16632 Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Proposed Rules 

Year Stationary 

sources (1) 

2010 ...................................... 81,097,647 

2011 ...................................... 78,787,371 

2012 ...................................... 79,815,562 

The SCAQMD’s MOE reduction 

resulted from a loss of revenues due to 

circumstances beyond its control. EPA 

proposes to determine that the 

SCAQMD lower the FY2012 MOE level 

to $108,291,832 to meet the CAA 

section 105(c)(2) criteria as resulting 

from a non-selective reduction of 

expenditures. 

This notice constitutes a request for 

public comment and an opportunity for 

public hearing as required by the Clean 

Air Act. All written comments received 

by April 17, 2013 on this proposal will 

be considered. EPA will conduct a 

public hearing on this proposal only if 

a written request for such is received by 

EPA at the address above by April 17, 

2013. If no written request for a hearing 

is received, EPA will proceed to the 

final determination. While notice of the 

final determination will not be 

published in the Federal Register, 

copies of the determination can be 

obtained by sending a written request to 

Gary Lance at the above address. 

Dated: March 6, 2013. 

Jared Blumenfeld, 

Regional Administrator, Region IX. 

[FR Doc. 2013–05923 Filed 3–15–13; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 414 and 419 

[CMS–1455–P] 

RIN 0938–AR73 

Medicare Program; Part B Inpatient 

Billing in Hospitals 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: The proposed rule would 

revise Medicare Part B billing policies 

when a Part A claim for an hospital 

inpatient admission is denied as not 

medically reasonable and necessary. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on May 17, 2013. 

ADDRESSES: In commenting, please refer 

to file code CMS–1455–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this document 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1455–P, P.O. Box 8013, Baltimore, 

MD 21244–8013. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–1455–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments ONLY to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–7195 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: Ann 

Marshall, (410) 786–3059, for issues 

related to payment of Part B inpatient 

and Part B outpatient services. 

David Danek, (617) 565–2682, for 

issues related to hospital or beneficiary 

appeals. 

Fred Grabau, (410) 786–0206, for 

issues related to time limits for filing 

claims. 

Twi Jackson, (410) 786–1159, for 

information on all other issues. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

I. Summary and Background 

A. Executive Summary 

1. Purpose 

In the Calendar Year (CY) 2013 

Hospital Outpatient Prospective 

Payment System (OPPS)/Ambulatory 

Surgical Center (ASC) proposed rule 

(July 30, 2012, 77 FR 45155 through 

45157) and final rule with comment 

period (November 15, 2012, 77 FR 

68426 through 68433), we expressed our 

ongoing concern about recent increases 

in the length of time that Medicare 

beneficiaries spend as hospital 

outpatients receiving observation 

services. (In this proposed rule, 

‘‘hospital’’ means hospital as defined at 

section 1861(e) of the Social Security 

Act (the Act), but includes critical 

access hospitals (CAHs) unless 

otherwise specified. Although the term 

‘‘hospital’’ does not generally include 

CAHs, section 1861(e) of the Act 

provides that the term ‘‘hospital’’ 


pmangrum on DSK3VPTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Proposed Rules 16633 

includes CAHs if the context otherwise 

requires. In this case, we believe it is 

appropriate to propose to apply the 

same policies regarding payment for 

inpatient services under Part B in CAHs 

as apply in hospitals). 

Observation services include shortterm ongoing treatment and assessment 

for the purpose of determining whether 

a beneficiary can be discharged from the 

hospital or will require further 

treatment as an inpatient (Section 20.6, 

Chapter 6 of the Medicare Benefit Policy 

Manual (Pub. 100–02)). Beneficiaries 

who are treated for extended periods of 

time as outpatients receiving 

observation services may incur greater 

financial liability than if they were 

admitted as inpatients. They may incur 

financial liability for Medicare Part B 

copayments; the cost of selfadministered drugs that are not covered 

under Part B; and the cost of posthospital Skilled Nursing Facility (SNF) 

care, because section 1861(i) of the Act 

requires a prior 3-day hospital inpatient 

stay (toward which time spent receiving 

outpatient observation services does not 

count) for coverage of post-hospital SNF 

care under Medicare Part A. In the CY 

2013 OPPS/ASC proposed and final 

rules, we discussed how the trend 

towards the provision of extended 

observation services may be attributable 

in part to hospitals’ concerns about 

Medicare Part A to Part B billing 

policies when a hospital inpatient claim 

is denied because the inpatient 

admission was deemed not medically 

necessary. Under longstanding Medicare 

policy, in these situations hospitals can 

only receive payment for a limited set 

of largely ancillary inpatient services 

under Part B. 

In the CY 2013 OPPS/ASC proposed 

rule (77 FR 45155 through 45157) and 

final rule with comment period (77 FR 

68426 through 68433), we solicited and 

described the public comments received 

on potential clarifications or changes to 

our policies regarding patient status that 

may be appropriate to provide more 

clarity and consensus among providers, 

beneficiaries, and other stakeholders 

regarding the relationship between 

inpatient admission decisions and 

appropriate Medicare payment. We also 

provided an update on the Part A to Part 

B Rebilling (Part A/B) Demonstration 

that was slated to be in effect for CYs 

2012 through 2014 and was designed to 

assist us in evaluating these issues. 

Having further considered the concerns 

raised in these comments as well as our 

experience with the Part A/B 

Demonstration, we are proposing to 

revise our Part B inpatient billing 

policy. 

2. Summary of the Major Proposed 

Provisions 

We propose that when a Medicare 

Part A claim for inpatient hospital 

services is denied because the inpatient 

admission was deemed not to be 

reasonable and necessary, or when a 

hospital determines under § 482.30(d) or 

§ 485.641 after a beneficiary is 

discharged that his or her inpatient 

admission was not reasonable and 

necessary, the hospital may be paid for 

all the Part B services (except for 

services that specifically require an 

outpatient status) that would have been 

reasonable and necessary had the 

beneficiary been treated as a hospital 

outpatient rather than admitted as an 

inpatient, if the beneficiary is enrolled 

in Medicare Part B. We propose to 

continue applying the timely filing 

restriction to the billing of all Part B 

inpatient services, under which claims 

for Part B services must be filed within 

1 year from the date of service. In this 

proposed rule, we also describe the 

beneficiary liability and other impacts 

of our proposals. 

3. Summary of Costs and Benefits— 

Proposed Part B Inpatient Payment 

Policy 

We estimate that the proposals in this 

proposed rule would result in an 

approximately $4.8 billion decrease in 

Medicare program expenditures over 5 

years. In section V. of this proposed rule 

we set forth a detailed analysis of the 

regulatory and federalism impacts that 

the proposed changes would have on 

affected entities and beneficiaries. 

B. Legislative and Regulatory Authority/ 

Prior Rulemaking 

Under section 1832 of the Act, when 

Part A payment cannot be made for a 

hospital inpatient claim because the 

inpatient admission is determined not 

reasonable and necessary under section 

1862(a)(1)(A) of the Act, we believe 

Medicare should pay all for Part B 

services (except for services that 

specifically require an outpatient status) 

that would have been reasonable and 

necessary if the hospital had treated the 

beneficiary as a hospital outpatient 

rather than treating the beneficiary as an 

inpatient. We have previously 

addressed this issue in prior rulemaking 

through the proposed and final rules 

titled Prospective Payment System for 

Hospital Outpatient Services, 

(September 8, 1998, 63 FR 47560; and 

April 7, 2000, 65 FR 18444; 

respectively); the proposed and final 

rule titled, Changes to the Hospital 

Outpatient Prospective Payment System 

for Calendar Year 2002, (August 24, 

2001, 66 FR 44698 through 44699) and 

(November 30, 2001, 66 FR 59891 

through 59893 and 59915); and the final 

rule, titled Payment Policies Under the 

Physician Fee Schedule and Other 

Revisions to Part B for CY 2011; 

(November 29, 2010, 75 FR 73449 and 

73627). 

II. Proposed Payment of Medicare Part 

B Inpatient Services 

A. Background 

In the CY 2013 OPPS/ASC proposed 

rule and final rule with comment period 

(77 FR 45155 through 45157 and 77 FR 

68426 through 68433, respectively), we 

discussed that when a Medicare 

beneficiary arrives at a hospital in need 

of medical or surgical care, the 

physician or other qualified practitioner 

may admit the beneficiary for inpatient 

care or treat him or her as an outpatient. 

In some cases, when the physician or 

other qualified practitioner admits the 

beneficiary and the hospital provides 

inpatient care, a Medicare claims review 

contractor, such as a Medicare 

Administrative Contractor (MAC), a 

Recovery Audit Contractor (RAC), or a 

Comprehensive Error Rate Testing 

(CERT) Contractor, subsequently 

determines that the inpatient admission 

was not reasonable and necessary under 

section 1862(a)(1)(A) of the Act, and 

therefore denies the associated hospital 

Part A claim for payment. To date, 

under Medicare’s longstanding policy, 

in these cases hospitals may bill a 

subsequent Part B inpatient claim for 

only a limited set of medical and other 

health services, referred to as ‘‘Part B 

inpatient’’ or ‘‘Part B only’’ services, 

even if additional services furnished 

would have been medically necessary 

had the beneficiary been treated as an 

outpatient. Under current Medicare 

policy, these Part B inpatient claims are 

considered new claims subject to the 

time limits for filing claims described at 

sections 1814(a)(1), 1835(a), and 

1842(b)(3)(B) of the Act and 42 CFR 

424.44 (see section II.G. of this proposed 

rule). We do not consider these claims 

to be adjustments to the originally 

submitted Part A claim. 

Medicare’s policy to pay only a 

limited set of medical and other health 

services as inpatient services under Part 

B when payment cannot be made under 

Part A has been in place for many years. 

As early as 1968, the Medicare manuals 

provided for payment under Part B of 

only a limited list of ancillary medical 

and other health services furnished to 

inpatients of participating hospitals (see 

Section 3110 of the Medicare 

Intermediary Manual and Section 2255C 

of the Medicare Carriers Manual, 


pmangrum on DSK3VPTVN1PROD with PROPOSALS
16634 Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Proposed Rules 

1CMS Pamphlets: ‘‘Are You a Hospital Inpatient 

or Outpatient? If You Have Medicare—Ask!’’, CMS 

Product No. 11435, Revised, February 2011; ‘‘How 

replaced by Section 10, Chapter 6 of the 

Medicare Benefit Policy Manual 

(MBPM) (Pub. 100–02)), and under 

current policy, we continue to provide 

that the payable Part B inpatient 

services include only a limited set of 

ancillary services (66 FR 44698 through 

44699; 66 FR 59891 through 59893, and 

59915). Hospitals are required to submit 

a Part B inpatient claim (Type of Bill 

(TOB) 12x, or 85x for CAHs) within the 

usual timely filing requirements in 

order to be paid for these Part B 

inpatient services (75 FR 73449 and 

73627). 

