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CMS Proposes to Extend the 3-Day DRG Window to Hospital-Owned and Hospital-Operated Physician Practices

August 4, 2011

Authors: Joan W. Feldman, Vincenzo Carannante, William J. Roberts

In CMS’ proposed 2012 Medicare physician fee update, CMS suggests applying the DRG payment window policy to hospital-owned or hospital-operated  physician practices (but not those that are provider-based).  Under the proposed rule, all outpatient diagnostic services as well as emergency room, outpatient surgery and observation services related to a subsequent admission, and provided by the hospital 3 days prior to admission, will be subject to the DRG payment window policy.  For example, if any of the above listed services were provided 3 days prior to an inpatient admission to a hospital and have a professional and technical component, CMS proposed that it only pay the professional component for the service.  If there is not a professional/technical split, then CMS will only pay the facility rate for the pre-admission service.  In other words, CMS will treat the service like a hospital outpatient service paying physicians lower fees, taking into account that the hospital is paying the physician overhead expense. (Note that the window is 1 day for inpatient rehabilitation, psychiatric, long-term care and children’s hospitals.) As hospitals consider various models for hospital and physician collaborations, they should keep their eye on reimbursement issues like this one.

If you have any questions about this proposal or its impact, please contact any of the members of Shipman & Goodwin's Health Law Practice Group.

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