In its recently proposed Calendar Year 2012 Physician Fee Schedule (PFS) Update [PDF], 76 Fed. Reg. 42772, 42914-42917 (July 19, 2011), the Agency proposes to expand the three-day payment window policy to include physician practices that are wholly-owned or wholly-operated by hospitals. More specifically, CMS proposes to reduce Medicare payment to physicians under the PFS where, within three days of receiving the physician service, the patient is admitted to a hospital that wholly owns or wholly operates the physician practice. The proposed rule, if implemented, will be effective for services furnished on or after January 1, 2012.

Under the proposed rule, CMS would establish a new Medicare HCPCS modifier to signal to the claims processing system that payment should be made as if the service had been provided in the hospital and not in the physician’s office. Although the site of service on the claim will be a physician’s office, the payment amount will be the same as the amount that would have been paid if the site of service had been the hospital. For CPT/HCPCS codes with a technical component (TC)/professional component (PC) split and that fall within the three-day window, CMS would pay only the professional component for those codes. For codes without a TC/PC split CMS would pay only the facility rate for the codes. Special rules would apply to surgical services included within global surgical package payment rules to capture certain pre-admission diagnostic and non-diagnostic services.