We have provided in manual 

guidance that the limited set of Part B 

inpatient services could be paid if there 

was no Part A coverage for the following 

reasons: 

• In prospective payment system 

(PPS) hospitals— 

++ No Part A prospective payment is 

made at all for the hospital stay because 

of patient exhaustion of benefit days 

before admission; 

++ The admission was disapproved 

as not reasonable and necessary (and 

waiver of liability payment was not 

made); 

++ The day or days of the otherwise 

covered stay during which the services 

were provided were not reasonable and 

necessary (and no payment was made 

under waiver of liability); 

++ The patient was not otherwise 

eligible for or entitled to coverage under 

Part A; or 

++ For discharges before October 

1997; 

—No Part A day outlier payment is 

made for one or more outlier days 

due to patient exhaustion of benefit 

days after admission but before the 

case’s arrival at outlier status, or 

because outlier days are otherwise 

not covered and waiver of liability 

payment is not made; or 

—If only day outlier payment is 

denied under Part A, Part B 

payment may be made for only the 

services covered under Part B and 

furnished on the denied outlier 

days. 

• In non-PPS hospitals, Part B 

payment may be made for services on 

any day for which Part A payment is 

denied (that is, benefit days are 

exhausted; services are not at the 

hospital level of care; or patient is not 

otherwise eligible or entitled to payment 

under Part A) (Section 10, Chapter 6 of 

the MBPM). 

The services payable are as follows: 

• Diagnostic x-ray tests, diagnostic 

laboratory tests, and other diagnostic 

tests. 

• X-ray, radium, and radioactive 

isotope therapy, including materials and 

services of technicians. 

• Surgical dressings, and splints, 

casts, and other devices used for 

reduction of fractures and dislocations. 

• Prosthetic devices (other than 

dental) which replace all or part of an 

internal body organ (including 

contiguous tissue), or all or part of the 

function of a permanently inoperative or 

malfunctioning internal body organ, 

including replacement or repairs of such 

devices. 

• Leg, arm, back, and neck braces, 

trusses, and artificial legs, arms, and 

eyes including adjustments, repairs, and 

replacements required because of 

breakage, wear, loss, or a change in the 

patient’s physical condition. 

• Outpatient physical therapy, 

outpatient speech-language pathology 

services, and outpatient occupational 

therapy (see the Medicare Benefit Policy 

Manual, Chapter 15, ‘‘Covered Medical 

and Other Health Services,’’ § 220 and 

§ 230). 

• Screening mammography services. 

• Screening pap smears. 

• Influenza, pneumococcal 

pneumonia, and hepatitis B vaccines. 

• Colorectal screening. 

• Bone mass measurements. 

• Diabetes self-management. 

• Prostate screening. 

• Ambulance services. 

• Hemophilia clotting factors for 

hemophilia patients competent to use 

these factors without supervision). 

• Immunosuppressive drugs. 

• Oral anti-cancer drugs. 

• Oral drug prescribed for use as an 

acute anti-emetic used as part of an anticancer chemotherapeutic regimen. 

• Epoetin Alfa (EPO). 

To enable beneficiaries to make 

informed financial and other decisions 

prior to hospital discharge, Medicare 

allows the hospital to change a 

beneficiary’s inpatient status to 

outpatient (using condition code 44 on 

a Part B outpatient claim) and bill all 

reasonable and necessary services that it 

provided to Part B as outpatient 

services, but only if these conditions are 

met: (1) The change in patient status is 

made prior to discharge; (2) the hospital 

has not submitted a Medicare claim for 

the admission; (3) both the practitioner 

responsible for the care of the patient 

and the utilization review committee 

concur with the decision; and (4) the 

concurrence is documented in the 

medical record (See Section 50.3, 

Chapter 1 of the Medicare Claims 

Processing Manual (MCPM) (Pub. 100– 

04); MLN Matters article SE0622, 

Clarification of Medicare Payment 

Policy When Inpatient Admission Is 

Determined Not To Be Medically 

Necessary, Including the Use of 

Condition Code 44: ‘‘Inpatient 

Admission Changed to Outpatient,’’ 

September 2004). The hospital 

conditions of participation (CoPs) 

provide similar patient protections. For 

example, in accordance with 42 CFR 

482.13(b), patients have the right to 

participate in the development and 

implementation of their plan of care and 

treatment, to make informed decisions, 

and to accept or refuse treatment. 

Informed discharge planning between 

the patient and the physician is 

important for patient autonomy and for 

achieving efficient outcomes. 

Hospitals have expressed concern that 

the policy allowing only limited billing 

for Part B inpatient services provides 

inadequate payment for resources they 

expended to take care of beneficiaries in 

need of medically necessary hospital 

care, although not necessarily inpatient 

care. Also, hospitals have indicated that 

often they do not have the necessary 

staff (for example, utilization review 

staff or case managers) available after 

normal business hours to confirm 

physicians’ decisions to admit 

beneficiaries. Thus, for short-stay 

admissions, the hospitals may be unable 

to complete a timely review and change 

beneficiaries’ status from inpatient to 

outpatient prior to discharge in 

accordance with the condition code 44 

requirements. 

In the CY 2013 OPPS/ASC proposed 

rule (77 FR 45156), we discussed that 

we have heard from various 

stakeholders that hospitals appear to be 

responding to the financial risk of 

admitting Medicare beneficiaries for 

inpatient stays that may later be 

determined not reasonable and 

necessary and denied upon contractor 

review by electing to treat beneficiaries 

as outpatients receiving observation 

services, often for longer periods of 

time, rather than admitting them as 

inpatients. In recent years, the number 

of cases of Medicare beneficiaries 

receiving observation services for more 

than 48 hours, while still small, has 

increased from approximately 3 percent 

in 2006 to approximately 8 percent in 

2011. This trend is concerning because 

of its effect on Medicare beneficiaries. 

There could be significant financial 

implications for Medicare beneficiaries 

of being treated as outpatients rather 

than being admitted as inpatients, and 

we have published educational 

materials for beneficiaries to inform 

them of their respective liabilities.1 As 


pmangrum on DSK3VPTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Proposed Rules 16635 

Medicare Covers Self-Administered Drugs Given in 

Hospital Outpatient Settings,’’ CMS Product No. 

11333, Revised, February 2011. 

we discuss later in this proposed rule, 

the statute provides different cost 

sharing responsibilities for beneficiaries 

for Part A and Part B services. In 

addition, section 1861(i) of the Act 

requires a 3-day hospital inpatient stay 

(towards which any time spent 

receiving outpatient observation 

services prior to the calendar day of 

admission does not count) in order for 

a beneficiary to qualify for coverage of 

subsequent post-hospital care in a SNF. 

Therefore, treating beneficiaries as 

outpatients rather than inpatients or 

expanding the number of payable Part B 

inpatient services could impact the 

financial liability of some beneficiaries. 

In light of concerns related to the 

impact of extended time as an 

outpatient on Medicare beneficiaries 

and the impact on hospitals of denials 

of hospital inpatient claims, we 

implemented a demonstration, the Part 

A to Part B (A/B) Rebilling 

Demonstration, for hospitals. The 

demonstration was initially slated to 

last for 3 years, from CYs 2012 through 

2014. The demonstration allows a 

limited number of hospitals to rebill for 

additional Part B inpatient services 

outside the usual timely filing 

requirement, when Part A inpatient 

short-stay claims are denied because the 

inpatient admissions were determined 

not reasonable and necessary. Under the 

demonstration, hospitals may be eligible 

to receive 90 percent of payment for all 

Part B services that would have been 

reasonable and necessary had the 

beneficiaries been treated as outpatients 

rather than admitted as inpatients. We 

also solicited public comments in the 

CY 2013 OPPS/ASC proposed rule on 

various policy clarifications or changes 

that have been suggested by 

stakeholders to address these issues, 

including revising our Part B inpatient 

billing policy (77 FR 45155 through 

45157). 

In an increasing number of cases, 

hospitals that have appealed Part A 

inpatient claims that were denied 

because the inpatient admission was not 

reasonable and necessary have received 

partially favorable decisions from the 

Medicare Appeals Council or 

Administrative Law Judges (ALJs). 

While upholding the Medicare review 

contractor’s determination that the 

inpatient admission was not reasonable 

and necessary, the Medicare Appeals 

Council and ALJ decisions have ordered 

payment of the services as if they were 

rendered at an outpatient or 

‘‘observation level’’ of care. These 

decisions effectively require Medicare to 

issue payment for all Part B services that 

would have been payable had the 

beneficiary originally been treated as an 

outpatient (rather than an inpatient), 

instead of payment for only the limited 

set of Part B inpatient services that are 

designated in the MBPM. Moreover, 

these decisions have required such 

payment regardless of whether the 

subsequent hospital claim for payment 

under Part B is submitted within the 

otherwise applicable time limit for filing 

Part B claims. These Medicare Appeals 

Council and ALJ decisions providing for 

payment of all reasonable and necessary 

Part B services under the circumstances 

described previously are contrary to our 

longstanding policies that permit billing 

for only a limited list of Part B inpatient 

services and require that the services be 

billed within the usual timely filing 

restrictions (See Section 10, Chapter 6 of 

the MBPM (Pub. 100–02); 63 FR 47560; 

65 FR 18444; 66 FR 44698 through 

44699; 66 FR 59891 through 59893, and 

59915; and 75 FR 73449, 73627). While 

decisions issued by the Medicare 

Appeals Council and ALJs do not 

establish Medicare payment policy, we 

are bound to effectuate each individual 

decision. The increasing number of 

these types of decisions has created 

numerous operational difficulties. 

After reviewing the public comments 

we received in response to the CY 2013 

OPPS/ASC proposed rule, considering 

the most efficient way to effectuate the 

Medicare Appeals Council and ALJ 

decisions referenced earlier in this 

section, and further assessing our Part B 

inpatient payment policy, we are 

concurrently issuing this proposed rule 

and CMS Ruling 1455–R (hereinafter 

referred to as the Ruling). The Ruling 

establishes a standard process for 

effectuating these Medicare Appeals 

Council and ALJ decisions and handling 

claims and appeals while CMS 

considers how to best address this issue 

going forward. The Ruling also 

addresses the scope of administrative 

review in these and other, similar cases. 

Until this proposed rule is finalized, 

CMS, through the Ruling, acquiesces in 

the approach taken in the 

aforementioned Medicare Appeals 

Council and ALJ decisions on the issue 

of subsequent Part B billing following 

the denial of a Part A hospital inpatient 

claim on the basis that the inpatient 

admission was not reasonable and 

necessary. The Ruling is intended as an 

interim measure until we can finalize a 

policy to address the issues raised by 

these decisions going forward. 

