Three-Day Rule for Hospital Inpatients Appears to be Expanding

The three-day rule, which governs the payment of services provided in hospital outpatient departments on either the day of or during the three days prior to an inpatient admission, has caused confusion among hospitals for many years. On June 25, 2010, President Obama signed into law the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (the Act), which appears to expand the three-day rule.

The three-day rule traditionally required hospitals to bill as part of any inpatient stay 1) all diagnostic services provided within three days of admission and 2) all non-diagnostic services "related" to the inpatient admission. "Related" was defined as an "exact diagnosis code match between the inpatient admission and the outpatient therapeutic services." However, under the new statutory changes, hospitals should bill as part of the inpatient stay all non-diagnostic services provided on the day of admission as well as those provided in the three days prior to admission, unless the hospital can demonstrate that the services are unrelated to the admission. The new changes put the burden on hospitals to document and prove that an outpatient service is separate and distinct from the inpatient admission. According to a CMS press release, if a hospital believes that a non-diagnostic service is truly distinct from and unrelated to the inpatient stay, the hospital may separately bill for the service provided that it has documentation to support that the service is unrelated to the admission, consistent with the new provision. However, such separately billed service may be subject to subsequent review.

CMS now has the task of issuing instructions that clarify the documentation necessary to show that a non-diagnostic service is truly unrelated to the inpatient admission. Until such instructions are issued, CMS advises that "hospitals should include charges for all diagnostic services and all non-diagnostic services it believes meet the requirements of this provision." As a result, hospitals have the difficult task of interpreting the law until further instructions are issued by CMS. Many hospitals fear that they may need to have a clinician review all services provided in the three-day window to determine which services are unrelated to the inpatient stay.

Included in the new statutory changes is language that prohibits Medicare from reopening, adjusting or making payments when hospitals submit new claims or adjustment claims for services that were provided prior to the date of enactment in order to separately bill outpatient non-diagnostic services. It is hoped that this statutory language will protect hospitals from the national recovery audit contractors (RACs) related to the application of the three-day rule. Pending further clarification from CMS, hospitals should not rely upon such language to protect themselves from the RACs. Hospitals should carefully review their billing policies and make all necessary changes to comply with the new three-day rule.