When Inpatient Claims Are Impacted by Outpatient Services: Part 1

As I continue to focus on documentation, this week I am turning my attention to a frequently misunderstood Medicare rule: the Three-Day Payment Window.

This is not the same as the three-day requirement to qualify for Skilled Nursing Facility (SNF) care.

The Three-Day Payment Window provision applies to short-term acute-care hospitals (the rules are different for Critical Access Hospitals) when a “beneficiary is admitted before midnight of the third day following receipt of outpatient services.” The day a Medicare beneficiary is formally admitted as an inpatient is counted as the first impatient day, which may or may not coincide with the onset of hospital care.

Hospital services provided during the three-day window, prior to the inpatient order, are included in the Prospective Payment System (PPS) and cannot be billed separately.

The inpatient hospital claim must include all the diagnosis codes, procedure codes, and charges for the preadmission outpatient diagnostic and nondiagnostic services that meet the Three-Day Payment Window requirements. Therefore, emergency department (ED) services, observation services, or outpatient procedures and their applicable diagnoses may be reported on the inpatient claim. It is the inpatient coder who determines which of these “outpatient” diagnoses will be reported on the inpatient claim, based on their understanding of coding guidelines.

My experience is that ED documentation is the most problematic in these situations. During my career, I’ve encountered hospitals where inpatient coders were not allowed to code diagnoses from ED notes. This is a conservative approach that can lead to under-coding and subsequent revenue leakage.

About 39-41percent of inpatient Medicare stays are preceded by ED services. Some of these patients may have also received observation services. Because of the Three-Day Payment Window, those services are no longer paid separately but are covered under the MS-DRG payment.  

Although there is a distinction between inpatient care and outpatient care, like ED services, it is all hospital care. The bundling of these services into one MS-DRG payment can create confusion on several different levels:

1. There may be discrepancies in the patient’s length of stay (LOS);
2. Conditions that are acquired during outpatient services are present on admission, even though they occurred during a hospital stay;
3. Conditions that are resolved during outpatient services should not be reported on the inpatient claim; and
4. Outpatient procedures can result in assignment of MS-DRGs where the principal diagnosis is unrelated to the procedure.

This week, I’m going to focus on potential unintentional consequences of the Medicare Three-Day Payment Window on a patient’s LOS. Medicare had strict rules regarding the counting of days due to how inpatient benefits are structured. According to the Medicare Benefits Policy Manual, “The midnight-to-midnight is to be used in counting days of care for Medicare reporting purposes,” even if the hospital uses a different definition for days. Other key considerations regarding how inpatient days are counted include:

• A day begins at midnight and ends 24 hours later;
• Part of a day is counted as a full day; and
• The day of discharge, death, or the day a leave of absence begins is not counted as a day unless discharge or death occurs on the day of admission.

At some hospitals, the day of admission may obscure ED and observation services that occurred in the preceding days, creating a blind spot. According to the Medicare Administrative Contractor Noridian, a common error is the incorrect admission date on billed claims – specifically, bills with an admission date before the physician order is signed and dated. The admission date must equal the date the inpatient order was written. The Centers for Medicare & Medicaid Services (CMS) does not allow retrospective orders.

Although the prior hospital services may be “lost” within the electronic medical record (EMR), they are accounted for on the inpatient claim, because the date range should reflect when hospital care was initiated. Therefore, the “from” date on the inpatient claim could be up to and including three days before the inpatient admission date. This allows hospital services that precede the admission date to be accounted for in the span of service dates.  

Why does this matter? Because many hospitals use the geometric mean length of stay (GMLOS) associated with the working MS-DRG to help manage patient throughput. More often than not, hospitals begin counting the GMLOS commensurate with the admission date. When the onset of hospital services precedes the date of admission, the actual length of stay may be longer than what is being tracked by the EMR. Any calculations or decisions based on the GMLOS will be inaccurate. It will look like the patient has spent less time in the hospital, which can result in longer stays and revenue leakage.

If a traditional Medicare patient arrives at the ED at 2 p.m. on June 1 and spends the night in the ED, followed by an inpatient admission the following morning at 11:00 am on June 2, the admission date is June 2, but the MS-DRG covers services beginning on June 1. If the working MS-DRG has a 3.8 GMLOS, the patient should be discharged by June 4 to avoid revenue leakage. How did I arrive on this date?

• Hospital care began on June 1 (the most expensive day of care is the first day);
• Day 1 is the day of the inpatient order (admission), June 2
• The GMLOS is rounded up to four days, since inpatient services are based on days (midnight-to-midnight)
• The day of discharge does not count
• The MS-DRG payment is covering services beginning June 1
• June 1, 2, 3, and 4 are covered by the MS-DRG payment

Even though the day of discharge does not count towards the GMLOS, most hospitals will not discharge a patient at 12:01 a.m. Typically, patients are discharged after four days of care, not on the fourth day. The longer the patient remains in the hospital on the day of discharge, the more “lost” revenue there will be, because more hospital resources are being used than accounted for within the MS-DRG payment.

If the Three-Day Payment Window is not taken into consideration, the GMLOS will appear to start on June 2. If four days are based upon a start date of June 2 and the adjustment of not counting the day of discharge is not considered, the patient could spend six days receiving hospital care for a payment based on four days of hospital care.

This results in revenue leakage. It may also distort key metrics like LOS and GMLOS.

Next week, in Part 2, I’ll review coding requirements for the reporting of diagnoses documented during the Three-Day Payment Window.

Programming note:

Listen live today on Talk Ten Tuesday 10 Eastern for the CDI report with Cheryl Ericson.