Specifically, the Ruling provides that 

when a Part A claim for a hospital 

inpatient admission is denied by a 

Medicare review contractor because the 

inpatient admission was determined not 

reasonable and necessary, the hospital 

may submit a subsequent Part B 

inpatient claim for more services than 

just those listed in section 10, Chapter 

6 of the MBPM, to the extent the 

services furnished were reasonable and 

necessary. The hospital may submit a 

Part B inpatient claim for payment for 

the Part B services that would have been 

payable to the hospital had the 

beneficiary originally been treated as an 

outpatient rather than admitted as an 

inpatient, except when those services 

specifically require an outpatient status. 

The Ruling only applies to denials of 

claims for inpatient admissions that 

were not reasonable and necessary; it 

does not apply to any other 

circumstances in which there is no 

payment under Part A, such as when a 

beneficiary exhausts Part A benefits for 

hospital services or is not entitled to 

Part A. Under the Ruling, Part B 

inpatient and Part B outpatient claims 

that are filed later than 1 calendar year 

after the date of service will not be 

rejected as untimely by Medicare’s 

claims processing system as long as the 

corresponding denied Part A inpatient 

claim was filed timely in accordance 

with 42 CFR 424.44, consistent with the 

directives of the Medicare Appeals 

Council and ALJ decisions to which we 

are acquiescing. 

The Ruling also provides that the 

A/B Rebilling Demonstration will be 

discontinued. We will communicate to 

hospitals and contractors the details 

regarding termination of the 

demonstration and implementation of 

Part B billing under the Ruling in future 

transmittals. As described in the Ruling, 

the Ruling is effective on its date of 

issuance. It applies to Part A hospital 

inpatient claims that were denied by a 

Medicare review contractor because the 

inpatient admission was determined not 

reasonable and necessary, as long as the 

denial was made: (1) While the Ruling 

is in effect; (2) prior to the effective date 

of the Ruling, but for which the 

timeframe to file an appeal has not 

expired; or (3) prior to the effective date 

of the Ruling, but for which an appeal 

is pending. The Ruling does not apply 

to Part A hospital inpatient claim 

denials for which the timeframe to 

appeal expired, and it does not apply to 

inpatient admissions determined by the 

hospital to be not reasonable and 

necessary (for example, through 

utilization review or other self-audit). 

The policy announced in the Ruling 

supersedes any other statements of 

policy on the issue of Part B inpatient 

billing following the denial by a 


pmangrum on DSK3VPTVN1PROD with PROPOSALS
16636 Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Proposed Rules 

Medicare review contractor of a Part A 

inpatient hospital claim because the 

inpatient admission was not reasonable 

and necessary (although hospital 

outpatient services would have been 

reasonable and necessary), and it 

remains in effect until the effective date 

of the regulations that finalize this 

proposed rule. This proposed rule 

proposes revisions to our Part B 

payment policy that would apply 

prospectively from the effective date of 

the final regulations and would differ in 

some respects from the provisions of the 

Ruling, the purpose of which is to 

effectuate the Medicare Appeals Council 

and ALJ decisions. 

B. Proposed Payable Part B Inpatient 

Services 

Having reviewed the statutory and 

regulatory basis of our current Part B 

inpatient payment policy, we believe 

that, under section 1832 of the Act, 

Medicare should pay all Part B services 

that would have been reasonable and 

necessary (except for services that 

require an outpatient status) if the 

hospital had treated the beneficiary as a 

hospital outpatient rather than treating 

the beneficiary as an inpatient, when 

Part A payment cannot be made for a 

hospital inpatient claim because the 

inpatient admission is determined not 

reasonable and necessary under section 

1862(a)(1)(A) of the Act. Therefore, in 

this section, we propose to revise our 

current policy to allow payment for 

additional Part B inpatient services than 

Medicare currently allows when CMS, a 

Medicare review contractor, or a 

hospital determines after discharge that 

payment cannot be made under Part A 

because a hospital inpatient admission 

was not reasonable and necessary, 

provided the statutorily required 

timeframe for submitting claims is not 

expired, as discussed in section II.G. of 

this proposed rule. The hospital could 

re-code the reasonable and necessary 

services that were furnished as Part B 

services, and bill them on a Part B 

inpatient claim. This proposed policy 

would only apply to denials of claims 

for inpatient admissions that are not 

reasonable and necessary, and would 

not apply to any other circumstances in 

which there is no payment under Part 

A, such as when a beneficiary exhausts 

Part A benefits for hospital services or 

is not entitled to Part A. 

Specifically, we propose to revise our 

Part B inpatient billing policy to allow 

payment of all hospital services that 

were furnished and would have been 

reasonable and necessary if the 

beneficiary had been treated as an 

outpatient, rather than admitted to the 

hospital as an inpatient, except for those 

services specifically requiring an 

outpatient status. We would exclude 

services that by statute, Medicare 

definition, or standard Healthcare 

Common Procedure Coding System 

(HCPCS) code are defined as outpatient 

services, including outpatient diabetes 

self-management training services 

(DSMT) defined in section 1861(qq) of 

the Act; outpatient physical therapy 

services, outpatient speech-language 

pathology services, and outpatient 

occupational therapy services (PT/SLP/ 

OT or ‘‘therapy’’ services) defined in 

section 1833(a)(8) of the Act; and 

outpatient visits, emergency department 

visits, and observation services (G0378, 

Hospital observation service, per hour; 

and G0379, Direct referral for hospital 

observation care). These services are, by 

definition, provided to hospital 

outpatients and not inpatients. 

Hospitals could only submit claims for 

Part B inpatient services that were 

furnished to an inpatient in accordance 

with their Medicare and standard 

Healthcare Common Procedure Coding 

System (HCPCS) code definitions, and 

in accordance with Medicare coverage 

and payment rules. 

In accordance with section 1833(e) of 

the Act, hospitals would be required to 

furnish information as may be necessary 

in order to determine the amounts due 

for the services billed on a Part B 

inpatient claim for services rendered 

during the inpatient stay. We would 

implement this provision in proposed 

new 42 CFR 414.5, entitled, ‘‘Hospital 

inpatient services paid under Medicare 

Part B when a Part A hospital inpatient 

claim is denied because the inpatient 

admission was not reasonable and 

necessary, but hospital outpatient 

services would have been reasonable 

and necessary in treating the 

beneficiary.’’ The claim for inpatient 

Part B services would have to be 

submitted within the timely filing 

period (we discuss the time limits for 

filing claims in section II.G. of this 

proposed rule). To ensure the accuracy 

and appropriateness of payment under 

Part A, we propose that this policy 

would apply when CMS or a Medicare 

review contractor determines that the 

hospital inpatient admission was not 

reasonable and necessary, and also 

when a hospital determines under 

Medicare’s utilization review 

requirements in sections 1861(e)(6)(1) 

and 1861(k) of the Act and 42 CFR 

482.30 (42 CFR 485.641 for CAHs) that 

a beneficiary should have received 

hospital outpatient rather than hospital 

inpatient services, but the beneficiary 

has already been discharged from the 

hospital (hereinafter referred to as 

hospital ‘‘self-audit’’ for purposes of this 

preamble). In this circumstance, we 

would continue requiring the hospital to 

submit a ‘‘no pay/provider liable’’ Part 

A claim indicating that the provider is 

liable under section 1879 of the Act for 

the cost of the Part A services (see 

section 40.2.2(E), Chapter 3 of the 

MCPM). Submission of this Part A claim 

indicates that the provider is assuming 

financial liability for the denied items or 

services on the Part A claim consistent 

with section 1879 of the Act (and 

acknowledging that the beneficiary is 

not financially liable under section 1879 

of the Act) for the cost of the Part A 

items and services. The claim also 

ensures accurate cost reporting, 

reporting of utilization of inpatient 

days, and triggers refund requirements 

of the Part A cost sharing under sections 

1866(a) and 1879(b) of the Act and 42 

CFR 411.402 of the regulations (see 

sections II.E. and F. of this proposed 

rule). Submitting the provider-liable 

Part A claim also cancels any claim that 

may have already been submitted by the 

hospital for payment under Part A. The 

hospital could then submit an inpatient 

claim for payment under Part B for all 

services that would have been 

reasonable and necessary if the 

beneficiary had been treated as a 

hospital outpatient rather than admitted 

as a hospital inpatient, except for those 

services specifically requiring an 

outpatient status. This claim would 

have to be submitted within the timely 

filing period (we discuss the time limits 

for filing claims in section II.G. of this 

proposed rule). We believe that 

providing for additional payment under 

Part B when a hospital determines itself 

that an inpatient admission was not 

reasonable and necessary but hospital 

outpatient services would have been 

reasonable and necessary would reduce 

improper payments under Part A, and 

would reduce the administrative costs 

of appeals for both hospitals and the 

Medicare program. 

1. Part B Inpatient Services Paid Under 

the Hospital OPPS 

We propose payment of services that 

are paid under the OPPS (except those 

requiring an outpatient status) under 

proposed new § 414.5(a)(1), ‘‘If a 

Medicare Part A claim for inpatient 

hospital services is denied because the 

inpatient admission was not reasonable 

and necessary, or if a hospital 

determines under § 482.30(d) or 

§ 485.641 after a beneficiary is 

discharged that the beneficiary’s 

inpatient admission was not reasonable 

and necessary, the hospital may be paid 

for the following Part B inpatient 

services that would have been 


pmangrum on DSK3VPTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Proposed Rules 16637 

reasonable and necessary if the 

beneficiary had been treated as a 

hospital outpatient rather than admitted 

as an inpatient, provided the beneficiary 

is enrolled in Medicare Part B: (1) 

Services described in § 419.21(a) that do 

not require an outpatient status.’’ We 

would exclude payment of services 

under the OPPS such as observation 

services and clinic visits that, by 

definition, require an outpatient status. 

2. Services Excluded From Payment 

Under the OPPS 

For the proposed Part B inpatient 

services furnished by the hospital that 

are not paid under the OPPS, but rather 

under some other Part B payment 

methodology, we propose that when the 

inpatient admission is determined not 

reasonable and necessary, Part B 

payment would be made pursuant to the 

respective Part B fee schedules or 

prospectively determined rates for 

which payment is made for these 

services when provided to hospital 

outpatients (see 65 FR 18442 and 

18443). As provided in 42 CFR 419.22, 

the services for which payment is made 

under other payment methodologies are 

as follows: 

• Ambulance services, as described in 

section 1861(v)(1)(U) of the Act, or, if 

applicable, the fee schedule established 

under section 1834(l) of the Act; 

• Except as provided in 42 CFR 

419.2(b)(11), prosthetic devices, 

prosthetics, prosthetic supplies, and 

orthotic devices; 

• Except as provided in 42 CFR 

419.2(b)(10), durable medical 

equipment supplied by the hospital for 

the patient to take home; 

• Clinical diagnostic laboratory 

services; 

• Effective December 8, 2003, 

screening mammography services and 

effective January 1, 2005, diagnostic 

mammography services (which would 

become paragraph (r) under our 

proposed redesignation, discussed in 

section II.C. of this proposed rule); and 

• Effective January 1, 2011, annual 

wellness visit providing personalized 

prevention plan services as defined in 

42 CFR 410.15 (which would become 

subparagraph (s) under our proposed redesignation, discussed in section II.C. of 

this proposed rule). 

