Medicare Compliance & Reimbursement

Learn to distinguish between observation and inpatient services.

“We do not believe that observation services and inpatient services are the same services,” (78 FR 50911) states the Federal Register. Is this true at your hospital? Are there cases in which exactly the same services are provided? How do you distinguish between the two? Here are a few examples of common scenarios and what to expect in each.

Example 1: Two patients with exactly the same complaints and symptoms present to the ER. In Case A, the physician orders observation services. In Case B, a different physician decides to admit the patient. Both patients receive exactly the same services. They both arrive at the hospital Monday morning and are discharged on Wednesday afternoon. Since the physicians have different opinions, utilization review can play a decisive role. The Case B inpatient status will need to satisfy the RACs regarding medical necessity.

Example 2: Two Medicare patients come to the ER with exactly the same symptoms. The physician decides to admit Patient A at 10 p.m. Tuesday. A different physician decides to admit Patient B at 2 a.m. Wednesday. Both patients receive exactly the same services and are discharged on Thursday afternoon. In this example, Patient A went over two midnights, while Patient B did not. Therefore, the RACs will probably not look at the first case, but may well look at the second.

Example 3: The beneficiary has been transferred to your facility from another hospital. In order to calculate the two-midnight benchmark, the receiving hospital is allowed to take into account the pre-transfer time and care provided to the beneficiary at the initial hospital. Any excessive wait times spent in the initial hospital for non-medically necessary services shall be excluded from the physician’s admission decision.

Final takeaway: Let all your providers and clinical staff come together to devise a uniform admission policy that would solve this disparity in admission status of similar patients.

“We all simply have to follow CMS’s lead in this case,” decrees Abbey. “There is really no good reason to even have the ‘over 2-midnight’ rule in lieu of the old ‘24-hour’ rule. The over 2-midnights is for the benefit of CMS and RACs in order to delimit RAC reviews of short-stay inpatient admissions.”