Knowledge Base Article

With the recent changes and focus on the hospital inpatient three-day payment window, it is important to review the basic tenets of the original rule, such as the definition of an entity that is “wholly owned or operated” by the hospital.

The Payment for Preadmission Services Final Rule (Federal Register, Vol. 63, No. 28, February 11, 1998, page 6864) addressed this definition.  The notice gives the following definition: “In general, if a hospital has direct ownership or control over another entity’s operations, then services provided by that other entity are subject to the 3-day window.  However, if a third organization owns or operates both the hospital and the entity, then the window provision does not apply.” 

The notice goes on to give several examples.  Key points of the examples are:

• A hospital-owned or hospital-operated physician clinic or practice is subject to the payment window provision.  The technical portion of preadmission diagnostic services performed by the physician clinic or practice must be included in the inpatient bill and may not be billed separately. A physician’s professional service is not subject to the window.
• If Hospital A owns Hospital B which owns Hospital C, then CMS would consider Hospital A as owning both Hospitals B and C and the payment window would apply.
• The payment window does not apply to situations in which both the admitting hospital and the entity that furnishes the preadmission services are owned or operated by a third entity. The payment window includes only those situations in which the entity furnishing the preadmission services is wholly owned or operated by the admitting hospital itself.
• The payment window does not apply to situations in which the admitting hospital is not the sole owner or operator of the entity performing the preadmission testing (such as independent laboratories that perform testing and bill Medicare directly for the testing).
• The admitting hospital must be the sole owner or operator of the entity performing the preadmission testing for the payment window to apply.  If the hospital is only part owner of the entity, the payment window would not apply.

The Federal Register notice can be viewed at FR Payment for Preadmission Services Final Rule.