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Inpatient Hospital Billing Changes

April 22, 2010:

As of April 1, 2010, hospitals are required to submit to Medicare separate claims for noncovered and covered services provided during the same inpatient stay.

Hospitals must report ICD-9-CM codes to identify both diagnoses and procedures for services rendered in the hospital inpatient setting for Medicare severity-diagnosis related group (MS-DRG) assignment. All procedures and services rendered during an inpatient episode are bundled into one MS-DRG payment rate per inpatient admission.

There are certain charges and codes hospital departments use that Medicare considers noncovered services, meaning that Medicare has no payment allowance for these services. Noncovered inpatient hospital services include personal convenience items such as telephone or television, private duty nurses, and extra charges for a private room—unless any of these are medically necessary.

There has been confusion over how nonbillable services differ from noncovered services. Nonbillable charges are for services, items, and supplies that are available to every patient. Medicare views these as part of the cost of doing business as a hospital, and the charges should be included as part of the room or procedure charge. Charging for nonbillable services is prohibited, and in some cases, charging for nonbillable services may be considered fraudulent. Noncovered services on the other hand, are typically billable to the patient. Before providing services, providers are required to issue to the Medicare beneficiary notice of noncoverage for services that are not covered under the Medicare. For other services, when the provider has reason to believe the services will not be covered by Medicare (for example, they do not meet medical necessity criteria or are not reasonable and necessary under Medicare program standards), the provider must also issue an advanced notice of noncoverage to the beneficiary.

The Centers for Medicare and Medicaid Services (CMS) requires that all inpatient claims be processed through the Medicare Code Editor (MCE) before the claims can be considered for payment. These code edits are used to validate the ICD-9-CM codes on inpatient claims, identify coding inconsistencies, and detect incorrect billing data. When a noncovered procedure is provided during the same inpatient admission during which a covered procedure is also provided, the claims processing system cannot determine which procedures are noncovered and should be excluded when grouping to the MS-DRG.

For inpatient discharges on or after April 1, 2010, ICD-9 CM codes for noncovered procedures performed during an inpatient stay with covered procedures must be submitted on a separate claim form. For inpatient stays for which both covered and noncovered ICD-9 CM procedure codes are reported, a hospital must submit two claims?one with the covered services on a 11X Type of Bill (TOB) and another with the noncovered services on a Type of Bill 110 (i.e., no-pay claim).

Transmittal 1895 and detailed instructions in the Medicare Claims Processing Manual, (Pub. 100-04) can be found on the Medicare website at http://www.cms.hhs.gov/transmittals/downloads/R1895CP.pdf.

Sarah A. Serling, CPC, CPC-H, CPC-I, CCS-P, CCS
Clinical/Technical Editor

Key Terms: Inpatient procedures, ICD-9-CM Volume 3 procedure codes, Medicare Code Editor


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