This post was also written by Rachel M. Golick. On March 13, 2013, the Centers for Medicare & Medicaid Services (CMS) concurrently issued a proposed rule and Administrator’s Ruling addressing the submission of Medicare Part B inpatient claims where a Medicare Part A claim for a hospital inpatient admission is denied by a Medicare review contractor on the grounds that the inpatient admission was not reasonable and necessary. The proposed rule also would apply to situations where a hospital determined, through a self-audit, that an inpatient admission was not reasonable and necessary. The Administrator’s Ruling, which is effective as of the issuance date, establishes an interim policy until CMS finalizes the proposed rule. The Administrator’s Ruling (CMS Ruling Number CMS-1455-R) stems from an influx of Administrative Law Judge (ALJ) and Medicare Appeals Council (MAC) decisions upholding Medicare review contractors’ decisions denying inpatient admissions as not reasonable and necessary, but ordering payment of all services at issue as though they were rendered at an outpatient level of care. The Administrative Ruling notes that such ALJ and MAC decisions defy current Medicare regulations limiting such payment to a small set of outpatient services. The Administrator’s Ruling acquiesces, at least on a temporary basis, to the approach taken by the ALJs and the MAC, allowing hospitals to submit Part B inpatient claims for payment for nearly all reasonable and necessary services that would have been payable to the hospital had the beneficiary originally been treated as an outpatient, subject to certain limitations set forth in the Administrator’s Ruling. The proposed rule would establish a permanent policy that would permit hospitals to submit Medicare Part B claims as if the hospital treated the Medicare beneficiary as an outpatient rather than admitted the beneficiary as an inpatient. Current Medicare policy allows hospitals to rebill Medicare Part B only a limited set of “ancillary services,” listed in Chapter 6, Section 10 of the Medicare Benefit Policy Manual, when Part A coverage is denied for certain reasons. As a consequence, the proposed rule would expand the services that hospitals could rebill to Part B when Part A coverage is denied. Notably, however, the proposed rule would exclude from rebilling services that specifically require an outpatient status, including emergency department visits and observation services. In addition, unlike the Administrator’s Ruling, which permits Part B inpatient and/or outpatient claims to be filed more than one year after the date of service (assuming timely filing of the original Part A inpatient claim), the proposed rule would impose a one-year timely filing deadline. In other words, a hospital would have to bill Part B claims within one calendar year of the date of service. This timely filing limitation would likely significantly reduce the number of denied Part A claims that a hospital could rebill to Medicare Part B. The proposed rule would apply to all hospitals billing Part A services, including short-term acute care hospitals, hospitals paid under the outpatient prospective payment system, long-term acute care hospitals inpatient psychiatric facilities, inpatient rehabilitation facilities, critical access hospitals, children’s hospitals, cancer hospitals, and Maryland waiver hospitals. CMS is accepting comments on the proposed rule until May 17, 2013. We are preparing a Client Alert providing a more detailed analysis of the proposed rule and Administrator’s Ruling. In the meantime, please contact Daniel A. Cody (415-659-5909), Rachel M. Golick (415-659-4802), Susan A. Edwards (202-414-9261) or any other member of the Reed Smith Health Care Group with whom you work, if you would like additional information or if you have any questions.