We propose to provide payment of 

these OPPS-excluded services in 42 CFR 

414.5(a)(2) through (a)(7) as follows: 

• Ambulance services, as described in 

section 1861(v)(1)(U) of the Act, or, if 

applicable, the fee schedule established 

under section 1834(l) of Act. 

• Except as provided in 

§ 419.2(b)(11), prosthetic devices, 

prosthetics, prosthetic supplies, and 

orthotic devices. 

• Except as provided in 

§ 419.2(b)(10), durable medical 

equipment supplied by the hospital for 

the patient to take home. 

• Clinical diagnostic laboratory 

services. 

• Effective December 8, 2003, 

screening mammography services and 

effective January 1, 2005, diagnostic 

mammography services. 

• Effective January 1, 2011, annual 

wellness visit providing personalized 

prevention plan services as defined in 

§ 410.15 of this chapter. 

In our review of the current 

regulations governing payment of Part B 

inpatient services, we noted an 

oversight in 42 CFR 419.22 that 

outpatient DSMT services which are 

described in section 1861(qq) of the Act 

and 42 CFR 414.63 and are paid under 

the Medicare Physician Fee Schedule 

(MPFS), were never excluded from 

OPPS payment along with all other 

physician services. Since the statute 

defines these services as outpatient 

services, § 414.63(e)(2) stipulates that 

outpatient DSMT services can be paid 

only if the beneficiary ‘‘[i]s not receiving 

services as an inpatient in a hospital, 

SNF, hospice, or nursing home.’’ 

Therefore, under our proposal these 

services would not be payable Part B 

inpatient services. However, pursuant to 

our review of the regulations, we 

propose a technical correction to clarify 

that outpatient DSMT services are 

excluded from OPPS payment. This 

correction would appear in § 419.22(u). 

In addition, we noted a typographical 

error in paragraph (j), which should 

cross reference § 419.2(b)(11) rather than 

§ 419.22(b)(11). We propose a technical 

correction to delete the erroneous 

‘‘§ 419.22(b)(11)’’ and replace with 

‘‘§ 419.2(b)(11)’’. Also we noted that 

§ 419.22(h) excludes ‘‘outpatient’’ 

therapy services from coverage under 

the OPPS. Section 1833(t)(1)(B)(iv) of 

the Act specifically states that ‘‘the term 

‘covered OPD services’* * *(iv) does 

not include any therapy services 

described in subsection (a)(8)’’ and 

section 1833(a)(8) describes outpatient 

therapy services furnished by a hospital 

to a hospital outpatient or a hospital 

inpatient who is entitled to benefits 

under Part A but has either exhausted 

or is not so entitled to such benefits. In 

order to more clearly follow the 

statutory language defining covered 

OPD services, we propose to replace the 

words ‘‘outpatient therapy’’ with 

‘‘therapy’’ in § 419.22(h) so that it reads, 

‘‘Therapy services described in section 

1833(a)(8) of the Act.’’ 

We further noted that the headings of 

§ 419.21 and § 419.22 describe the 

‘‘hospital outpatient’’ services that are 

subject to (in § 419.21) or excluded from 

payment under (in § 419.22) the OPPS. 

To more appropriately describe the 

services that are payable under these 

regulations under the OPPS, we propose 

to amend the titles of these sections by 

removing the term ‘‘outpatient.’’ The 

title of § 419.21 would then read, 

‘‘Hospital services subject to the 

outpatient prospective payment 

system.’’ The title of § 419.22 would 

then read, ‘‘Hospital services excluded 

from payment under the hospital 

outpatient prospective payment 

system.’’ 

C. Billing for Part B Outpatient Services 

in the Three-Day Payment Window 

The proposals in this proposed rule 

would not change the 3-day payment 

window policy, which requires payment 

for certain outpatient services provided 

to a beneficiary on the date of an 

inpatient admission or during the 3 

calendar days (or 1 calendar day for a 

hospital that is not paid under the 

Inpatient Prospective Payment System 

(non-IPPS)) prior to the date of an 

inpatient admission to be bundled (that 

is, included) with the payment for the 

beneficiary’s inpatient admission, if 

those outpatient services are provided 

by the admitting hospital or an entity 

that is wholly owned or wholly 

operated by the admitting hospital 

(Section 40.3, Chapter 3 and Section 

10.12, Chapter 4 of the Medicare Claims 

Processing Manual (Pub. 100.04)). The 

current policy applies to all diagnostic 

outpatient services and non-diagnostic 

(that is, therapeutic) services that are 

related to the inpatient stay. As stated 

in Section 10.12, Chapter 4 of the 

Medicare Claims Processing Manual, in 

the event that there is no Part A 

coverage for the inpatient stay, services 

provided to the beneficiary prior to the 

point of admission may be separately 

billed to Part B as the outpatient 

services that they were. This policy 

would continue to apply where Part A 

payment is not available. The Part B 

outpatient claims for the outpatient 

services provided in the 3-day (or 1-day 

for a non-IPPS hospital) payment 

window would be subject to the usual 

timely filing restrictions and not be 

considered adjustment claims (see 

section II.G. in this proposed rule). 

Hospitals may only submit claims for 

Part B outpatient services that are 

reasonable and necessary in accordance 

with Medicare coverage and payment 

rules. In accordance with section 

1833(e) of the Act, hospitals must 

furnish information as may be necessary 


pmangrum on DSK3VPTVN1PROD with PROPOSALS
16638 Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Proposed Rules 

in order to determine the amounts due 

for the services billed on a Part B 

outpatient claim for services rendered in 

the 3-day payment window prior to the 

inpatient admission. 

D. Applicability—Types of Hospitals 

We propose that all hospitals billing 

Part A services be eligible to bill the 

proposed Part B inpatient services, 

including short-term acute care 

hospitals paid under the IPPS, hospitals 

paid under the OPPS, long-term care 

hospitals (LTCHs), inpatient psychiatric 

facilities (IPFs), inpatient rehabilitation 

facilities (IRFs), CAHs, children’s 

hospitals, cancer hospitals, and 

Maryland waiver hospitals. We propose 

that hospitals paid under the OPPS 

would continue billing the OPPS for 

Part B inpatient services. Hospitals that 

are excluded from payment under the 

OPPS in 42 CFR 419.20(b) would be 

eligible to bill Part B inpatient services 

under their non-OPPS Part B payment 

methodologies. 

In the CY 2002 OPPS proposed rule 

(66 FR 44698 through 44699) and final 

rule (66 FR 59891 through 59893), we 

recognized that certain hospitals do not 

submit claims for outpatient services 

under Medicare Part B, either because 

they do not have outpatient departments 

or because they have outpatient 

departments but submit no claims to 

Medicare Part B (for example, state 

psychiatric hospitals). When the OPPS 

was implemented, the only claims these 

hospitals would ever have submitted for 

Part B payment would have been for the 

ancillary services designated as ‘Part B 

Only’ services. These hospitals were 

concerned about the administrative 

burden and prohibitive costs they 

would incur if they were to change their 

billing systems to accommodate OPPS 

requirements solely to receive payment 

for Part B Only (Part B inpatient) 

services. Under our current policy of 

limited Part B inpatient billing 

following a reasonable and necessary 

Part A claim denial, the cost to these 

hospitals of implementing claims 

systems to bill Part B inpatient services 

to the OPPS would have been greater 

than the payments they would have 

received for the services. In response to 

this concern, we revised 42 CFR 419.22 

by adding paragraph (r), which provides 

that services defined in 42 CFR 

419.21(b) that are furnished to 

inpatients of hospitals that do not 

submit claims for outpatient services 

under Medicare Part B are excluded 

from payment under the OPPS. We 

provided an exception under which, 

rather than billing Part B inpatient 

services under the OPPS, hospitals 

would bill these services under the 

hospital’s pre-OPPS payment 

methodology, for example at reasonable 

cost or the per diem payment rate, 

unless the services were subject to a 

payment methodology that was 

established prior to the OPPS. As 

described in section II.B. of this 

proposed rule, services subject to preOPPS payment methodologies include 

PT/SLP/OT services; ambulance 

services; devices and supplies paid 

under the Durable Medical Equipment, 

Prosthetics, Orthotics, and Supplies 

(DMEPOS) fee schedule; clinical 

diagnostic laboratory services; screening 

and diagnostic mammography services; 

and the annual wellness visit providing 

personalized plan prevention services. 

We are soliciting public comments 

from these hospitals regarding the types 

of Part B inpatient services they 

anticipate billing Medicare under our 

proposal for payment of additional Part 

B services. If under our proposed 

policies, the Part B inpatient services 

payable to these hospitals would largely 

be limited to the ancillary services they 

currently bill Medicare, these hospitals 

would continue billing Part B inpatient 

services under the current exception. 

However, if we receive public 

comments indicating that hospitals 

subject to the exception in 42 CFR 

419.22(r) would be eligible and seek 

payment for additional Part B inpatient 

services under this proposed rule, we 

would consider finalizing a policy to 

require these hospitals to bill the OPPS 

since unlike under existing policy, their 

eligible payments would likely 

outweigh the cost of implementing 

billing systems specific to the OPPS. To 

reflect such a policy, we would delete 

42 CFR 419.22(r) and redesignate 

§ 419.22(s) and § 419.22(t) as § 419.22(r) 

and § 419.22(s), respectively. 

E. Beneficiary Liability Under Section 

1879 of the Act 

As discussed earlier in this proposed 

rule, our policy previously allowed for 

billing of only a limited set of Part B 

inpatient services rather than all Part B 

services following the reasonable and 

necessary denial of a Part A inpatient 

claim. We recognize the proposal would 

allow billing for additional Part B 

inpatient services, which could create a 

unique liability issue for Medicare 

beneficiaries that did not previously 

exist. 

When a Part A inpatient admission is 

denied as not reasonable and necessary 

under section 1862(a)(1)(A) of the Act, 

or a hospital submits a ‘‘provider liable/ 

no-pay’’ claim (following a self-audit as 

described in section II.B. of this 

proposed rule) indicating that the 

hospital has determined that an 

inpatient admission is not reasonable 

and necessary, a determination of 

financial liability for the non-covered 

inpatient admission is made in 

accordance with section 1879 of the Act. 

