Mark PolstonHospitals that are denied payment for services delivered under Medicare Part A have a recourse today: They can file follow-up claims for some of these services under Medicare Part B. But hospitals must make their voices heard if they are to retain this option.

In mid-March, the Centers for Medicare & Medicaid Services (CMS) issued CMS Ruling 1455-R, which allows hospitals to rebill Medicare Part B for an expanded range of services following denial of a Part A stay. The Ruling is only an interim measure, however. On the same day, CMS issued a proposed rule, CMS-1455-P, which will virtually eliminate expanded Part B billing if it is finalized (“Medicare Program; Part B Inpatient Billing in Hospitals,” Federal Register, March 18, 2013). 

The issuance of CMS-1455-P means hospitals have their work cut out for them in the short term. They need to object to the proposed rule and lay the foundation for challenging the rule if it is finalized. Hospitals also need to act now to take advantage of the limited relief provided in CMS Ruling 1455-R. To do so, they must first understand the ruling, which can be confusing, and then establish a process to follow it.

The Challenge of CMS Proposed Rule 1455-P

Both CMS Ruling 1455-R and CMS 1455-P provide for expanded Part B rebilling following the denial of a Part A inpatient stay. The Ruling offers a real promise of expanded rebilling because CMS has waived the timely filing deadlines for submitting new Part B claims after the Part A claim is denied. If CMS 1455-P were finalized, however, hospitals would almost never be able to take advantage of this expanded Part B rebilling option for denials covered by the final rule. 

Hospitals would lose this option under the rule as proposed because it would require hospitals to file Part B claims within one year of the date the services were provided, instead of affording them latitude to file such claims by a deadline falling after the date the Part A claim is denied or an appeal is exhausted. This shortened timeframe for filing the claims seems unfair given that recovery audit contractors (RACs), which are responsible for virtually all of the Part A denials on appeal, can reach back three years to deny a claim. 

What is more, CMS also proposes to take power away from the administrative law judges (ALJs) to order Part B payment in Part A claims appeals. With the time to file Part B claims expired and no appeal route open to them, hospitals would be shut out of Part B payment.

Hospitals can avoid these circumstances through one of three actions: 

  • Persuading CMS to reject the proposal and, instead, adopting a policy similar to that in the Ruling 
  • Convincing Congress to enact statutory changes that would mandate expanded Part B rebilling
  • Challenging the final rule in litigation

Whatever action may ultimately be deemed necessary, commenting on the proposed rule is a critical first step that can determine whether the effort will be successful. It is not unprecedented, for example, for CMS to shift policy in response to strong industry reaction to a proposal, particularly if the comments can provide facts that undercut CMS’s assumptions about its policy.  Moreover, even if CMS is not persuaded by the comments, the act of commenting demonstrates to Congress that hospitals have tried to resolve the problem administratively but failed only because of the agency’s refusal to respond, increasing the likelihood that Congress might consider a statutory remedy.

Further, if CMS were to adopt the proposal, litigation would become a viable option, and hospital comments in response to the proposal could be instrumental in securing a favorable judicial decision. Parties that are considering challenging a final rule are in a better position if they articulate their factual and legal arguments in rulemaking comments. In the case of CMS 1455-P, for example, CMS cites data suggesting that hospitals would be able to submit Part B claims within the timely filing deadline about 25 percent of the time following a denial. By submitting rulemaking comments, hospitals can build a factual record that shows how CMS’s assertion ignores hospitals’ real experience. 

The broad lesson for hospitals is simple: Commenting on a proposed rule is always well worthwhile.

The Promise of CMS Ruling 1455-R 

Unlike the proposed rule, CMS Ruling 1455-R does provide a real opportunity for Part B rebilling, and hospitals should prepare to take advantage of it. The ruling applies to all pending administrative appeals in which a hospital is challenging a Medicare contractor’s denial of a Part A claim because the inpatient stay was not medically necessary. The ruling also applies to Part A claims denied after its March 13, 2013, effective date—a point that has created much confusion and many questions about hospitals’ options under the ruling. 

Under the ruling, hospitals have the same basic option whether they had appeals pending on March 13 or were denied payment for Part A services after that date: They can either appeal denied claims to get the denials reversed or forgo the appeals and file Part B claims to be paid for the services in question. This situation requires that hospitals perform a sort of “claims triage” to determine which approach they will take with each denied claim, because the ruling prevents a hospital from simultaneously submitting a Part B claim and pursuing a Part A claim appeal.

