Inpatient Facility Coding & Compliance Alert

Guard yourself from RACs with this expert advice.

Got the RACs knocking at your door? If it’s short inpatient stays they are looking for, then it’s time to brush up on how you count the two midnights of a patient’s stay. The RACs (Recovery Audit Contractors) have been heavily involved in this area. Read on for a lowdown of the rules and how to tackle the issues that come along.

Background: The 2-midnight rule supplants the 24-hour rule (or benchmark) that stipulated a stay of less than 24 hours would be considered as an outpatient, most likely observation stay, and more than 24 hours would be considered as inpatient.

The 2-midnight rule, however, indicates that if the patient should be in the hospital over two midnights, then the inpatient admission is presumed proper by the auditors. CMS justifies the need for this rule as follows: “The two midnight benchmark clarifies when beneficiaries determined to need such continuing treatment are generally appropriate for inpatient or outpatient care in the hospital.” This is a rather strange enhancement to the 24 hour rule.

“It wasn’t written to help hospitals. It wasn’t written to help physicians. It was written to help the RACs,” says Duane C. Abbey, PhD, president of Abbey and Abbey Consultants Inc., in Ames, IA.

What Constitutes an Inpatient Admission?

As of today, the order to admit a patient is a complex medical decision, based on the severity of the illness and the doctor’s clinical insight whether the patient’s condition requires inpatient monitoring and intensive treatment.

“In our existing guidance, we stated that the decision to admit a patient as an inpatient is a complex medical decision based on many factors, including the risk of an adverse event during the period considered for hospitalization, and an assessment of the services that the beneficiary will need during the hospital stay,” says the federal register (78 FR 50945).

Impossible to predict cases: There may be cases when the patient appears sick enough, is admitted as an inpatient, but recovers sooner than two midnights of admission. For example, a patient presents with severe electrolytic imbalance to the extent that his condition and vitals need to be monitored. He is put on infusion therapy and responds so well he is fine in few hours.

You do come across such exceptional cases where you may have no way of predicting how long the patient would stay at the hospital. Unfortunately, the RACs don’t have this perspective. They would choose this case and do a retrospective analysis.

Why do the RACs concentrate on short stay inpatient admissions? “Because of the money,” warns Abbey. “They have recouped a lot of money. And as long as they’re recouping money in significant quantities, they’re going to be active in this area.”

Way out: One solution Abbey suggests is to use Occurrence Span Code 72 (unforeseen circumstances and exceptions) to rescue your claims. This code allows providers to voluntarily identify those claims in which the 2-midnight benchmark was met because the beneficiary was treated as an outpatient in the hospital prior to the formal inpatient order and admission. In other words, it permits providers and subsequently review contractors to identify the “contiguous outpatient hospital services [midnights] that preceded the inpatient admission,” as well as the total number of midnights after formal inpatient order and admission, on the face of the claim. While MACs may still select this claim type for medical review, the use of occurrence span 72 will help support the medical record and the MAC’s review decision. For more information, see Transmittal 1334 from January 24, 2015.

One Man’s Music is Another Man’s Noise: Inpatient or Observation?

Does CMS recognize or propagate any national standards for inpatient admission? Unfortunately, no. This is a gap that yet needs to be bridged. As of now, the only parameter we have is the two midnight rule, and the physician’s ability to defend the medical necessity of inpatient care requirement for the patient.

 In an OIG Report “Hospitals’ Use of Observation Stays and Short Inpatient Stays for Medicare Beneficiaries” (OEI-02-12-00040, July 2013), the OIG found that the reasons for short inpatient stays and for outpatient observation stays were often the same. They further noted that the relative use of short inpatient stays versus outpatient observation stays varied widely between hospitals, consistent with medical review findings that identical beneficiaries may receive identical services as either inpatients or outpatients in different hospitals.

“In theory, patients with the same conditions could receive identical services with one being observation and the other classified at inpatient,” explains Abbey.

Food for thought: There may be situations where it’s kind of hard to distinguish between observation and inpatient admission. So what does that mean to us?

“We need to be extremely clear, have medical necessity documented as to whether it’s inpatient or outpatient,” says Abbey. “And that’s going to mean developing policies and procedures relative to this.”

Physician’s Order Is Not Enough

Sadly enough, although it is for the doctor on duty to take a call at that point in time whether the patient’s situation warrants inpatient admission or not, “… the physician order and the physician certification are not considered by CMS to be conclusive evidence that an inpatient hospital admission or service was medically necessary. Rather, the physician order and physician certification are considered along with other documentation in the medical record” (78 FR 50934). A legible, dated physician’s signature is a mandatory requirement.

Documentation for Medical Necessity

We probably would all agree with Medicare on the fact that we need documentation. Even if you submit an apparently “okay” case where the patient stayed in the hospital for over two midnights, Abbey advises you to be ready with the audit question: “What if it wasn’t medically necessary for them to be in there for over two midnights?”

He further tells you to ensure that your documentation includes specific answers to questions like:

• What’s happening to this patient? 

• What conditions are they coming with? 

• What exacerbations are they suffering from?

“We need to document all of those things in order to be consistent, and use inpatient admission correctly,” Abbey adds.

The road ahead: Ensuring medical necessity is your best bet. And that’s not all. There are still more issues to deal with. Look out for these and expert advice on how to be RACs ready, in the next issue of Inpatient Coding and Compliance Alert.