revised policy on Part B billing following the denial of a Part A inpatient hospital claim. if you have any questions regarding these developments or questions regarding the RAC appeals process, please contact an experienced health care attorney at Wachler & Associates at 248-544-0888.