ED Coding and Reimbursement Alert

The expected length of the hospital stay will suggest the proper site of service designation.

If you though you knew when a service was observation instead of an inpatient admission, you might need to think again. The proposal and planned implementation of the so-called two midnight rule to determine whether a hospital stay is considered to be inpatient or outpatient status could have a big impact on ED facility services.

The rule is a reaction from the OIG to concerns about short stay or observation visits being reported when the patient is actually in the hospital for an extended time. For some patients, the resulting bills can be significantly larger if outpatient status is reported because the Medicare coverage for Part B is typically 80/20 coverage. Whereas, if the patient is made a formal inpatient, they would pay a single deductible under Medicare Part A, says Michael Granovsky, MD, FACEP, CPC, President of LogixHealth, an ED coding and billing company in Bedford, MA.

The RAC Is Watching, But Not Acting For Now

In the 2014 Medicare inpatient final rule, the benchmark of a hospital stay in which the admitting physician expects the beneficiary to require care that crosses over two midnights, would suggest Part A payment is generally appropriate for that stay. Conversely, for stays that are not expected to transcend two midnights, Part A payment is generally not appropriate. Based on this benchmark, Medicare RAC contractors would adopt a presumption that a medically necessary inpatient stay covering at least two midnights is appropriate and should be paid accordingly without being subject to medical review.

You have a little more time to come up to full speed on this issue. In response to concern about the “Two Midnight” rule, CMS declared a grace period from audits, while hospitals learn and adjust to the new regulations. As a part of the enforcement delay, CMS originally announced that RACs could not look at the medical necessity of any short (one day or less) inpatient stays for a period of 90 days, the entirety of the fourth quarter 2013. In October 2013, CMS extended this grace period through March 2014.

There Is An Exception Clause

CMS has clarified that it recognizes that there are claims that may fall outside of the presumption, because part of the hospitalization was spent as an outpatient, such as when the inpatient order was written after the first night was spent in observation status. Medicare review contractors will review these claims under the same guidance CMS has given to providers; that the outpatient time may be taken into consideration when admitting a patient based on the reasonable expectation that they will require a stay lasting at least two midnights. A combination outpatient/inpatient stay will look like a one day inpatient stay and will be reviewed by the RAC. However, upon review the outpatient time may be considered.

The bottom line: The final rule clarifies that the benchmark used in determining the expectation of a stay of at least two midnights begins when the beneficiary starts receiving services in the hospital. This would include outpatient care received while the beneficiary is in observation or is receiving services in the emergency department, operating room, or other treatment area, Granovsky explains.

Follow These Tips To Stay Out Of Trouble

The 2 midnight rule will likely lead to an increase in the number of inpatient stays and a net decrease in long observation stays, particularly those that spanned three days. And the two midnight rule will likely increase the efficiency of patient turn over for observation stays, since there will be pressure to wrap up the observation treatment before the expiration of the second midnight.

The rapid assessment and treatment culture of the ED setting with streamlined and protocol driven units provide increased value to a facility in the setting of the 2 midnight rule and resultant efficiency pressures, says Granovsky.

No Change to Skilled Nursing Facili ty (SNF) Requirements

Current CMS regulations require an inpatient stay of 3 midnights to qualify for Medicare part A coverage for a SNF.

Being admitted as an inpatient triggers the part A deductible (2014 $1,216) and by the time the patient spends a third day in the hospital they potentially qualify for placement in a SNF.

With a qualifying inpatient stay, there is no patient cost sharing for the first 20 days, a potential savings of $250 per day.

The 2 midnight rule did not fully address the SNF qualification issue, but did move the ball down the field so that appropriate patients will have the 3 day clock started on their inpatient stay rather than having a very long observation/outpatient stay that would not qualify for a SNF.