The Medicare DRG window payment policy requires that under certain conditions outpatient services furnished to a beneficiary before his/her inpatient hospital admission are not paid separately but rather are bundled into the inpatient diagnosis-related group (“DRG”) payment.

Under the DRG window preadmission services otherwise payable under Medicare Part B furnished to a beneficiary on the date of his/her inpatient admission to the hospital and during the three calendar days immediately preceding the beneficiary’s admission are not separately paid as outpatient services but rather are bundled into the inpatient DRG payment under the following conditions:

  1. The services are furnished by the hospital or by an entity wholly owned or operated by the hospital
  2. The services are diagnostic in nature (including clinical diagnostic laboratory tests)
  3. The services are nondiagnostic (therapeutic) services (excluding ambulance services and maintenance renal dialysis services) that are furnished on the date of the beneficiary’s inpatient admission, or are provided during the first, second or third calendar day immediately preceding the date of the beneficiary’s inpatient admission and the hospital does not attest that such services are unrelated to the beneficiary’s inpatient admission.

The Department of Health and Human Services’ Office of Inspector General (“OIG”) studied the DRG window payment policy and reported its findings in a report entitled “Medicare and Beneficiaries Could Realize Substantial Savings If the DRG Window Were Expanded,” OEI-05-12-00480 (February 2014).  The OIG determined that if the DRG window were expanded, both the Medicare program and beneficiaries would realize significant savings.

The OIG examined the effect of the following possible changes to the DRG window:

  1. expanding the three calendar days to 11 calendar days immediately preceding a beneficiary’s inpatient admission
  2. applying the DRG window to additional hospital ownership structures, for example, applying the payment rule to outpatient services provided at hospitals affiliated with, but not owned by, admitting hospitals. The OIG recommended that CMS seek legislative authority to expand the DRG window to include additional days prior to the inpatient admission and expand the payment rule to include other hospital ownership arrangements, such as affiliated hospital groups. CMS did not concur with either recommendation.

Read the OIG report.

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