The Medicare Three-Day Payment Window Rule: Part IV

This week I am reviewing coding rules that impact inpatient claims when the Medicare Three-Day Payment Window results in ambulatory/outpatient surgery being paid as part of a subsequent inpatient admission.

Most of these coding guidelines are located in Section II: Selection of the Principal Diagnosis, but that does not mean that these diagnoses can only be reported if they meet criteria to be the principal diagnosis.

When a patient presents for a scheduled elective surgery with a medical condition that prevents the surgery from occurring and the original treatment plan is not carried out, coding guidelines state, “sequence as the principal diagnosis the condition, which after study occasioned the admission to the hospital, even though treatment may not have been carried out due to unforeseen circumstances (p. 107).”

The medical condition postponing the elective surgery may or may not be related to the reason for surgery. For example, say a patient with a history of hypertension presents for an elective hip arthroplasty, but due to hypertensive urgency, the procedure cannot be performed until the patient’s blood pressure is under control. The reason for admission would be hypertensive urgency, not arthritis of the hip.

Sometimes a complication may occur during a procedure that interrupts the surgery. This is when ICD-10-PCS coding guidelines must be referenced. Guideline B3.3 states, “if the intended procedure is discontinued or otherwise not completed, code the procedure to the root operation performed. If a procedure is discontinued before any other root operation is performed, code the root operation Inspection of the body part or anatomical region inspected.”

Another relevant coding guideline is Section II.G, Complications of surgery. If the need for additional hospital treatment is due to a complication that occurs during outpatient surgery, it can lead to a subsequent inpatient admission subject to the Medicare Three-Day Window. The guideline states that in this situation, the complication is sequenced as the principal diagnosis.

As a reminder, the complication code would be present on admission (POA) = Y, even though it was hospital-acquired, because it happened prior to the inpatient order. This guidance is repeated in the two coding guidelines specific to outpatient surgery, Section II.I.2, Admission Following Post-Operative Observation, and Section II.J, Admission from Outpatient Surgery.

The first guideline reinforces the Uniform Hospital Discharge Data Set (UHDDS) definition of principal diagnosis as “that condition established after study to be chiefly responsible for occasioning the admission of the patient to the hospital for care (p. 107).” Most clinical documentation integrity (CDI) and coding professionals are used to applying this guidance.

The second guideline is more complicated, and may be confusing without clear provider documentation:

“When a patient receives surgery in the hospital’s outpatient surgery department and is subsequently admitted for continuing inpatient care at the same hospital, the following guidelines should be followed in selecting the principal diagnosis for the inpatient admission:

• If the reason for the inpatient admission is a complication, assign the complication as the principal diagnosis.
• If no complication, or other condition is documented as the reason for the inpatient admission, assign the reason for the outpatient surgery as the principal diagnosis.
• If the reason for the inpatient admission is another condition unrelated to the surgery, assign the unrelated condition as the principal diagnosis (p. 108).”

Inpatient care following outpatient surgery requires strong communication between CDI and utilization review (UR) staff. It is not uncommon for a surgeon to erroneously order inpatient care postoperatively, and UR staff may or may not be able to validate inpatient medical necessity before the patient becomes eligible for CDI review. Although most CDI professionals are unfamiliar with the criteria used to determine inpatient medical necessity, they recognize when a patient lacks acuity, or may have a difficult time determining the principal diagnosis.

Claims wherein the provider fails to document a complication or other condition as the reason for the inpatient admission will lack medical necessity for inpatient care. If there was medical necessity to support an inpatient admission, the surgery would have been scheduled as an inpatient procedure, rather than as an ambulatory (outpatient) procedure.

These are cases that likely need to be reviewed by UR staff to avoid billing inpatient care when medical necessity is unmet. When an outpatient surgery is combined with a subsequent inpatient admission, an MS-DRG where the operating-room procedure is unrelated to the principal diagnosis may occur (MS-DRG 981-983 or MS-DRGs 987-989). Developers of the MS-DRG methodology considered that there could be patients who received surgical procedures completely unrelated to the Major Diagnostic Category (MDC) to which the patient was assigned (a patient with the principal diagnosis of pneumonia whose only surgical procedure is destruction of the prostate, for example). These types of patients are ultimately never assigned to a well-defined MS-DRG.

Most hospitals have a second-level work queue for these types of cases to verify the assigned MS-DRG, since these MS-DRGs often pay higher than those for which the principal diagnosis is related to the principal procedures. These MS-DRGs are often incorrectly assigned, resulting in overpayment, so they are heavily scrutinized by payors. A legitimate reason for a discrepancy between the principal diagnosis and procedure is implementation of the Medicare Three-Day Payment Window, when a patient is subsequently admitted for a complication or other medical condition unrelated to the procedures.

Correctly applying the Medicare Three-Day Payment Window Rule can be complicated. It requires cooperation among UR, CDI, coding, and billing. It can lead to billing errors without clear documentation to support the assignment of the principal diagnosis and secondary diagnoses that were documented during the outpatient portion of hospital care.

This can also result in the assignment of an MS-DRG for which the principal diagnosis is unrelated to the principal procedure, which is a frequent audit target, so it is recommended hospitals validate these claims prior to billing.

Programming note: Listen live this morning when Cheryl Ericson reports this story on Talk Ten Tuesday, 10 Eastern with Chuck Buck.