CMS Pub. 100-02, ch. 1, § 10

Patients covered under hospital insurance are entitled to have payment made on their

behalf for inpatient hospital services. (Inpatient hospital services do not include extended

care services provided by hospitals pursuant to swing bed approvals. See Pub. 100-02,

Chapter 8, §10.3, "Hospital Providers of Extended Care Services."). However, both

inpatient hospital and inpatient SNF benefits are provided under Part A - Hospital

Insurance Benefits for the Aged and Disabled, of Title XVIII).

Additional information concerning the following topics can be found in the following

chapters of this manual:

• Benefit Period is found in Chapter 3

• Counting Inpatient Days is found in Chapter 3

• Lifetime reserve days is found in Chapter 5

• Related payment information is housed in the Provider Reimbursement Manual

Blood must be furnished on a day which counts as a day of inpatient hospital services to

be covered as a Part A service and to count toward the blood deductible. Thus, blood is

not covered under Part A and does not count toward the Part A blood deductible when

furnished to an inpatient after the inpatient has exhausted all benefit days in a benefit

period, or where the individual has elected not to use lifetime reserve days. However,

where the patient is discharged on their first day of entitlement or on the hospital's first

day of participation, the hospital is permitted to submit a billing form with no

accommodation charge, but with ancillary charges including blood.

The records for all Medicare hospital inpatient discharges are maintained in CMS for

statistical analysis and use in determining future Prospective Payment System (PPS)

Diagnosis Related Group (DRG) classifications and rates.

Non-PPS hospitals do not pay for noncovered services generally excluded from coverage

in the Medicare Program. This may result in denial of a part of the billed charges or in

denial of the entire admission, depending upon circumstance. In PPS hospitals, the

following are also possible:

1. In appropriately admitted cases where a noncovered procedure was performed,

denied services may result in payment of a different DRG (i.e., one which

excludes payment for the noncovered procedure); or

2. In appropriately admitted cases that become cost outlier cases, denied services

may lead to denial of some or all of an outlier payment.

The following examples illustrate this principle. If care is noncovered because a patient

does not need to be hospitalized, the A/B MAC Part A denies the admission and makes

no Part A (i.e., PPS) payment unless paid under limitation on liability. Under limitation

on liability, Medicare payment may be made when the provider and the beneficiary were

not aware the services were not necessary and could not reasonably be expected to know

that the services were not necessary. For detailed instructions, see Pub. 100-04, Medicare

Claims Processing Manual, Chapter 30,"Limitation on Liability" section 20. If a patient

is appropriately hospitalized but receives (beyond routine services) only noncovered care,

the admission is denied.

NOTE: The A/B MAC Part A does not deny an admission that includes covered care,

even if noncovered care was also rendered. Under PPS, Medicare assumes that it is

paying for only the covered care rendered whenever covered services needed to treat

and/or diagnose the illness were in fact provided.

If a noncovered procedure is provided along with covered nonroutine care, a DRG

change rather than an admission denial might occur. If noncovered procedures are

elevating costs into the cost outlier category, outlier payment is denied in whole or in

part.

When the hospital is included in PPS, most of the subsequent discussion regarding

coverage of inpatient hospital services is relevant only in the context of determining the

appropriateness of admissions, which DRG, if any, to pay, and the appropriateness of

payment for any outlier cases.

If a patient receives items or services in excess of, or more expensive than, those for

which payment can be made, payment is made only for the covered items or services or

for only the appropriate prospective payment amount. This provision applies not only to

inpatient services, but also to all hospital services under Parts A and B of the program. If

the items or services were requested by the patient, the hospital may charge him or her

the difference between the amount customarily charged for the services requested and the

amount customarily charged for covered services.

An inpatient is a person who has been admitted to a hospital for bed occupancy for

purposes of receiving inpatient hospital services (see §10.2 below). Generally, a patient

is considered an inpatient if formally admitted as inpatient with the expectation that he or

she will require hospital care that is expected to span at least two midnights and occupy a

bed even though it later develops that the patient can be discharged or transferred to

another hospital and not actually use a hospital bed overnight.

The physician or other practitioner responsible for a patient's care at the hospital is also

responsible for deciding whether the patient should be admitted as an inpatient.

Physicians should use the expectation of the patient to require hospital care that spans at

least two midnights period as a benchmark, i.e., they should order admission for patients

who are expected to require a hospital stay that crosses two midnights and the medical

record supports that reasonable expectation. However, the decision to admit a patient is a

complex medical judgment which can be made only after the physician has considered a

number of factors, including the patient's medical history and current medical needs, the

types of facilities available to inpatients and to outpatients, the hospital's by-laws and

admissions policies, and the relative appropriateness of treatment in each setting. Factors

to be considered when making the decision to admit include such things as:

• The severity of the signs and symptoms exhibited by the patient;

• The medical predictability of something adverse happening to the patient;

• The need for diagnostic studies that appropriately are outpatient services (i.e.,

their performance does not ordinarily require the patient to remain at the hospital

for 24 hours or more) to assist in assessing whether the patient should be

admitted; and

• The availability of diagnostic procedures at the time when and at the location

where the patient presents.

Admissions of particular patients are not covered or noncovered solely on the basis of the

length of time the patient actually spends in the hospital. In certain specific situations

coverage of services on an inpatient or outpatient basis is determined by the following

rules:

Minor Surgery or Other Treatment - When patients with known diagnoses enter a

hospital for a specific minor surgical procedure or other treatment that is expected to keep

them in the hospital for only a few hours (less than 24), they are considered outpatients

for coverage purposes regardless of: the hour they came to the hospital, whether they

used a bed, and whether they remained in the hospital past midnight.

Renal Dialysis - Renal dialysis treatments are usually covered only as outpatient services

but may under certain circumstances be covered as inpatient services depending on the

patient's condition. Patients staying at home, who are ambulatory, whose conditions are

stable and who come to the hospital for routine chronic dialysis treatments, and not for a

diagnostic workup or a change in therapy, are considered outpatients. On the other hand,

patients undergoing short-term dialysis until their kidneys recover from an acute illness

(acute dialysis), or persons with borderline renal failure who develop acute renal failure

every time they have an illness and require dialysis (episodic dialysis) are usually

inpatients. A patient may begin dialysis as an inpatient and then progress to an outpatient

status.

Under original Medicare, the Quality Improvement Organization (QIO), for each hospital

is responsible for deciding, during review of inpatient admissions on a case-by-case basis,

whether the admission was medically necessary. Medicare law authorizes the QIO to

make these judgments, and the judgments are binding for purposes of Medicare coverage.

In making these judgments, however, QIOs consider only the medical evidence which

was available to the physician at the time an admission decision had to be made. They do

not take into account other information (e.g., test results) which became available only

after admission, except in cases where considering the post-admission information would

support a finding that an admission was medically necessary.

Refer to chapters 4 and 7 of Pub. 100-10, Quality Improvement Organization Manual

with regard to initial determinations for these services. The QIO will review the swing

bed services in these PPS hospitals as well.

NOTE: When patients requiring extended care services are admitted to beds in a

hospital, they are considered inpatients of the hospital. In such cases, the services

furnished in the hospital will not be considered extended care services, and payment may

not be made under the program for such services unless the services are extended care

services furnished pursuant to a swing bed agreement granted to the hospital by the

Secretary of Health and Human Services.