A hospital’s first order of business, therefore, should be to review these denials and separate them into two groups: those that are likely to result in a favorable outcome on appeal and those that are not. 

At this point, the hospital also should consider the stage of the appeal and how soon it may expect a decision. If an ALJ decision is expected soon, for example, the hospital may want to follow through with the appeal even if it has a lower likelihood of succeeding. On the other hand, the hospital should strongly consider withdrawing appeals that are in the early stages of appeal if the claims are relatively weak.  

Another consideration is how urgently the hospital needs to receive payment in the short term. Aggressive RAC denials have created financial strains for many hospitals, and hospitals may need to consider their short-term financial needs when evaluating the likelihood of a favorable outcome on appeal. 

The analysis is the same for claims denied after March 13, 2013: The hospitals should consider the likelihood that the claim might be reversed on appeal. If low, Part B rebilling may be the better option.

Despite some confusion regarding the ruling’s claims filing deadlines, the deadlines are fairly straightforward: Hospitals have 180 days to file their Part B claims. The confusion has surrounded the question of when these 180 days should begin. There are three possible answers:

  • If a claim is on appeal, the hospital has 180 days from the date it receives notice of a final, unfavorable decision. 
  • If an appeal has been withdrawn, the hospital has 180 days from the date it receives notice that the claims adjudicator has dismissed the appeal. 
  • If a claim has been denied and will not be appealed, the hospital has 180 days after the denial date. 

In the first two instances, receipt of notice is assumed to occur five days after the date of the decision. In the third instance, CMS has stated at an industry open door forum that it considers the date a claim is denied to be the date of the remittance advice.  

Hospitals that are preparing their Part B claims should be aware of one possible pitfall. To put the ruling into effect, CMS issued Change Request 8185 on March 22, 2013, instructing its contractors to accept Part B claims that were coded appropriately and not to reject them as untimely. Providers also must follow the coding instructions in the Change Request, but the contractors are not required to have their systems ready until July 1, 2013, raising the question of whether Part B claims will be accepted and paid before July 1, 2013. Hospitals that submit Part B claims under the ruling before this date should establish a system for monitoring these claims and resubmitting them if they are denied for technical reasons. 

Claims that Qualify for Part B Rebilling

Before CMS Ruling 1455-R, hospitals that could not follow the Condition Code 44 requirements for changing a patient’s status from inpatient to outpatient were permitted to bill Part B only for a small set of ancillary services. Those services were expressly listed in the Medicare Benefits Policy Manual. In its ruling, CMS now says hospitals can bill Part B for an “expanded” list of Part B services beyond what is listed in the manual. The Ruling now allows hospitals to submit two types of Part B claims: Part B outpatient claims and Part B inpatient claims. 

A Part B outpatient claim can be filed for any service that was provided before the time of admission and that was bundled into the Part A claim because it was provided within the three-day payment window. A Part B inpatient claim can be submitted for any service that was provided after the point of admission and that would have been payable if it had been provided on an outpatient basis. Generally, this definition applies to any service payable under the outpatient prospective payment system. 

The ruling does not provide a specific list of expanded services, however, and CMS does not intend to provide one. Instead, hospitals must go through the process of identifying the exact time the beneficiary was admitted (looking at the admit order), identifying those services that were provided both before and after that time, and then recoding the services—taking into account the required HCPCS, CPT, and revenue codes for the services—as if they were provided on an outpatient basis. 

The Ongoing Challenge

One additional element of confusion exists: The ruling and subsequent guidance say that hospitals may not submit Part B inpatient claims for services that by statute, Medicare definition, or coding definition require an “outpatient status.” Again, CMS does not provide a complete list of such services, but it does provide examples, including emergency department visits, clinic visits, and observation services. Obviously, a clinic visit cannot be attributed to an inpatient. But by what criteria does CMS define the circumstances when observation services can be delivered only on an outpatient basis? To answer this question and similar questions about other services, hospitals will need to closely monitor and keep informed of agency coding statements, CMS manuals, and other guidance to ascertain whether a service requires “outpatient status.”


Mark Polston, JD, is a partner, King & Spalding, Washington, D.C. (mpolston@kslaw.com).

Publication Date: Thursday, April 25, 2013