Overview
This manual sets detailed guidelines for Medicare inpatient hospital billing, including claim submission formats, benefit determinations, payment methodologies, exceptions, and the functional requirements for different provider and facility types under various Medicare payment systems.
General Inpatient Requirements
- Hospitals must only bill for services actually provided and confirm service delivery before billing.
- All necessary support information must be submitted or the claim will be denied.
- State agencies identify deficiencies if hospitals fail to transfer appropriate medical info during patient transfers.
Claim Formats
- Institutional claims use ASC X12 837 or Form CMS-1450 for hospitals, except physician services.
- Professional services are billed using ASC X12 837 professional format or Form CMS-1500.
- Beneficiaries submitting their own claims use Form CMS-1490S.
Spell of Illness
- Determined by A/B MAC according to specific Medicare and Medicaid criteria.
- Presumptions guide whether SNF care meets skilled level, affecting spell continuity and benefit period.
- Only some presumptions are rebuttable by the beneficiary.
Payment for Nonphysician Services
- Hospitals must bill for all nonphysician inpatient services, bundled into Part A unless specified.
- Exceptions exist for vaccines, ambulance services under transfer, and certain anesthetist services.
Hospital Inpatient Bundling
- Ambulance services for inpatients are bundled; claims from independent suppliers during inpatient stays are denied.
- Some exceptions apply for transfers from other care facilities.
Payment Under Prospective Payment System (PPS)
- Hospitals are paid a predetermined rate per discharge based on DRGs.
- Outliers receive additional payments if costs exceed a set threshold.
- Payment adjustments include DSH and IME.
- Special handling exists for certain hospitals (e.g., excluded units, teaching, rural, or high capital cost).
Cost-to-Charge Ratios (CCR) and Outlier Calculations
- CCRs from the most recent cost report are used to estimate hospital costs for outlier determination.
- Statewide or national averages may be used for new or anomalous providers.
- Outlier reconciliation is triggered if CCR changes significantly and outlier payments exceed thresholds.
PPS Computer Programs
- MCE software edits claims for coding, coverage, and clinical consistency before DRG assignment.
- Groupon and Pricer software assign DRGs and calculate payments.
Add-On Payments for New Technologies
- Special additional payments may be available for cases involving approved new technologies under specified criteria.
DSH and Additional Payment Adjustments
- DSH payments are provided based on percentages of patient days for dual eligible Medicare/SSI and Medicaid patients.
- Detailed formulas dictate thresholds and adjustment factors for different hospital types and fiscal periods.
Critical Access Hospitals (CAHs) and Rural Programs
- CAHs are reimbursed at reasonable cost rates, with specific requirements on bed totals, lengths of stay, and geographic criteria.
Billing Special Situations
- Distinct billing instructions apply for abortion services, terminations, swing-bed services, all-inclusive rate providers, and hospitals that do not charge.
Organ and Stem Cell Transplant Payments
- Covered transplants (kidney, liver, heart, pancreas, intestinal) must be billed per strict acquisition and procedural requirements.
- Allogeneic stem cell acquisition costs are handled on a reasonable cost basis from Oct 2020 for inpatient cases; autologous transplants remain under prospective payment.
Inpatient Rehabilitation Facility (IRF), Psychiatric Facility (IPF), and Long-Term Care Hospital (LTCH) PPS
- Each provider type has distinct payment systems, case-mix groupings, and facility/patient-level payment adjustments.
- Routine, ancillary, and capital costs are included in per-discharge rates; payment rates are updated annually.
- Quality reporting and cost-to-charge ratio rules apply, with reconciliation processes for outlier payments.
Action Items
- 04-11-25 – Contractors: Update MCE and related billing software as instructed for new rules.
- TBD – Hospitals: Ensure documentation practices comply with updated spell of illness, DSH, and outlier policies.
- TBD – Providers/MACs: Utilize correct claim formats and adhere to new outlier payment reconciliation requirements.
- TBD – All facilities: Periodically review CMS updates and participate in cost report and quality data submissions as required.
Recommendations / Advice
- Verify all claims for completeness and documentation before submission to avoid denials.
- Maintain updated knowledge of CMS rules for special patient populations and new technologies.
- Monitor CCR changes and request updates or corrections if significant operational changes occur.