The proposed rule updates hospital Part B inpatient billing policy consistent with the statute and payment regulations:


  • When the Medicare review contractor denies a Part A claim because a hospital inpatient admission is not reasonable and necessary, Medicare would accept new, timely filed Part B inpatient claims and provide payment for all reasonable and necessary Part B inpatient services, except those that by statute, Medicare definition, or coding definition specifically require an outpatient status (such as observation services).


  • The proposed policy also would apply when a hospital determines upon self-audit or other utilization review that a beneficiary should have been treated as an outpatient, rather than admitted to the hospital.

Under current policy, a hospital may not change a beneficiary’s status and bill for Part B outpatient services once the beneficiary has been discharged from the hospital.  Also under current policy, the hospital may only bill for the limited list of Part B inpatient ancillary services and those services must be billed no later than 12 months after the date of service.  Under the proposed policy, the hospital still would not be able to change the beneficiary’s status to outpatient after discharge, but it would be able to bill for all reasonable and necessary services—except those that can only be furnished to an outpatient—on an Part B inpatient claim.

  • Pre-admission services— including services that are outpatient services by definition—that are furnished up to three calendar days (or one calendar day for a non-IPPS hospital) prior to admission, which hospitals must include on inpatient claims, would be billable under Part B as outpatient services if the Part A claim is denied because the admission was not reasonable and necessary.


  • The statutory timely filing deadline would apply to the subsequent Part B inpatient and outpatient claims.  These claims would be denied for payment if filed more than 12 months after the date of service.


  • The proposed policy would apply to all types of hospitals and critical access hospitals, including Maryland waiver hospitals, psychiatric hospitals, inpatient rehabilitation facilities, and long-term care hospitals.


When Part A payment cannot be made for a hospital inpatient claim because the beneficiary has exhausted his or her Part A benefits or is not entitled to Part A, Medicare’s current policy pays for the limited set of ancillary inpatient services under Part B, subject to the timely filing restriction.  The proposed rule would not change this policy.


Under the Administrator’s Ruling, Medicare will pay for all Part B inpatient services that would have been reasonable and necessary if the beneficiary had been treated as an outpatient, rather than admitted as an inpatient (except for services requiring strictly outpatient status), until the proposed rule, Medicare Program; Part B Inpatient Billing in Hospitals, is finalized.  Hospitals that have appeals pending with the Medicare Appeals Council or an Administrative Law Judge (ALJ) may withdraw them to seek payment for all Part B inpatient services.  Alternatively, they will have 180 days to bill Medicare for inpatient Part B services following the date of receipt of the appeals dismissal notice or an appeal decision upholding the reasonable and necessary denial on the Part A claim.


The Ruling does not cover hospital self-audits or situations where Part A payment cannot be made because the beneficiary has exhausted or is not entitled to Part A benefits.  The Ruling only addresses Part A claims denied because the inpatient admission was not reasonable and necessary.


Beneficiary impact

Under the Ruling and the proposed rule, beneficiaries receiving Part B inpatient services would be responsible for their usual Part B financial obligation, which may be more or less than their obligation under Part A.  Beneficiaries would be entitled to a refund of any amounts they paid to the hospital for the Part A claim that is denied.


Beneficiaries would be responsible for Part B copayments and for the cost of drugs that are usually self-administered.  Part B does not cover self-administered drugs.  Most supplemental insurers or benefit programs that market Medicare supplemental insurance policies, such as employer retiree plans, FEHBP, TRICARE, and Medicaid, may cover some beneficiary costs.


Under the proposed rule, a hospital’s submission of a Part B claim would not affect a beneficiary’s existing appeal of the Part A claim denial.


CMS will inform participating hospitals that the Part A to Part B Rebilling Demonstration is being terminated and will provide the necessary instructions.

View the CMS Ruling in the Federal Register

View the proposed rule in the Federal Register

View the Fact Sheet from CMS


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