The Medicare contractor determines 

whether the hospital and the beneficiary 

knew, or could have reasonably been 

expected to know, that the services were 

not covered. If neither the hospital nor 

the beneficiary knew, or could 

reasonably have been expected to know, 

that the services were not covered, then 

Medicare makes payment for the denied 

services. However, because hospitals are 

expected to have knowledge of our 

coverage and payment rules, hospitals 

are often determined liable under 

section 1879 of the Act for the cost of 

the non-covered items and services 

furnished. In addition, unless the 

beneficiary had knowledge of noncoverage in advance of the provision of 

services (typically through a Hospital 

Issued Notice of Non-Coverage (HINN)), 

the beneficiary will not be financially 

liable for the denied Part A services in 

accordance with section 1879 of the Act. 

Following a denial of a Part A 

inpatient admission as not reasonable 

and necessary and a determination that 

the beneficiary was not financially 

liable in accordance with section 1879 

of the Act, the hospital is required to 

refund any amounts paid by the 

beneficiary (such as deductible and 

copayment amounts) for the services 

billed under Part A. (See, 42 CFR 

411.402.) The beneficiary would have 

no out-of-pocket cost in this scenario. 

However, under the Part B inpatient 

billing policy proposed in this rule, if 

the hospital subsequently submits a 

timely Part B claim after the Part A 

claim is denied, the financial 

protections afforded under section 1879 

of the Act to limit liability for the 

denied Part A claim cannot also be 

applied to limit liability for the covered 

services filed on the Part B claim. The 

beneficiary (who may previously have 

had no out-of-pocket costs for the 

denied Part A claim) is responsible for 

applicable deductible and copayment 

amounts for Medicare covered services, 

and for the cost of items or services 

never covered (or always excluded from 

coverage) under Part B of the program. 

(The beneficiary’s responsibility for 

payment of deductible, cost-sharing, 

and items excluded from coverage 

under Part B is discussed further in 

section II.F. of this proposed rule.) If, 

however, a hospital does not bill under 

Part B in a timely manner, in 

accordance with section 1866(a)(1)(A)(i) 

of the Act, the hospital may not charge 

the beneficiary for any costs related to 


pmangrum on DSK3VPTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Proposed Rules 16639 

the Part B items and services furnished, 

if the beneficiary would otherwise be 

entitled to have Part B payment made 

on his/her behalf. Finally, in instances 

where the beneficiary is not enrolled in 

Medicare Part B, we encourage hospitals 

and beneficiaries to recognize the 

importance of billing supplemental 

insurers and pursuing an appeal of the 

Part A inpatient claim denial, as 

appropriate. 

We do not believe that the existing 

beneficiary liability notices used in the 

Medicare fee-for-service program (the 

HINN and Advance Beneficiary Notice 

of Noncoverage (ABN)) are applicable or 

relevant for the Part B inpatient billing 

process described in this proposed rule 

to alert beneficiaries to the possible 

change in deductible and cost-sharing if 

a Part A inpatient claim is denied and 

a Part B claim is subsequently 

submitted. These notices must be given 

prior to the provision of an item or 

service that is expected to be denied, 

and cannot be issued retroactively (that 

is, after the receipt of the post-payment 

Part A inpatient claim denial). We 

would conduct an educational 

campaign and issue materials that 

address various aspects of this 

rulemaking, including raising 

beneficiary awareness that certain 

denied Part A inpatient hospital 

services may be covered under Part B of 

the program. We welcome public 

comment on recommendations for 

notification to beneficiaries in these 

situations, consistent with our current 

notice policies. (For additional 

information on beneficiary notices, see 

the CMS Web site at http://www.cms.

gov/Medicare/Medicare-GeneralInformation/BNI/index.html). 

F. Applicable Beneficiary Liability: 

Hospital Services 

As we note in section II.E. and section 

V. of this proposed rule, increasing the 

number of billable Part B inpatient 

services could affect beneficiary 

liability. In accordance with statute, 

beneficiary cost-sharing under Part A is 

different (and, in some cases, may be 

less) than under Part B. The CY 2013 

Part A inpatient deductible and 

coinsurance amounts, which are set in 

accordance with statute, were recently 

announced in a notice published in the 

November 21, 2012 Federal Register (77 

FR 69848 through 69850). Under Part A, 

a beneficiary pays a one-time deductible 

for all hospital inpatient services 

provided during the first 60 days in the 

hospital of the benefit period; therefore, 

an inpatient deductible does not 

necessarily apply to all hospitalizations. 

Part A coinsurance only applies after 

the 60th day in the hospital. A 

beneficiary would be entitled to refunds 

of any amounts he or she paid to the 

hospital for the Part A claim if the 

hospital, but not the beneficiary, is held 

financially responsible for denied 

services under section 1879 of the Act 

(42 CFR 411.402.) However, under our 

proposed policy, beneficiaries would 

continue to be liable for their usual Part 

B financial liability. 

Beneficiaries would be liable for Part 

B copayments for each hospital Part B 

outpatient or Part B inpatient service 

and for the full cost of drugs that are 

usually self-administered, which section 

1861(s)(2)(B) of the Act does not 

include. We note that self-administered 

drugs are typically covered under 

Medicare Part D, and beneficiaries who 

have Part D coverage may submit a 

claim to their Part D plan for 

reimbursement of these costs. If a 

beneficiary must receive the selfadministered drug from a hospital, 

rather than a community pharmacy, he 

or she would likely be subject to higher 

out-of-pocket costs due to the hospital 

pharmacy’s status as a non-network 

pharmacy. Hospital billing systems, Part 

D reimbursement rates, and drug 

utilization review requirements make it 

difficult for hospitals to participate as a 

Part D network provider for these drugs. 

Therefore, if coverage is available, 

consistent with 42 CFR 423.124(b), 

beneficiaries would be responsible for 

the difference between the Part D plan’s 

plan allowance and the hospitals’ 

charges, and the difference may be 

significant. Thus under our proposed 

Part B billing policy, some beneficiaries 

who are entitled to coverage under both 

Part A and Part B may have a greater 

financial liability for hospital services 

compared to current policy, as they 

would be liable for additional Part B 

services billed when the inpatient 

admission is determined not reasonable 

and necessary. We are soliciting 

comment on whether we should 

consider additional policies to mitigate 

or prevent this potential additional 

liability for beneficiaries. 

Most supplemental insurers or benefit 

programs (this includes but is not 

limited to Medigap plans that market 

Medicare supplemental insurance 

policies, employer retiree plans, FEHBP, 

TRICARE, and Medicaid) participate in 

Medicare’s coordination of benefits 

(COB) or claims crossover process. Such 

payers sign national agreements with 

Medicare to facilitate the automatic 

transfer of Medicare-adjudicated 

professional as well as facility claims to 

them. Most, if not all of these 

supplemental insurers elect to receive 

Medicare crossover claims if there is 

cost-sharing (that is, deductible or coinsurance amounts remains for the 

beneficiary to pay). The vast majority of 

insurers that pay after Medicare 

currently accept Part B physician claims 

as well as outpatient-oriented hospital 

claims as part of the Medicare crossover 

process. Therefore, if we finalize our 

proposal to allow for hospital billing of 

additional Part B services using claims 

whose National Uniform Billing 

Committee (NUBC) approved type of 

bill (TOB) designation is 12x (HospitalInpatient Part B), the vast majority of 

providers will find that their patients’ 

claims will be automatically transferred 

to their supplemental insurance 

programs for further payment 

consideration. Additionally, to ensure 

that supplemental payers would 

coordinate benefits with Medicare 

successfully and pay benefits 

appropriately, Medicare would 

communicate with all supplemental 

payers to ensure they know: (1) What 

additional services beyond those 

traditionally termed ‘‘ancillary’’ would 

now be included under the TOB 12x 

designation; and (2) what new cost 

sharing this change in billing and 

payment methodology will impose. The 

Medicare crossover process currently in 

place will ensure that, for the most part, 

providers are not inconvenienced by 

having to bill their patients’ 

supplemental insurance plans or 

programs for balances owed following 

Medicare’s payment. 

G. Time Limits for Filing Claims 

Sections 1814(a)(1), 1835(a), and 

1842(b)(3)(B) of the Act establish time 

limits for filing Medicare Part A and B 

claims. Section 424.44 of the regulations 

implements those sections of the Act 

and requires that all claims for services 

furnished on or after January 1, 2010 be 

filed within 1 calendar year after the 

date of service unless an exception 

applies. In the November 29, 2010 final 

rule with comment period (75 FR 

73627) titled, ‘‘Medicare Program; 

Payment Policies Under the Physician 

Fee Schedule and Other Revisions to 

Part B for CY 2011’’ modifying § 424.44, 

commenters requested that we create an 

exception to the time limits for filing 

claims so that hospitals are permitted to 

file inpatient Part B only claims for any 

inpatient cases that are retrospectively 

reviewed by a Medicare Recovery Audit 

Contractor (RAC) or other review entity 

and determined not to be medically 

necessary in an inpatient setting. 

Commenters requested that an 

exception be created at § 424.44(b) to 

allow for the billing of Part B inpatient 

and Part B outpatient claims when there 

is no coverage under Part A for a 

hospital stay. For the reasons discussed 


pmangrum on DSK3VPTVN1PROD with PROPOSALS
16640 Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Proposed Rules 

in the November 29, 2010 final rule, we 

declined to create such an exception 

and we continue to believe that was the 

correct decision. 

Under CMS Ruling 1455–R (published 

concurrently elsewhere in this issue of 

the Federal Register), we adopted 

(although we did not endorse) the views 

of the Medicare Appeals Council and 

many ALJs that subsequent Part B 

rebilling is allowed after the timely 

filing period has expired. The Ruling 

states that subsequent Part B inpatient 

and Part B outpatient claims that are 

filed later than 1 calendar year after the 

date of service are not to be rejected as 

untimely by Medicare’s claims 

processing system as long as the original 

corresponding Part A inpatient claim 

was filed timely pursuant to 42 CFR 

424.44. The Ruling remains in effect 

until the effective date of final 

regulations that result from this 

proposed rule. At that time, the final 

rule would supersede the Ruling’s 

treatment of claims that providers file 

later than 1-calendar year after the date 

of service. 

Accordingly, we propose a new 

§ 414.5(b) that would require that claims 

for billed Part B inpatient services be 

rejected as untimely when those Part B 

claims are filed later than 1 calendar 

year after the date of service. Our 

proposal treats these Part B claims as 

new claims subject to the timely filing 

requirements, instead of as adjustment 

claims. This is consistent with 

longstanding Medicare policy because 

an adjustment claim supplements 

information on a claim that was 

previously submitted without changing 

the fundamental nature of that original 

claim. In these Part B claim situations, 

however, the fundamental nature of the 

originally filed claim is changed 

completely (from a Part A claim to a 

Part B claim). 

