CMS finalized its proposal that a hospital may be paid for Part B services furnished during an inpatient admission for which payment is denied by a Medicare review contractor that determined that the inpatient admission was not reasonable and necessary.  Under a new policy announced in Ruling 1455-R (March 13, 2013), if Part A payment is denied on medical necessity grounds (and the patient in question is enrolled in Medicare Part B), the hospital may bill Part B services that would have been reasonable and necessary if the beneficiary had been treated on an outpatient basis.

The Ruling applied to Part A denials that occurred while the Ruling was in effect (i.e., after issuance of the Ruling and prior to the effective date of this Final Rule), or that occurred prior to the effective date of the Ruling and for which the period for appeal had not yet expired or for which there was an appeal pending.  Under the Ruling, associated claims for Part B services were not subject to the timely filing restrictions as long as the underlying Part A claims had been submitted timely.  Under the policy adopted in the Final Rule, however, the timely filing restrictions, which require all claims for Part B services to be filed within 1 year from the date of service, will apply going forward, unless (1) the Part A claim denial was one to which the Ruling originally applied; or (2) the inpatient admission date is before October 1, 2013 and the Part A claim is denied after September 30, 2013 on the grounds that although the care furnished was reasonable and necessary, the inpatient admission was not.  This is a liberalization of CMS’s proposed timing restrictions.

Observation services, outpatient diabetes self-management training services, and hospital outpatient visits are excluded from Part B inpatient payment.  Part B inpatient services will be paid under the OPPS or the respective Part B fee schedules for OPPS-excluded services.  The hospital is also permitted to bill any Part B outpatient services furnished during the 3-day payment window preceding the denied inpatient admission.