Inpatient Facility Coding & Compliance Alert

CMS to allow exceptions on a case to case basis, with proven medical necessity.

It’s time to celebrate the new year with your newfound autonomy on deciding the patient’s status, thanks to the revision CMS made in the Federal Register regarding the over two-midnight rule, as a part of final OPPS rule for 2016, on Nov.13. Here is a lowdown on the revisions you need to know.

Score Big With the Exceptions to the Two-Midnight Rule

The new revision modifies the exceptions to the two-midnight rule. CMS has previously indicated that an inpatient admission with less than an over two-midnight stay would be rare and unusual. Hospitals have subsequently challenged this assertion and the associated language from CMS. Therefore, CMS revised the Nov. 13, 2015, Federal Register, concerning this rare and unusual language.

Highlights of what’s new include:

• The exceptional circumstances can now be determined by the provider in a case to case basis. However, every case can still be subjected to a medical review.
• The issues of inpatient short stays will no longer be scrutinized by the Medicare administrative contractors (MACs). As per the updated rule, Quality Improvement Organization contractors will review these, effective Oct. 1, 2015. This could be a probable move to cut down on contingency funds.

Nevertheless, CMS continues to uphold that stays under 24 hours would rarely qualify for an exception to the two-midnight benchmark.

The Rule that has been…

The two-midnight rule became effective two years back, in October 2013.This 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 two-midnight rule, however, indicates that if the patient should be in the hospital over two-midnights, then the inpatient admission is presumed proper. Vice versa, if the provider expects the patient to stay for fewer than two-midnights, the services should be classified as outpatient.

Ensure Medical Necessity Passes Muster

Good news: Physicians will have the opportunity to justify an inpatient admission so long as the medical necessity of the admission is appropriately documented.

“While this softening of the requirements is certainly welcome, physicians must sometimes document beyond clinical documentation into what might be called payment documentation,” says Duane C. Abbey, PhD, president of Abbey and Abbey Consultants Inc., in Ames, IA.

The main points for consideration of medical necessity are:

• The severity of the signs and symptoms exhibited by the patient;
• The medical predictability of something adverse happening to the patient; and
• The need for diagnostic studies that appropriately are outpatient services (that is, their performance does not ordinarily require the patient to remain at the hospital for 24 hours or more).

“The over two-midnight rule is totally unnecessary, in my opinion,” states Abbey. “Apparently, CMS is using this new rule as a means of better controlling what the recovery auditors are allowed to review relative to inpatient versus outpatient status.”

Explore the Opinions Galore: What’s Yours?

Interestingly enough, some think the over two-midnight rule should be rescinded. According to the Federal Register, “MedPAC and the American Medical Association (AMA) recommended that CMS rescind the two-midnight rule in its entirety.” Some feel that any time-based admission policy would interfere with physician judgment.

The AMA expressed concern that the two-midnight rule places considerable burden on the admitting physician and erodes the ability of physicians and providers to improve health outcomes through personalized, evidence-based clinical care because it detracts from admission criteria that depend upon clinical judgment. (80 FR 70542-70543)

As per MedPAC, this rule may tempt hospitals to lengthen hospital stays to avoid scrutiny. Longer stays would mean increased costs and unnecessary potential exposure of patients to hospital borne infections.

What CMS says…

After consideration of the public comments we received, we are finalizing, without modification, our proposal to revise our previous “rare and unusual” exceptions policy to allow for Medicare Part A payment on a case-by-case basis for inpatient admissions that do not satisfy the two-midnight benchmark, if the documentation in the medical record supports the admitting physician’s determination that the patient requires inpatient hospital care despite an expected length of stay that is less than two- midnights. Accordingly, we also are finalizing our proposal to revise § 412.3(d) to reflect the above policy modification and to increase clarity. (80 FR 70545)

MedPAC favors withdrawal of the two-midnight rule because it becomes redundant in light of MedPAC recommendations related to the Recovery Audit Program.

Watch Out for QIO Reviews as CMS Stands Firm

CMS has rejected the recommendations that the over two-midnight rule be rescinded. Instead, get ready as CMS is going to involve the Quality Improvement Organizations (QIOs) in the rule’s implementation.

The QIOs will conduct “Revised Determination Reviews” (42 CFR 405.980) on hospital short-stay Medicare Part A claims. QIOs will conduct patient status reviews to determine the appropriateness of Medicare Part A payment for these short-stay inpatient hospital admissions, in accordance with section 1862(a)(1)(A) of the Act.

Gear up: So, how does one prepare for the QIOs? Are they going to inspect along the same lines as MACs, or do the hospitals need to prepare for a different perspective?

“At this time we don’t know,” admits Abbey. “Whether this is a compliance exercise or educational exercise (or both) is not yet known.”

However, as we wait to know more, it’s safe to start preparing by assuming the QIO reviewers will ask for the information documented in the patient’s medical record, and may use evidence-based guidelines and other relevant clinical decision support materials as components of their review activity.