Therefore, in order to remove any 

ambiguity, if this rule is finalized as 

proposed, billed Part B inpatient claims 

would be rejected as untimely when 

those Part B claims are filed later than 

1-calendar year after the date of service. 

Moreover, because it is the 

responsibility of providers to correctly 

submit claims to Medicare by coding 

services appropriately, it is important to 

note that the exception located at 

§ 424.44(b)(1), which extends the time 

for filing a claim if failure to meet the 

deadline was caused by error or 

misrepresentation of an employee, 

contractor or agent of HHS (commonly 

referred to as the ‘‘administrative error’’ 

exception), would not apply in 

situations where a provider bills the 

originally submitted Part A claim 

incorrectly. Finally, we remind 

providers that in accordance with 42 

CFR 405.926(n), determinations that a 

provider failed to submit a claim timely 

are not appealable. 

H. Appeals Procedures 

If a hospital is dissatisfied with an 

initial or revised determination by a 

Medicare contractor to deny a Part A 

claim for an inpatient admission as not 

reasonable and necessary, the hospital 

may either submit Part B inpatient or 

outpatient claims (consistent with this 

proposed rule) or file a request for 

appeal of the denied Part A claim in 

accordance with the procedures in 42 

CFR Part 405 subpart I. In order to 

prevent duplicate billing and payment, 

a hospital may not have simultaneous 

requests for payment for the same 

services provided to a single beneficiary 

on the same dates of service. (See IOM 

Pub. 100–4, Chapter 1, section 120.) 

This includes requests for payment 

under both Part A and Part B. Thus, if 

a hospital chooses to submit a Part B 

claim for payment following the denial 

of an inpatient admission on a Part A 

claim, then the hospital cannot also 

maintain its request for payment for the 

same services on the Part A claim 

(including an appeal of the Part A 

claim). In this situation, before the 

hospital submits a Part B claim, it must 

ensure that there is no pending appeal 

request on the Part A claim. (A pending 

appeal means an appeal for which there 

is no final or binding decision or 

dismissal.) If the hospital has filed a 

Part A appeal, the appeal must be 

withdrawn, or the decision must be 

final or binding, before the Part B claim 

can be processed. If a hospital submits 

a Part B claim for payment without 

withdrawing its appeal request, the Part 

B claim would be denied as a duplicate. 

In addition, once a Part B claim is filed, 

there would be no further appeal rights 

available with respect to the Part A 

claim. However, the hospital and 

beneficiary would have appeal rights 

with respect to an initial determination 

made on the Part B claim under existing 

policies set forth at 42 CFR part 405 

subpart I. 

Additionally, if a beneficiary files an 

appeal of a Part A inpatient admission 

denial, a hospital cannot utilize the Part 

B billing process proposed in this rule 

to extinguish a beneficiary’s appeal 

rights. Therefore, the hospital’s 

submission of a Part B claim would not 

affect a beneficiary’s pending appeal or 

right to appeal the Part A claim. If a 

beneficiary has a pending Part A appeal 

for an inpatient admission denial, then 

any claims rebilled under Part B by the 

hospital would be denied as duplicates 

by the Medicare contractor. As 

explained previously, in order for the 

Part B claim(s) to be processed, the Part 

A appeal must be final or binding or 

dismissed. For example, if a beneficiary 

receives an unfavorable reconsideration 

on a Part A inpatient claim and does not 

file a timely request for hearing before 

an ALJ, the reconsideration decision 

becomes binding. At that point, the 

hospital could submit a Part B claim, 

provided it is filed within 12 months 

from the date of service. (See proposed 

42 CFR 414.5(b) and 42 CFR 424.44). 

As discussed in sections II.E and F. of 

this proposed rule, beneficiaries who 

are not enrolled in Medicare Part B may 

be liable for the cost of items and 

services associated with a hospital stay 

when billed under the Part B billing 

process proposed in this rule. We 

believe that some beneficiaries who are 

not enrolled in Medicare Part B may 

have other health insurance that might 

pay for some or all of the Part B items 

and services. If a beneficiary is not 

enrolled in Part B of the program, we 

strongly encourage the hospital to 

submit a Part B claim to Medicare before 

billing the beneficiary so that, when 

appropriate, the beneficiary’s 

supplemental insurer receives the claim. 

We are also clarifying in this 

proposed rule the scope of review with 

respect to appeals of Part A inpatient 

admission denials in the context of the 

Part B billing policy. As explained in 

CMS Ruling 1455–R, a large number of 

recent appeal decisions for Part A 

inpatient admission claim denials by 

Medicare review contractors have 

affirmed the Part A inpatient admission 

denial, but ordered that payment be 

issued as if services were provided at 

the outpatient or ‘‘observation’’ level of 

care under Part B of the Medicare 

program. These decisions ordered 

payment under Part B (or consideration 

of payment for services furnished that 

the contractor determined to be covered 

and payable under Part B) even though 

a Part B claim had not been submitted 

for payment. Hospitals are solely 

responsible for submitting claims for 

items and services provided to 

beneficiaries and determining whether 

submission of a Part A or Part B claim 

is appropriate. Once a hospital submits 

a claim, the Medicare contractor can 

make an initial determination and 

determine any payable amount (42 CFR 

405.904(a)(2)). Under existing Medicare 

policy, if such a determination is 

appealed, an appeals adjudicator’s 

scope of review is limited to the claim(s) 

that are before them on appeal, and such 

adjudicators may not order payment for 

items or services that have not yet been 

billed or have not yet received an initial 

determination. (See 42 CFR 405.920, 


pmangrum on DSK3VPTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Proposed Rules 16641 

405.940, 405.948, 405.954, 405.960, 

405.968, 405.974, 405.1000, 405.1032, 

405.1100, and 405.1128.) For example, 

if a hospital submits an appeal of a 

determination that a Part A inpatient 

admission was not reasonable and 

necessary, the only issue before the 

adjudicator is the propriety of the Part 

A claim, not an issue involving any 

potential Part B claim the hospital has 

not yet filed. In making a decision on 

that Part A claim, an appeals 

adjudicator may not develop 

information, or make a finding, with 

respect to a Part B claim that does not 

exist. 

Thus, under the billing processes 

described in this proposed rule, if a 

hospital appeals a Part A inpatient 

admission denial and receives a 

decision indicating that payment may 

not be made under Part A, appeals 

adjudicators may not order payment for 

items and services not yet billed under 

Part B. Rather, payment for items and 

services that may be covered under Part 

B may only be made in response to a 

Part B claim submitted by the hospital 

that is timely filed under proposed 42 

CFR 414.5(b) and 42 CFR 424.44. 

III. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for the following 

sections of this document that contain 

information collection requirements 

(ICRs): 

With regard to the proposed payment 

of Medicare Part B inpatient services as 

discussed in section II.B. of this 

proposed rule, the medical 

recordkeeping requirement associated 

with the services billed on Part B 

inpatient claims during the inpatient 

stay is exempt from the PRA in 

accordance with 5 CFR 1320.3(b)(2). 

The same holds for recordkeeping 

associated with the services billed on a 

Part B outpatient claim for services 

rendered in the 3-day payment window 

prior to the inpatient admission. We 

believe that the time, effort, and 

financial resources necessary to comply 

with the aforementioned recordkeeping 

requirements would be incurred by 

persons in the normal course of their 

activities; and therefore, considered to 

be usual and customary business 

practices. 

With regard to the appeals of 

proposed payment of Medicare Part B 

inpatient services, the appeals 

information collection activity 

discussed in section II.H. of this 

proposed rule is exempt from the 

requirements of the Paperwork 

Reduction Act since it is associated with 

an administrative action (5 CFR 

1320.4(a)(2) and (c)). 

The aforementioned provisions would 

not impose any new or revised reporting 

or recordkeeping requirements and 

would not impose any new or revised 

burden estimates. 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

[CMS–1455–P], Fax: (202) 395–6974; or 

Email: OIRA_submission@omb.eop.gov. 

IV. Response to Comment 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

V. Regulatory Impact Analysis 

A. Statement of Need 

This proposed rule is needed to 

address Medicare Part A to Part B 

billing policies when a hospital 

inpatient claim is denied because the 

inpatient admission was not reasonable 

and necessary. 

B. Overall Impact 

We have examined the impacts of this 

proposed rule as required by Executive 

Order 12866 on Regulatory Planning 

and Review (September 30, 1993), 

Executive Order 13563 on Improving 

Regulation and Regulatory Review 

(January 18, 2011), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Social Security Act, section 202 of 

the Unfunded Mandates Reform Act of 

1995 (UMRA) (March 22, 1995, Pub. L. 

104–4), Executive Order 13132 on 

Federalism (August 4, 1999), and the 

Contract with America Advancement 

Act of 1996 (Pub. L. 104–121) (5 U.S.C. 

804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This rule 

has been designated as an 

‘‘economically’’ significant rule under 

section 3(f)(1) of Executive Order 12866 

and a major rule under the Contract 

with America Advancement Act of 1996 

(Pub. L. 104 121). Accordingly, the 

proposed rule has been reviewed by the 

Office of Management and Budget. We 

have prepared a regulatory impact 

analysis that, to the best of our ability, 

presents the costs and benefits of this 

proposed rule. In this proposed rule, we 

are soliciting public comments on the 

regulatory impact analysis provided. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, we 

estimate that most hospitals are small 

entities as that term is used in the RFA. 

For purposes of the RFA, most hospitals 

are considered small businesses 

according to the Small Business 

Administration’s size standards with 

total revenues of $34.5 million or less in 

any single year. We estimate that this 

proposed rule may have a significant 

impact on approximately 2,053 

hospitals with voluntary ownership. For 

details, see the Small Business 

Administration’s ‘‘Table of Small 

Business Size Standards’’ at http:// 

www.sba.gov/content/table-smallbusiness-size-standards. 


pmangrum on DSK3VPTVN1PROD with PROPOSALS
16642 Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Proposed Rules 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a metropolitan statistical area and has 

100 or fewer beds. We estimate that this 

proposed rule may have a significant 

impact on approximately 708 small 

rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

In 2013, that threshold level is currently 

approximately $141 million. This 

proposed rule does mandate 

requirements for the private sector. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and a subsequent final 

rule) that imposes substantial direct 

costs on state and local governments, 

preempts state law, or otherwise has 

federalism implications. We have 

examined the provisions included in 

this proposed rule in accordance with 

Executive Order 13132, federalism, and 

have determined that they will not have 

a substantial direct effect on state, local 

or tribal governments, preempt state 

law, or otherwise have a federalism 

implication. As reflected in Table 1 of 

this proposed rule, we estimate that 

Medicare expenditures will increase for 

services furnished in governmental 

hospitals (including state and local 

governmental hospitals). The analyses 

we have provided in this section of the 

proposed rule, in conjunction with the 

remainder of this document, 

demonstrate that this proposed rule is 

consistent with the regulatory 

philosophy and principles identified in 

Executive Order 12866, the RFA, and 

section 1102(b) of the Act. 

