8.3 Worked Case 2 — Hospital Inpatient + Commercial
Key Takeaways
- An inpatient hospital stay generates a facility claim on the UB-04 (837I) reimbursed under a Medicare Severity Diagnosis Related Group (MS-DRG), separate from the surgeon's professional claim.
- The operating surgeon's professional services are billed separately on a CMS-1500 (837P), independent of the hospital's UB-04.
- When a patient has active employer-sponsored commercial coverage and Medicare, coordination of benefits (COB) makes the commercial plan primary and Medicare secondary.
- The primary payer's electronic remittance advice (835 ERA) must be received and posted before the secondary Medicare claim is submitted.
- Group codes on the ERA — CO (contractual obligation), PR (patient responsibility), and OA (other adjustment) — tell the biller how each adjustment is classified.
Case Narrative (Fictional)
Patient: Diane Pruitt, age 67, still actively employed full time. She is enrolled in her employer-sponsored commercial group health plan and is also enrolled in Medicare Part A and Part B.
Encounter: Ms. Pruitt is admitted as a hospital inpatient at Cedar Ridge Hospital for a planned surgical procedure. Dr. Marcus Hale, an orthopedic surgeon, performs the surgery. She stays three nights and is discharged in stable condition.
Two distinct bills arise from this single admission:
- The hospital facility charges (room and board, operating room, supplies, nursing).
- The surgeon's professional service (the operative work itself).
Two Claims, Two Forms
A single inpatient admission almost always splits into separate facility and professional claims.
| Component | Billed by | Claim form | Reimbursement basis |
|---|---|---|---|
| Facility charges | Cedar Ridge Hospital | UB-04 (electronic 837I) | Medicare Severity Diagnosis Related Group (MS-DRG) |
| Professional services | Dr. Hale's practice | CMS-1500 (electronic 837P) | Physician fee schedule |
The hospital's UB-04 groups the admission into an MS-DRG — a single bundled payment for the inpatient stay based on the principal diagnosis, procedures, and severity. The surgeon's CMS-1500 is completely separate and is paid line by line under the fee schedule. A common exam trap is assuming the surgeon's fee is included in the hospital's DRG payment; it is not.
Coordination of Benefits (COB)
Ms. Pruitt has two coverages, so coordination of benefits (COB) rules decide order. Under Medicare Secondary Payer (MSP) rules, when a beneficiary is age 65 or older and covered by a group health plan through current, active employment (her own or a spouse's) at an employer of sufficient size, the commercial group plan is primary and Medicare is secondary.
Process for both the hospital and the surgeon:
- Submit to the commercial plan first as the primary payer.
- Wait for the primary payer's electronic remittance advice (835 ERA) and post it.
- Submit the secondary claim to Medicare, attaching the primary payer's payment and adjustment information so Medicare can calculate its secondary payment.
Submitting to Medicare first would cause a denial directing the biller to bill the primary plan.
Expected ERA Group Codes
When the commercial plan's 835 ERA arrives, each adjustment line carries a group code that classifies the dollars:
| Group code | Meaning | Typical use on this claim |
|---|---|---|
| CO | Contractual Obligation | The negotiated write-off between billed charge and allowed amount; not billable to the patient. |
| PR | Patient Responsibility | Deductible, coinsurance, or copay Ms. Pruitt owes; this is what flows to Medicare as secondary. |
| OA | Other Adjustment | Adjustments that are neither a contractual write-off nor patient responsibility. |
When building the Medicare secondary claim, the biller reports the primary plan's allowed amount, paid amount, and the PR balance so Medicare can determine how much, if anything, it pays toward the patient-responsibility portion.
In Case 2, which claim form does Cedar Ridge Hospital use for the inpatient facility charges?
How is Dr. Hale's surgical professional service billed relative to the hospital's claim?
Ms. Pruitt is 67, actively employed, and covered by both her employer's group health plan and Medicare. Which payer is primary?
Place the billing steps for Ms. Pruitt's claim in the correct sequence.
Arrange the items in the correct order
On the commercial plan's 835 ERA, which group code identifies the contractual write-off that cannot be billed to the patient?
When the biller builds Ms. Pruitt's secondary Medicare claim, which ERA group-code amount is most relevant to report from the primary remittance?