I. INTRODUCTION -

On March 13, 2013, the Centers for Medicare & Medicaid Services (CMS) put on display on the Federal Register’s website CMS Ruling 1455-R (the Ruling) and CMS Proposed Rule 1455-P (the Proposed Rule). Both the Ruling and Proposed Rule announce significant policy changes that will allow hospitals to rebill Medicare for Part B covered services in certain instances following the denial of a Part A inpatient admission for lack of medical necessity. This Ruling and Proposed Rule will be of great interest to hospitals dealing with Recovery Audit Contractor (RAC) denials of inpatient stays, and particularly “short stay” admission denials...

CMS has historically taken the position that when a Part A claim for an inpatient admission is denied, a hospital can not be paid under Part B for therapeutic or observation services, even if those services were medically necessary and would have been paid if billed initially as outpatient services. CMS, however, has partially reversed this policy in its Ruling and Proposed Rule.