C. Estimated Impacts of the Proposed 

Part B Inpatient Payment Policy 

1. Estimated Impact on Medicare 

Program Expenditures 

In this section, we provide the 

estimated impact of our proposal to 

provide payment for additional Part B 

inpatient services on Medicare benefit 

expenditures over the next 5 years. 

Column (3) of Table 1 shows the 

estimated impacts of this proposal, 

relative to an estimated increase in 

baseline expenditures that will result 

from the effectuation of recent decisions 

by the Medicare Appeals Council and 

ALJs on Medicare Part A to Part B 

‘‘rebilling’’ (in this section referred to as 

the ‘‘appeal decisions’’). 

In section II.A. of this proposed rule, 

we discuss that in an increasing number 

of cases, hospitals that have appealed 

Part A inpatient claim denials to the 

ALJs and the Medicare Appeals Council 

have received decisions upholding the 

Medicare review contractor’s 

determination that the inpatient 

admission was not reasonable and 

necessary, but ordering payment of the 

services as if they were rendered at an 

outpatient or ‘‘observation level’’ of 

care. These decisions effectively require 

Medicare to issue payment for all Part 

B services that would have been payable 

had the beneficiary originally been 

treated as an outpatient instead of 

limiting payment to only the set of Part 

B inpatient services designated in the 

Medicare Benefit Policy Manual. 

Further, the decisions have required 

payment regardless of whether the 

subsequent hospital bill for payment 

under Part B is submitted within the 

otherwise applicable time limit for filing 

Part B claims. The ALJ and Medicare 

Appeals Council decisions providing for 

payment of all reasonable and necessary 

Part B services under these 

circumstances are contrary to CMS’ 

longstanding policies that permit billing 

for only a limited list of Part B inpatient 

services and require that the services be 

billed within the usual timely filing 

restrictions. While these appeal 

decisions do not establish Medicare 

payment policy, CMS’ contractors are 

bound to effectuate each individual 

decision. Column (1) shows the 

estimated impacts of CMS’ instructions 

to contractors for effectuating the 

decisions that have been issued. To 

resolve the discrepancy between current 

Medicare policy and the decisions being 

made by the Medicare Appeals Council 

and ALJs, we are issuing CMS Ruling 

1455–R concurrent with this proposed 

rule. As we describe in section II.A. of 

this proposed rule, the Ruling provides 

a standard process for effectuation of 

these appeal decisions through payment 

of additional Part B inpatient (rather 

than Part B outpatient or ‘‘observation’’) 

services than current policy allows, in 

order to address the approach taken by 

ALJs and the Medicare Appeals Council 

for Part A hospital claims denied 

because an inpatient admission was not 

reasonable and necessary, but ordering 

payment of services as if they were 

rendered at an outpatient or 

‘‘observation level’’ of care. Under the 

Ruling, we will not apply the timely 

filing limitations in 42 CFR 424.44 to 

the subsequent claims for Part B 

services, but rather will afford the 

hospital 180 days from the date of 

receipt of a final or binding appeal 

decision, or 180 days from the date of 

receipt of the Part A initial 

determination or revised determination 

if there is no pending appeal, to file its 

Part B claim(s). Under the Ruling, 

hospitals are not required to appeal a 

claim denial prior to billing Part B; 

therefore, there is an added cost for the 

Ruling (shown in Column (2)) in 

addition to the cost of effectuating the 

appeal decisions (Column (1)). 

The Ruling is in effect until this 

proposed rule titled, ‘‘Medicare 

Program; Part B Inpatient Billing in 

Hospitals’’—is finalized, which will 

supersede the Ruling. The Ruling 

permits Part B inpatient billing as 

described previously for Part A hospital 

inpatient claims that were denied by a 

Medicare review contractor because the 

inpatient admission was determined not 

reasonable and necessary, as long as the 

denial was made: (1) While the Ruling 

is in effect; (2) prior to the effective date 

of the Ruling, but for which the 

timeframe to file an appeal has not 

expired; or (3) prior to the effective date 

of the Ruling, but for which an appeal 

is pending. In this proposed rule, we 

propose revisions to our Part B inpatient 

payment policy which would apply 

prospectively from the effective date of 

the finalized regulation for this 

proposed rule, and would differ in some 

respects from provisions of the Ruling, 

the purpose of which is to effectuate the 

appeal decisions. The key differences 

between the Ruling and the proposed 

policy are: (1) The proposed policy 

would apply the current timely filing 

restriction to the subsequent Part B 

inpatient claims rebilled after the Part A 

claim denial (that is, covered the Part B 

inpatient claims would only be paid if 

they are billed within 12 months of the 

date of service, which, as described 

previously, is not the case for the 

subsequent Part B inpatient claims 

rebilled under the Ruling); and (2) the 

proposed policy would apply when 

hospitals determine through self-audit 

that an inpatient admission is not 

reasonable and necessary (also subject 

to the timely filing limits). 

The estimates for each column of 

Table 1 assume that the policy in the 

preceding column is already in place. 

Specifically, the estimated cost for the 

Ruling is relative to a baseline that 

includes the effect of the appeal 

decisions. Similarly, the estimated costs 

under this proposed rule are in relation 

to a baseline that includes both the 


pmangrum on DSK3VPTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Proposed Rules 16643 

appeal decisions and the Ruling in 

place. We assumed short-stay inpatient 

utilization would increase by 1 percent 

as a result of the appeal decisions 

because hospitals would be able to rebill 

after an appeal. (There are currently no 

controls in place to monitor hospitals 

for changes in their inpatient growth 

trend and/or error rate.) In addition, we 

assumed short-stay inpatient utilization 

would increase by an additional 3 

percent under the Ruling, since 

hospitals could rebill under Part B 

without the expense of an appeal. Due 

to the timely filing restrictions and 

lower Part B payment rate for rebilling, 

we assumed there would be no increase 

in any inpatient utilization resulting 

from the proposed regulatory change to 

restrict inpatient Part B billing to the 

timely filing requirement of 12 months 

from the date of service, relative to 

circumstances prior to the appeal 

decisions. The 12-month timely filing 

restriction imposed by the proposed 

regulation would greatly limit the 

capacity in which a hospital could rebill 

and thereby substantially reduces the 

number of Part B inpatient claims 

rebilled by hospitals, largely offsetting 

the higher costs arising from the appeal 

decisions and the Ruling. The amounts 

are shown in millions for CYs 2013 

through 2017. 

TABLE 1—ESTIMATED IMPACT ON MEDICARE PROGRAM EXPENDITURES FOR HOSPITAL SERVICES

[Current year dollars (in millions)] 

Calendar year Appeal decisions CMS ruling 1455-R 

Part B inpatient 

billing with 

12-month timely 

filing restriction 

proposed policy 

Total impact 

(1) (2) (3) (4) 

2013 ................................................................................. $290 $560 $0 $850 

2014 ................................................................................. 410 770 ¥1,140 40 

2015 ................................................................................. 410 780 ¥1,160 40 

2016 ................................................................................. 430 830 ¥1,210 50 

2017 ................................................................................. 460 870 ¥1,280 50 

We note the following caveats relating 

to these cost estimates. First, the 

estimated financial effects are very 

sensitive to certain specifications of the 

proposed policy. For example, if the 12- 

month timely filing restriction on 

rebilling were to apply from the ‘‘date 

of denial’’, rather than from the ‘‘date of 

service’’, then the savings under the 

proposed policy would be much smaller 

than shown here. Second, the actual 

costs or savings would depend 

substantially on possible changes in 

behavior by hospitals, and such 

behavioral changes cannot be 

anticipated with certainty. The 

estimates are especially sensitive to the 

assumed utilization changes in inpatient 

and outpatient utilization. While we 

believe that these assumptions are 

reasonable, relatively small changes 

would have a disproportionate effect on 

the estimated net costs. 

2. Estimated Impact on Beneficiaries 

Table 2 contains the aggregate impacts 

on beneficiary out-of-pocket expenses 

for Parts A and B, as a result of the 

appeal decisions, the Ruling, and this 

proposed rule. These changes are 

mainly the result of the changes in 

beneficiary cost-sharing when inpatient 

services are paid under Part B rather 

than under Part A. The amounts are 

shown in millions for CYs 2013 through 

2017. 

TABLE 2—ESTIMATED IMPACT ON BENEFICIARIES’ OUT-OF-POCKET EXPENSES FOR PART A AND PART B SERVICES

[Current year dollars (in millions)] 

Calendar year Part A Part B Total 

Appeal Decisions 

2013 ............................................................................................................................................. $20 $20 $40 

2014 ............................................................................................................................................. 30 30 60 

2015 ............................................................................................................................................. 30 30 60 

2016 ............................................................................................................................................. 30 30 60 

2017 ............................................................................................................................................. 30 30 60 

CMS Ruling #1455-R 

2013 ............................................................................................................................................. 50 ¥40 10 

2014 ............................................................................................................................................. 80 ¥60 20 

2015 ............................................................................................................................................. 80 ¥60 20 

2016 ............................................................................................................................................. 80 ¥60 20 

2017 ............................................................................................................................................. 90 ¥70 20 

Proposed Part B Inpatient Billing With 12-Month Timely Filing Restriction Policy 

2013 ............................................................................................................................................. 0 0 0 

2014 ............................................................................................................................................. ¥100 40 ¥60 

2015 ............................................................................................................................................. ¥100 40 ¥60 

2016 ............................................................................................................................................. ¥110 50 ¥60 


pmangrum on DSK3VPTVN1PROD with PROPOSALS
16644 Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Proposed Rules 

TABLE 2—ESTIMATED IMPACT ON BENEFICIARIES’ OUT-OF-POCKET EXPENSES FOR PART A AND PART B SERVICES— 

Continued 

[Current year dollars (in millions)] 

Calendar year Part A Part B Total 

2017 ............................................................................................................................................. ¥110 50 ¥60 

Total 

2013 ............................................................................................................................................. 70 ¥20 50 

2014 ............................................................................................................................................. 0 20 20 

2015 ............................................................................................................................................. 0 20 20 

2016 ............................................................................................................................................. 0 20 20 

2017 ............................................................................................................................................. 0 20 20 

Note: Totals do not necessarily equal the sums of rounded components. 

3. Effects on Other Providers 

This proposed rule would not affect 

providers other than hospitals. 

4. Effects on the Medicaid Program 

This proposed rule will not affect 

expenditures under the Medicaid 

program. 

D. Effects of Other Policy Changes 

We are not proposing to make other 

changes in this proposed rule. 

