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The rules say that plans must pay for a medical service or item if regular Medicare would pay for it in this case. 
You can find this rule at 42 Code of Federal Regulations (CFR) Section 422.101. 
 
The rules say that to group diagnoses into the proper MS-DRG, CMS needs to identify a Present on Admission 
(POA) Indicator for all diagnoses reported on claims involving inpatient admissions to general acute care 
hospitals.  Use the UB-04 Data Specifications Manual and the ICD-10-CM Official Guidelines for Coding and 
Reporting to facilitate the assignment of the POA indicator for each "principal" diagnosis and "other" 
diagnoses codes reported on claim forms UB-04 and 837 Institutional.   
 
This web site is not intended to replace any guidelines in the main body of the ICD-10-CM Official Guidelines 
for Coding and Reporting.  The POA Indicator guidelines are not intended to provide guidance on when a 
condition should be coded, rather to provide guidance on how to apply the POA Indicator to the final set of 
diagnosis codes that have been assigned in accordance with Sections I, II, and III of the official coding 
guidelines.  Subsequent to the assignment of the ICD-10-CM codes, the POA Indicator should be assigned to 
all diagnoses that have been coded. 
 
As stated in the Introduction to the ICD-10-CM Official Guidelines for Coding and Reporting, a joint effort 
between the healthcare provider and the coder is essential to achieve complete and accurate documentation, 
code assignment, and reporting of diagnoses and procedures. The importance of consistent, complete 
documentation in the medical record cannot be overemphasized.  Medical record documentation from any 
qualified healthcare practitioner who is legally accountable for establishing the patient's diagnosis. 
 
The provider, a provider's billing office, third party billing agents and anyone else involved in the transmission 
of this data shall insure that any resequencing of diagnosis codes prior to transmission to CMS also includes a 
resequencing of the POA Indicators. 
 
The Inpatient Prospective Payment System (IPPS) Fiscal Year (FY) 2009 Final Rule determined payment 
implications for each of the different POA Indicator reporting options.  To review the payment implications, 
see the CMS POA Indicator Options and Definitions table  
 Y- Diagnosis was present at time of inpatient admission. CMS will pay the CC/MCC DRG for those selected 
HACs that are coded as "Y" for the POA Indicator. 
 
N- Diagnosis was not present at time of inpatient admission. CMS will not pay the CC/MCC DRG for those 
selected HACs that are coded as "N" for the POA Indicator. 
 
U-Documentation insufficient to determine if the condition was present at the time of inpatient admission. 
CMS will not pay the CC/MCC DRG for those selected HACs that are coded as "U" for the POA Indicator. 
 
W-Clinically undetermined.  Provider unable to clinically determine whether the condition was present at the 
time of inpatient admission. CMS will pay the CC/MCC DRG for those selected HACs that are coded as "W" 
for the POA Indicator. 
 
1- Unreported/Not used.  Exempt from POA reporting.  This code is equivalent to a blank on the UB-04, 
however; it was determined that blanks are undesirable when submitting this data via the 4010A. 
 
CMS will not pay the CC/MCC DRG for those selected HACs that are coded as "1" for the POA Indicator. The 
1 POA Indicator should not be applied to any codes on the HAC list.  For a complete list of codes on the 
POA exempt list, see the Official Coding Guidelines for ICD-10-CM. You can find this information in 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Coding 
 
If you want to read these Medicare rules, you can go to this website www.medicareappeal.com.