Medicare Inpatient Claims with Non-Covered Procedures

In Transmittal 1838 released October 28, 2009, CMS published information concerning the requirement for separate claims when both covered and non-covered procedures are performed during an inpatient hospital admission. 

Inpatient hospital MS-DRG assignment is determined by the patient’s principal diagnosis, secondary diagnoses, and any procedures performed, as well as age, gender, and discharge disposition.  When both covered and non-covered procedures are reported during an inpatient hospital admission, the Medicare claims processing system is unable to decipher what procedure code(s) is/are non-covered when grouping to the MS-DRG.  Therefore, effective for inpatient discharges on and after April 1, 2010, hospitals must submit ICD-9 CM codes for non-covered procedures performed in the same inpatient stay with covered procedure(s) on a separate claim. 

Hospitals must separate a hospital stay into two claims when both covered and non-covered procedures are reported. 

• One claim with covered services/procedures unrelated to the non-covered ICD-9-CM procedures on a Type of Bill (TOB) 11X (with the exception of TOB 110), and
• The other claim with the non-covered services/procedures on a TOB 110 (no-pay claim).
  The Statement Covers Period should match on both the covered and the non-covered claims.

Medicare will deny no-pay claims as non-covered with:

• claim adjustment reason code 50 and
• group code CO (Contractual Obligation) if a Hospital Issued Notice of Non-Coverage (HINN) was not issued or
• group code PR (Patient Responsibility) if a HINN was issued.

Note: Hospitals do not have to submit claims for statutorily non-covered services (e.g. cosmetic surgery), but may voluntarily wish to do so; for example, to receive a Medicare denial.  This transmittal requires that ICD-9 CM codes for non-covered procedures not be reported on the same inpatient claim with covered services.  If the hospital wishes to bill non-covered procedure(s) and related non-covered charges for whatever reason (e.g. a Medicare denial), the hospital may submit such services/charges on a TOB 110 (no-pay claim).

Refer to the complete transmittal or MLN Matters Article 6547 for more information.