News: Developments related to patient status make murky waters muddier still

The Office of the Inspector General (OIG) cited Yale-New Haven Hospital for errors which included inpatient stays that should have been billed as outpatient or observation services and the Oregon Health and Science University in Portland for 57 inpatient claims that should have been billed as outpatient or observation services, as well.

Patient status—whether the care provided to a patient would be better (and more economically) provided in an outpatient setting rather than admitting the patient to the hospital for more intensive (and more expensive) care—has long been a matter of consternation for hospitals and a target area for a variety of Medicare contractors and administrators.

Recently, CMS has attempted to draw a clearer distinction by creating the so-called Two-Midnight rule—a designation which allows physicians to admit a patient for inpatient care if they expect the patient to require treatment that crosses two-midnights. The change caused upheaval among providers, so CMS instructed its contractors to conduct probe-and-educate audits focused on using any errors as educational opportunities. In a November 6 announcement, CMS scaled back its third round of probe-and-educate reviews asking Medicare Administrative Contractors to focus on struggling facilities and to request a reduced amount (10 to 15 claims versus the originally planned 100 to 250 claims) of reviews. However, routine auditing of inpatient admissions is expected to resume in April 2015.

In the 2015 Outpatient Prospective Payment System Final Rule (the rule governing outpatient Medicare payments), CMS eliminated physician certification requirements for inpatient admissions of 20 days or less beginning with admissions on January 1, 2015, in most situations.

In the Final Rule, CMS states that “the admission order, medical record, and progress notes [should] contain sufficient information to support the medical necessity of an inpatient admission without a separate requirement of an additional, formal, physician certification.” However, costly or long-stay care requires evidence of additional review and documentation by a treating physician beyond the admission order to substantiate the continued medical necessity of the care.

Problems related to appropriate patient status designation and reimbursement may be having a negative effect on Medicare beneficiaries discharged to skilled nursing facilities, too. About 11,000 hospital stays ended with a non-covered discharge to a skilled nursing facility in 2012, according to a presentation from the Medicare Payment Advisory Commission (MedPAC) on November 6. Under current rules, Medicare only covers skilled nursing services after a beneficiary spends three days as a hospital inpatient, and time spent in observation is not counted toward this threshold, according to the presentation.