CMS issued a draft copy of two documents, a CMS Ruling and text of a proposed rule. Proposed regulations do NOT take effect when they are issued. Therefore, the proposed rules have no immediate impact. However, the CMS Ruling, which is a decision by the Administrator of CMS, takes effect immediately. CMS Rulings are supposed to be binding on RACs, MACs and even ALJs. The subject matter of the two documents is whether hospitals can receive outpatient reimbursement when an inpatient stay is denied. These documents will generate quite a buzz. If I am reading the two documents correctly, they come to very different results. The CMS Ruling does a wonderful thing. CMS is finally conceding that when inpatient status is denied, the hospital is entitled to get outpatient status. The Ruling says that when inpatient status is rejected, a hospital has 180 days to submit a bill for outpatient services. That 180 days runs from whenever the hospital learns of the denial. In other words, if a RAC concludes an inpatient stay was not necessary, the hospital has 180 days to bill for an outpatient stay. Alternatively, the hospital can appeal the RAC decision. If the hospital loses its appeal, the hospital has 180 days from the loss of the appeal to bill for outpatient stay. The typical timely filing requirements do NOT apply.

However, the proposed regulation appears to take an entirely different tact, saying that the timely filing requirements DO apply. If I am reading that language correctly, it directly contradicts the Ruling.

Under the Ruling, if a hospital agrees with a RAC or MAC denial of inpatient status, there will be no need to file an appeal. The hospital will be able to simply bill Part B for the outpatient status. It should go without saying that if the hospital does disagree with the audit, and elects to appeal, the hospital should NOT bill for Part B services unless/until the hospital loses the appeal. The bottom line is that this is a major and positive development. One key quote from the Ruling is here:

“Instead, hospitals may bill for these services on a Part B outpatient claim, which, in accordance with the policy announced in this Ruling, will not be subject to the usual timely filing restrictions discussed later in this Ruling.” (Page 10)

The bad news is that it appears the proposed regulation would take that away. The text of the proposed rule says that the normal timely filing limits DO apply. The proposed text of 42 CFR 414.5(b) says “(b) The claims for the Part B services filed under the circumstances described in this section must be filed in accordance with the time limits for filing claims specified in § 424.44(a) of this chapter.”

So what does all of this mean? As of right now, when you get a denial of an inpatient stay, if, rather than appealing, you are comfortable accepting outpatient payment, that option is now available to you. If you lose your appeal, you can then rebill the outpatient claim. However, if the proposed rule is ever adopted, that may end. So when the proposed rule is actually published in the Federal Register, which should happen in the next few weeks, comment on it! Take CMS to task for reversing the very fair, logical position contained in the Ruling. In the meantime, celebrate that at least until the Ruling is withdrawn or the proposed rule is finalized (a process that can take years, or even decades) things just got better!