Questions and Answers on the 3-Day Payment Window

on Tuesday, 14 August 2012. All News Items | Billing

In December 2011, CMS released Transmittal 2373, CR 7502 MLN Matters MM7502) concerning the 3-day payment window and wholly owned or operated physician practices.In June 2012, CMS published a list of 43 Questions and Answers related to this transmittal.Although several of the questions are focused on the billing by a physician practice or other Part B entity that is wholly owned or operated by a hospital, there is also general information about the 3-day window that all hospitals might find beneficial, even if they do not own/operate Part B entities.

The general information includes definitions of the 3-day rule (Q1), related services (Q2, 16 & 17), and diagnostic services (Q3); it also includes the types of hospitals affected (Q4 & 5), services excluded from the 3-day payment policy (Q39) and the effective dates of the rule (Q42). Of particular interest are the following points:

  • The rule is based on 3 calendar days, not 72 hours (Q6)
  • All services on the day of admission must be bundled to the inpatient claim, related or not (Q24)
  • All diagnostic services within the payment window must be bundled, even if they are not related to the inpatient admission (Q25)
  • The 3-day rule does not apply if there is no Part A coverage the inpatient admission (Q40)

As stated above, the majority of the questions and answers are specifically related to wholly owned or operated physician practices or other Part B entities. The hospital’s responsibilities if they own/operate Part B entities are:

  • To determine (collectively with the Part B entity) if that entity meets the definition of wholly owned or operated (Q12)
  • To notify the physician practice or other Part B entity of the patient’s admission to the hospital (Q15)
  • To determine if non-diagnostic services are clinically related to the inpatient admission (Q18)

Wholly owned/operated physician practices or other wholly owned/operated Part B entities should refer to the complete list of questions and answers for detailed billing information, including guidance on the use of modifier PD. Note that:

  • Modifier PD is to be appended to HCPCS codes subject to the payment window (Q20)
  • Modifier PD may be used for dates of service beginning January 1, 2012, but must be used beginning July 1, 2012 (Q21
  • Practices should only bill for the professional component of diagnostic services subject to the payment window. Append modifiers -26 and –PD (Q26)
  • Physician practices will be paid the professional component only of diagnostic services subject to the payment window; non-diagnostic services subject to the payment window will be paid at the facility rate (Q34)
  • Refer to the document for information concerning evaluation and management (E&M) services, “incident to” services, and global surgical services.

Modifier PD is not for use by hospitals and CR 7502 does not provide billing instructions for hospitals – it provides billing instructions for Part B 1500 claims. However, hospitals are to include the cost of the technical component of diagnostic services and those direct practice costs (clinical staff, equipment and supplies) for non-diagnostic services related to the inpatient admission on the hospital’s bill for the inpatient stay (Q19). This transmittal refers hospitals to CR 7142 (MM7142) for instructions on hospital implementation of this provision and to Medicare Claims Processing Manual, pub. 100-04, Chapter 4>, Section 10.12 for billing instructions

For more information see

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