ED Coding and Reimbursement Alert

Written notice to patients to be required under observation status in 2016.

If you were thinking the two midnight rule was the biggest regulatory hassle surrounding observation patients, guess again.

Background: Congress was considering the Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act that would require hospitals to fully inform patients who spend more than 24 hours in observation without being admitted as an inpatient. The goal was to address of some drawbacks to observation status, including obstacles to Medicare payment for subsequent skilled nursing facility (SNF) stays (See ED Coding & Reimbursement Alert, Vol. 18, No. 9).

Update: That law did pass and was signed into law by President Obama on Aug. 6, 2015 but effective a year later in August of 2016.

What This Means to You

According to the (NOTICE) Act, you are  required to provide “written notification” to patients under observation in hospitals for more than 24 hours, and adequate oral and written notification within 36 hours of the differences between their status and inpatient status. The notice must be clear about the implications for cost-sharing as an outpatient and for subsequent eligibility for SNF coverage.

Must do: The notification must be written in “plain language” and be signed by the patient or his or her representative. Should the patient or representative refuse to sign the notification, the hospital staff member who presented it must sign it in their place to demonstrate that the requirement was satisfied, says Michael Granovsky, MD, FACEP, CPC, President of LogixHealth a national ED coding and billing company based in Bedford, MA.

Was That Hospital Stay Observation Or An Inpatient Admission?

This legislation was prompted by continued concerns about the “two-midnight rule”, which was passed in 2013 and established the rule of thumb that a patient reasonably  expected to require necessary hospital care for a time period that would  span at least two midnights would  be presumptively considered appropriate  for inpatient services and, therefore, payable under Medicare Part A. Similarly, a hospital stay not spanning at least two midnights would be presumed as an outpatient stay and more correctly reported as observation rather than an inpatient admission, Granovsky explains.

Be Clear About The Significant Cost Differences

Observation visits generally lead to higher fees to the hospital than inpatient admission because of requiring higher copays from patients, says Granovsky. The 20 percent Medicare co-payment can easily exceed the per-inpatient admission deductible and the cost of outpatient drugs are not covered as they would be for an inpatient DRG, Granovsky adds.

Perhaps more dramatic would be the patient’s responsibility for the cost of a skilled nursing stay if the required three day inpatient admission was not met, Granovsky notes. Time spent in observation care did not count towards the three day stay, and some patients were confused as they did not understand the difference between outpatient observation and an impatient admission. They just knew that had to spend the night in the hospital, he says. 

Look for Probe and Educate Audits to End

Are you confused about just who is doing your reviews?  You might need to check the calendar to get it right.

Because of the concerns expressed over the two midnight rule, CMS also agreed to a “probe and educate” audit program rather than initially recouping payments for claims found to be in error.

CMS issued a moratorium on RAC reviews of inpatient admissions for dates beginning Oct. 1, 2013 when the “two-midnight rule” first took effect, with multiple successive extensions.   The Medicare Access and CHIP Reauthorization Act of 2015 passed in April 2015 extended the probe and educate period through Sept.  30, 2015. 

With the transition to reviews by Quality Improvement Organizations, there will be additional significant changes to both the organization performing the reviews and the process, Granovsky explains.

Check Out This Time Table For Transitioning Medical Review Contractors:

Because of the continued confusion and controversy over the two midnight rule, CMS recently proposed incremental changes in the 2016 OPPS proposed rule to improve the two midnight policy through a variety of changes

Look For A Greater Emphasis on Physician Clinical Decisions Than Calendar Dates

In the proposed rule, CMS has restored case-by-case assessment for stays expected to require less than two midnights of inpatient hospital care.

According to the proposed rule, physicians must carefully document the medical necessity of the short stay because it will now be the treating physician’s medical decision making rather than the number of calendar days in the facility that will be the key indicator as whether the short admission was inappropriate.

Such admissions are still subject to medical review but medical reviewers are instructed to look for documentation of factors including: signs and symptoms of medical severity; medical predictability of adverse consequences; and, need for diagnostic studies that are more appropriately performed in the outpatient setting, Granovsky explains.

Emergency physicians provide a significant amount of observation services, with an average length of stay of less than 24 hours, says Granovsky. Because they are highly skilled at rapid diagnosis and initiating effective treatment plans, emergency physicians are typically able to make a disposition to admit to inpatient or release to the community or back to a post-acute setting in less than 48 hours.

Main takeaway: It is advantageous to the specialty that CMS is giving recognition to the decision making of the physician actually treating the patient rather than a retrospective review of the chart when the clinical outcome is known, says Granovsky.