Important Reminder: CMS 3 Day Payment Window

The impact on wholly owned or wholly operated physician practices

This is an IMPORTANT REMINDER that the CMS 3 day payment window rule and its effect on wholly owned or operated practices that are NOT provider based goes into effect on July 1, 2012. The 3 day window refers to the technical portion of diagnostic services and admission related nondiagnostic services provided during the 3 days preceding a beneficiary’s admission as an inpatient.  Hospitals, including wholly owned or operated entities of the hospital, must include those services as part of the inpatient stay. The final rule clarified the new law enacted on June 25, 2010, the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PACMBPRA), also known as Public Law 111-192, part of which provides further instruction on the 3 day window change.

PACMBPRA, section 102(a)(1), clearly states that for outpatient services on or after June 25, 2010, all nondiagnostic services, other than ambulance and maintenance dialysis, provided by a hospital or one of its wholly owned or operated entities, furnished during the three days immediately preceding the date of admission are deemed related to the admission and must be billed with the inpatient stay, unless the hospital attests that certain nondiagnostic services are unrelated to the hospital claim.  In those cases, the hospital may separately bill for those services.  This rule also eliminates the additional requirement for an exact match of ICD-9 CM diagnosis codes for the outpatient services and the inpatient admission.  The final rule on November 28, 2011,took this a step further and stated that for services on/after January 1, 2012, when a physician furnishes services to a beneficiary in a hospital’s wholly owned or operated physician practice and the beneficiary is subsequently admitted within 3 days, the window will apply to all technical components of diagnostic services and any nondiagnostic services that are clinically related to the reason for the admission regardless of whether the reported ICD-9 CM diagnosis codes are the same.

CMS implemented a new modifier, -PD, to accomplish this. They will pay only the professional component (PC) for codes with a technical (TC)/PC split that are provided in the three day window in a wholly owned or operated physician practice.  The modifier was effective for claims with dates of service on or after January 1, 2012 and payment is at the facility rate for related nondiagnostic services and only for the professional component for diagnostic services.

Billing example


Three days prior to an inpatient admission for a cardiac condition, the patient is treated by their primary care physician for the same condition and receives an E/M service (99214),  a chest x-ray (71010) and an EKG (93000).

CMS 1500

  • Professional component of an E/M, 99214 is billed with the modifier –PD
  • Professional component of the x-ray, 71010 is billed with modifiers -26 and –PD
  • EKG, 93010, is billed with modifier -PD

Note:  When applicable, the Medicare professional fee will be paid at the facility rate

UB-04 (8371), Bill Type 11x

  • Added to other inpatient charges generated from the inpatient admission
    • Revenue code 0949 (other therapeutic service)
      • The wholly owned or operated by entity’s charge associated with the practice expense for the 99214 service
    • Revenue code 032 (radiology)
      • The wholly owned or operated by entity’s charge associated with the technical component of the radiology 99214 service
    • Revenue code 0483 (electrocardiology)
      • The wholly owned or operated by entity’s charge associated with the technical component of the 93010 EKG service

This rule has some onerous overtones for hospitals and their wholly owned or operated physician practices.


  • Each wholly owned or operated physician practice will need to manage its billing processes:
    • Reduction in reimbursement for wholly owned/operated practices
    • Ensure appropriate billing when there is a related inpatient admission
    • Hospitals responsible for notifying the practices of related IP admissions for a patient receiving services in a wholly owned/operated practice within the three day window
    • Requires physician practices to identify the services that are part of the IP admission and include the modifier –PD on services required to be bundled
      • Determine clinically related services
      • Case by case justification of services deemed not clinically related
    • Expect a slowdown in the dropping of bills by at least 72 hours for compliance
    • There becomes a real danger of overpayment without proper application of the modifier


This is generally a moot point for wholly owned or operated physician practices that are billing under provider-based rules, since there is already financial integration of their practices within the hospital.  For those hospitals with wholly owned or wholly operated practices that are not considered provider based, it will also be important to:

  • Analyze the financial implications on both the hospital and the wholly owned or operated physician practices
  • Determine whether the practices should become provider-based
  • Implement a methodology to notify the practices of related IP admissions
  • Determine the cost report implications related to identifying the cost of the service now to be billed by the hospital
  • Identify required process changes in the revenue cycle

Again, this rule goes into effect July 1, 2012. Please contact BNN with questions or for further clarification at 1.800.244.7444.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, investment, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.

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