1. Anticipated Effects on the Medicare 

Program—Part B Claims and Appeals 

Under this proposed rule, hospitals 

would be able to file Part B inpatient 

claims when payment cannot be made 

for an inpatient admission under Part A. 

As discussed in section II.G of this 

proposed rule, hospitals must submit 

the Part B inpatient claim to the 

appropriate contractor within the timely 

filing limits set forth in 42 CFR 424.44. 

Based on recent data related to claim 

denials, we anticipate some situations 

where the reasonable and necessary 

denial of the Part A inpatient admission 

is issued within 1 calendar year from 

the dates of service, and therefore 

hospitals would be able to file the Part 

B claim timely. Based on the level of 

billing under Part B as a result of recent 

ALJ and Medicare Appeals Council 

decisions, we estimate that 

approximately 25 percent of the Part A 

inpatient admissions denied by 

contractors would result in the 

submission of a Part B inpatient claim 

within the timely filing limits. 

In addition, we anticipate that 

hospitals would likely increase their 

efforts to proactively identify 

admissions that should be billed under 

Part B through self-audit, which would 

decrease the number of Part A inpatient 

claims submitted, while increasing the 

number of Part B inpatient claims 

submitted. Since we do not have data to 

estimate the number of Part A 

admissions that hospitals are likely to 

self-audit in order to determine if they 

should be billed under Part B, we are 

soliciting comments from hospitals 

regarding the frequency with which selfaudits are currently done and the 

anticipated frequency with which they 

would self-audit their inpatient 

admissions to submit Part B claims in a 

timely manner. 

For those cases in which hospitals 

would not be able to submit a timely 

Part B claim when the Part A inpatient 

claim is denied by a Medicare 

contractor on a post-payment basis, 

hospitals and beneficiaries may 

continue to file appeals of the Part A 

claim denial per 42 CFR part 405 

subpart I. We believe the Part B billing 

provisions proposed in this rule have 

the potential to lower Part A appeals 

volume due to the expanded 

opportunities for billing under Part B. 

Consequently, we are not anticipating 

any additional appeals as a result of this 

proposal. There would be some 

administrative costs incurred by MACs 

in verifying there is no pending Part A 

appeal prior to processing a Part B 

inpatient claim, but we believe that this 

would be similar to the existing 

administrative burden MACs incur with 

receiving and effectuating the appeal 

decisions that would have to be 

processed had the hospitals pursued 

their Part A appeal. 

2. Anticipated Effects on Hospitals 

The timely filing restrictions 

proposed on filing Part B claims will 

require hospitals to closely monitor the 

status of Part A claim denials so that 

they may submit Part B inpatient 

claims, when appropriate. While the 

timely filing limits would not always 

afford hospitals the opportunity to 

submit Part B claims, hospitals would 

still have the opportunity to appeal the 

Part A claim determination if they 

disagree with the contractor’s decision. 

Also, since a Part B claim can only be 

processed if there is no pending Part A 

appeal, hospitals would be required to 

request withdrawal of pending appeals 

if they wish to submit any Part B claims. 

Hospitals are parties to claim appeals, 

and will be able to track pending 

appeals, including beneficiary appeals. 

They receive copies of decision letters 

when appeals have been completed, and 

receive copies of notices of hearing 

when an appeal gets to the ALJ level. 

Hospitals may also access the status of 

a claim appeal at the reconsideration 

level and hearing level through 

www.q2a.com by using the Medicare 

appeal number for the claim. 

In addition, hospitals would have to 

refund amounts collected from the 

beneficiary (or third party insurer) for 

denied Part A claims if the hospital is 

determined to be liable under section 

1879 of the Act for the denied items and 

services furnished to a beneficiary. This 

is not a new burden, as hospitals are 

required to make that refund absent any 

of the proposals in this rule. Hospitals 

that choose to submit Part B inpatient 

claims under the proposed process may 

also need to collect from the beneficiary 

the applicable deductible and 

copayment related to covered Part B 

items and services, and the cost of items 

excluded from Part B coverage. We 

believe that the burden to bill a Part B 

claim and collect any Part B copayments 

and deductibles is likely similar to or 

less than the burden hospitals currently 

face when appealing the denial of the 

Part A inpatient admission. 

E. Alternatives Considered 

We proposed that all hospitals and 

CAHs would be eligible to bill 

additional Part B inpatient services 

when a Part A claim is denied because 

the admission was not reasonable and 

necessary but hospital outpatient 

services would have been reasonable 

and necessary. In section II.D. of this 

proposed rule, we proposed to require 

that hospitals currently not billing the 

OPPS for Part B inpatient services (those 


pmangrum on DSK3VPTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Proposed Rules 16645 

with no outpatient departments, or that 

have outpatient departments but submit 

no claims to Medicare Part B) would 

now bill the OPPS for these services. We 

considered allowing these hospitals to 

continue to bill Part B inpatient services 

for payment under their pre-OPPS 

payment methodology consistent with 

existing policy. We did not propose this 

policy because we believe their likely 

payments under the proposed Part B 

inpatient policy would outweigh their 

costs of implementing billing systems 

specific to the OPPS. 

F. Accounting Statement and Table 

Whenever a rule is considered a 

significant rule under Executive Order 

12866, we are required to develop an 

Accounting Statement. This statement 

must state that we have prepared an 

accounting statement showing the 

classification of the expenditures 

associated with the provisions of this 

proposed rule. We present this 

information in Table 3 as follows: 

TABLE 3—ACCOUNTING STATEMENT TABLE: CLASSIFICATION OF ESTIMATED MEDICARE AND BENEFICIARES’-OUT-OFPOCKET EXPENDITURES FOR HOSPITAL SERVICES * 

[In millions of 2013 dollars] 

Category Transfers 

Units discount rate Period covered 

Annualized Monetized Transfers .............................................................................................. 7% 3% 

¥$877 ¥$896 CYs 2013–2017 

From/To Federal Government to Hospitals 

Annualized Monetized Transfers .............................................................................................. 7% 3% 

¥$44 ¥$45 CYs 2013–2017 

From/To Beneficiaries to Hospitals 

* These amounts are based on the conversion to constant year dollars of the 12-month timely filing restriction policy figures in Tables 1 and 2 

of this proposed rule. 

G. Conclusion 

The analysis provided in this section 

of this proposed rule, together with the 

remainder of this preamble, provides a 

Regulatory Impact Analysis. In 

accordance with the provisions of 

Executive Order 12866, this rule was 

reviewed by the Office of Management 

and Budget. 

List of Subjects 

42 CFR Part 414 

Administrative practice and 

procedure, Health facilities, Health 

professions, Kidney diseases, Medicare, 

Reporting and recordkeeping 

requirements. 

42 CFR Part 419 

Hospitals, Medicare, Reporting and 

recordkeeping requirements. 

For the reasons set forth in the 

preamble, Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as forth below: 

PART 414—PAYMENT FOR PART B 

MEDICAL AND OTHER HEALTH 

SERVICES 

■ 1. The authority for part 414 

continues to read as follows: 

Authority: Secs. 1102, 1871, and 1881(b)(l) 

of the Social Security Act (42 U.S.C. 1302, 

1395hh, and 1395rr(b)(l)). 

■ 2. Subpart A is amended by adding 

§ 414.5 to read as follows: 

§ 414.5 Hospital inpatient services paid 

under Medicare Part B when a Part A 

hospital inpatient claim is denied because 

the inpatient admission was not reasonable 

and necessary, but hospital outpatient 

services would have been reasonable and 

necessary in treating the beneficiary. 

(a) If a Medicare Part A claim for 

inpatient hospital services is denied 

because the inpatient admission was not 

reasonable and necessary, or if a 

hospital determines under § 482.30(d) of 

this chapter § 485.641 of this chapter 

after a beneficiary is discharged that the 

beneficiary’s inpatient admission was 

not reasonable and necessary, the 

hospital may be paid for any of the 

following Part B services that would 

have been reasonable and necessary if 

the beneficiary had been treated as a 

hospital outpatient rather than admitted 

as an inpatient, provided the beneficiary 

is enrolled in Medicare Part B: 

(1) Services described in § 419.21(a) of 

this chapter that do not require an 

outpatient status. 

(2) Ambulance services, as described 

in section 1861(v)(1)(U) of the Act, or, 

if applicable, the fee schedule 

established under section 1834(l) of Act. 

(3) Except as provided in 

§ 419.2(b)(11) of this chapter, prosthetic 

devices, prosthetics, prosthetic supplies, 

and orthotic devices. 

(4) Except as provided in 

§ 419.2(b)(10) of this chapter, durable 

medical equipment supplied by the 

hospital for the patient to take home. 

(5) Clinical diagnostic laboratory 

services. 

(6)(i) Effective December 8, 2003, 

screening mammography services; and 

(ii) Effective January 1, 2005, 

diagnostic mammography services. 

(7) Effective January 1, 2011, annual 

wellness visit providing personalized 

prevention plan services as defined in 

§ 410.15 of this chapter. 

(b) The claims for the Part B services 

filed under the circumstances described 

in this section must be filed in 

accordance with the time limits for 

filing claims specified in § 424.44(a) of 

this chapter. 

PART 419—PROSPECTIVE PAYMENT 

SYSTEM FOR HOSPITAL OUTPATIENT 

DEPARTMENT SERVICES 

■ 3. The authority citation for part 419 

continues to read as follows: 

Authority: Secs. 1102, 1833(t), and 1871 

of the Social Security Act (42 U.S.C. 1302, 

1395l(t), and 1395hh). 

■ 4. Section 419.21 is amended by 

revising the section heading to read as 

follows: 

§ 419.21 Hospital services subject to the 

outpatient prospective payment system. 

* * * * * 

■ 5. Section 419.22 is amended as 

follows: 

■ A. Revising the section heading. 

■ B. In paragraph (h), by removing the 

phrase ‘‘Outpatient therapy’’ and adding 

in its place the term ‘‘Therapy’’. 


pmangrum on DSK3VPTVN1PROD with PROPOSALS
16646 Federal Register / Vol. 78, No. 52 / Monday, March 18, 2013 / Proposed Rules 

■ C. In paragraph (j), removing the 

cross-reference ‘‘§ 419.22(b)(11)’’ and 

adding in its place ‘‘§ 419.2(b)(11)’’. 

■ D. Adding paragraph (u). 

The revision and addition reads as 

follows: 

§ 419.22 Hospital services excluded from 

payment under the hospital outpatient 

prospective payment system. 

* * * * * 

(u) Outpatient diabetes selfmanagement training. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: March 1, 2013. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: March 7, 2013. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2013–06163 Filed 3–13–13; 4:15 pm] 

BILLING CODE 4120–01–P 


pmangrum on DSK3VPTVN1PROD with PROPOSALS