If you’ve ever received a readmission denial and wondered, “How can the payer deny this when the patient clearly needed to be readmitted?” You’re not alone.
Readmission denials are one of the most misunderstood areas of hospital billing and reimbursement. Between the Medicare 72-Hour Rule, same-day billing requirements, and 30-day readmission reviews, it can be difficult to determine whether a payer’s denial is supported by the rules.
In this Q&A, we sit down with Rikki Ashkin, Senior Client Success Director, and Cheryl Otworth, Manager, Clinical Operations, to discuss some of the most common questions hospitals ask when dealing with readmission denials and appeal strategies to overcome these denials.
Q: When do readmission denials occur?
Rikki Ashkin: So, generally speaking, a readmission denial occurs when a patient is discharged from the hospital and then readmitted within a specified timeframe. In these cases, the hospital submits a second claim for the new admission, but the payer may deny that claim by determining the readmission was avoidable or clinically related to the initial hospitalization. The payer may consider the second admission part of the original episode of care and deny or reduce reimbursement based on its readmission policy.
However, depending on the timing of the patient’s return and the circumstances surrounding the subsequent encounter, the denial may take several forms, including a preadmission services denial, a same-day outpatient-to-inpatient denial, or a same-day inpatient readmission denial, among others.
Q: What is the impact of readmission denials?
Cheryl Otworth: Readmission denials hit hospital revenue directly—that’s lost reimbursement—but they also affect quality metrics, like CMS’s Hospital Readmissions Reduction Program, and they pile onto operations too, with more audits, more appeals, more documentation work.
Here’s a helpful way to think about it: avoidable readmission denials usually point to a breakdown in systems or processes. Unavoidable admissions come down to disease instability—the patient just wasn’t stable long-term, no matter what the hospital did. If you can show the first admission ended with the patient stable, and the second one required real escalation of care, that’s one of your strongest tools for overturning a denial.
Q: The Medicare 72-Hour Rule. What does it actually mean?
Rikki Ashkin: The 72-Hour Rule kicks in when a patient gets outpatient services shortly before being admitted as an inpatient. Basically, payers don’t want hospitals billing separately for something that’s really just part of the inpatient admission.
So, if outpatient services happen within three calendar days before admission, the payer may require those to be bundled into the inpatient claim. But—and this is the part people miss—not every outpatient service gets bundled the same way.
Q: Are outpatient diagnostic services always bundled?
Cheryl Otworth: Yes, always. If it’s a diagnostic service and it happens within that preadmission window, it’s getting bundled into the inpatient stay. No exceptions there.
We’re talking about things like:
- CT scans
- MRIs
- Lab testing
- Other diagnostic work used to evaluate the patient’s condition
Payers see these as part of the workup that led to the admission in the first place, so they won’t pay for them separately. The charges still get reported—they just show up on the inpatient claim instead.
Tip: If you receive a denial for a diagnostic service performed during the preadmission window, first verify whether the service should have been bundled into the inpatient claim before pursuing an appeal.
Q: What about non-diagnostic services?
Rikki Ashkin: Good question, because this is where it gets more interesting. Non-diagnostic outpatient services can actually be billed separately—as long as they’re unrelated to whatever the patient ended up being admitted for.
Here’s an example: say a patient gets outpatient wound care two days before being admitted for an unrelated cardiac issue. Since those two things are clinically distinct, the hospital can bill for the wound care separately. To do that, you’d report Condition Code 51, which basically flags for the payer that the outpatient service wasn’t related to the admission.
Q: What happens when outpatient services occur on the same day as the admission?
Cheryl Otworth: This is probably where we see the most confusion. Same-day outpatient services get treated much more strictly.
If it’s a non-diagnostic outpatient service and it happens on the actual date of admission, it’s considered related to the inpatient stay, period—it has to be billed with the inpatient claim. That’s different from services in the one-to-three-day window before admission, where you at least have room to argue they were unrelated. On the day of admission itself, that argument mostly disappears.
Tip: Building on the wound care example, if the patient receives wound care in the hospital’s outpatient department in the morning and is later admitted the same day because the wound is found to be severely infected, the outpatient service is considered related to the reason for hospitalization and must be bundled into the inpatient claim.
Q: Back to inpatient admissions, what are reviewers actually looking for?
Rikki Ashkin: When it comes to multiple inpatient admissions within a select time period, what reviewers really want to know is whether the hospital did something that contributed to the patient coming back.
They’re usually asking things like:
- Was the patient discharged too soon?
- Did something important go untreated?
- Was the discharge planning solid, or did it fall short?
- Was there any attempt to split care across multiple admissions to boost reimbursement?
If the answer to all of that is ‘no,’ the payer’s going to have a hard time making a denial stick.
Here’s an example: A patient is admitted for pneumonia, responds well to treatment, and is discharged with appropriate medications, follow-up appointments, and clear discharge instructions. Five days later, the patient returns after developing an unrelated urinary tract infection that requires hospitalization. Although the second admission occurred within the payer’s review window, the hospital can demonstrate that the initial admission was appropriately managed, the patient was not discharged prematurely, and the second admission was unrelated to deficiencies in care or discharge planning. In this scenario, the payer may have difficulty supporting a readmission denial.
Q: What does Medicare consider a valid readmission denial?
Cheryl Otworth: Medicare really comes down to three things: was the second admission medically unnecessary, was the patient discharged too early the first time, or did the hospital try to get around PPS reimbursement rules.
So, depending on which one the payer is arguing, your appeal needs to match. If they’re saying it wasn’t medically necessary, you need to clearly show that it was. If they’re claiming premature discharge, you need to show the patient really was ready to go home—and that discharge planning and follow-up instructions were done right. And if they’re alleging PPS circumvention—meaning they think the hospital manipulated admissions or billing to squeeze out more reimbursement—your appeal needs to directly address why that’s not what happened.
Q: Do Medicare Advantage plans follow the same rules?
Rikki Ashkin: A lot of Medicare Advantage organizations run their own readmission review policies. But here’s an important guardrail: they can’t offer less coverage than traditional Medicare does. So, if Medicare would cover it, a Medicare Advantage plan generally can’t lean on a stricter internal standard just to deny the claim.
Q: What about commercial payers?
Cheryl Otworth: Commercial payers usually have their own policies, but a lot of them end up looking pretty similar to Medicare’s 30-day readmission review process. That said, the details really do vary from payer to payer, so it’s always worth digging into the specific policy language before you assume anything.
Q: What are some of the strongest appeal arguments?
Rikki Ashkin: Every case is a little different, but here are the ones we see work most often:
- The admissions were unrelated. The second hospitalization was for a completely different medical issue.
- The readmission was planned. Some admissions are simply an expected part of treatment—they shouldn’t be labeled avoidable.
- The readmission was unavoidable. Sometimes patients come back even after appropriate treatment, solid discharge planning, and good follow-up care. That happens.
- The patient left against medical advice. If a patient leaves AMA, there’s often a strong case that the hospital isn’t responsible for the readmission that followed.
- The patient refused treatment. You can’t force a patient to accept recommended care—and hospitals shouldn’t be penalized when a readmission follows a patient’s own decision to decline it.
So don’t stop at asking whether the two admissions were related—that’s rarely the real issue. Ask whether the payer can actually prove the hospital caused or contributed to the patient coming back. More often than not, that’s where these denials fall apart.
A readmission denial isn’t the end of the conversation—it’s the start of an appeal. With the right expertise and strategy behind you, many of these denials are winnable. Reach out today to learn how Aspirion can help your organization recover its earned revenue.
