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pdear120dsRing in the New Year by celebrating a decade in which all the rules of healthcare delivery, regulations and reimbursement are (and will be) under scrutiny and/or re-written!


It’s also a decade, incidentally, in which baby boomers will be entering Medicare at a rate of 7,000 per day starting in 2011, or stated another way, once every eight seconds.


The following excerpt appeared in an article published in USA Today on Friday, Dec. 31, 2010:


The Centers for Medicare and Medicaid Services pegs the annual cost for each new Medicare beneficiary at $7,700 – and rising. The program had been slated to run out of money in 2017, but Medicare’s government trustees reported this year that the new health care law could extend solvency to 2029 – if payments to doctors and other providers are slashed, which appears unlikely.


“We’re at the beginning of the age wave, which will bring a tsunami of spending associated with the Medicare program,” says David Walker, a former U.S. comptroller general now heading the Comeback America Initiative, a fiscal watchdog group. “It serves to reinforce the need to reform existing entitlement programs and restructure existing health care promises in order to make them affordable and sustainable.”


“Most people turning 65 today are actually in pretty good health,” says John Rother, director of legislation and public policy for AARP, the nation’s largest seniors group. “The true financial impact is still years away.”


Any idea what is driving and what will continue to drive CMS programs such as the RACs?


Now, this is not new news, and in fact like so many falsely threatened in the past (remember Chicken Little?), many in our provider industry hear it and appear to shrug with a “yeah yeah, and?” attitude. If you are not a member of the Baby Boomer bunch (ah, to NOT be a member!), I would think you might be just a bit sick of hearing about us, planning for us and perhaps one day paying for us in the Medicare program. What are a provider and staff to do?


Get back to the basics. Let us “block and tackle” key processes (front, middle, end), creating a bit of a primer for us early in 2011 by reminding ourselves where to start, where to review, what to review and who to review.


First things first, front and center: admission to the facility or practice is where to start.


  • Front-end defense “gate keepers” include the front office, patient financial counselors, ED staff, scheduling, outpatient admissions, admissions and physicians.
    • Patient “compliance” signs and symptoms: why are they here and being seen? Do they have conditions that may impact care not being treated (POA)?
    • Who sent them, and who is authorizing the care? Have they been notified (and do they have to be?)
    • Who is writing orders, and for what?


  • Diagnostic services to determine the extent of the concern?
  • Outpatient “extended recovery” post-outpatient procedures from PACU?
  • Outpatient observation to determine intensity of care necessity?
  • Inpatient admission due to severity of symptoms, conditions or diagnostic test results?


Do you have a clear process 24/7/365 (yes I do mean that!) to manage the above criteria? If not, what is the timeline to get one? If you answered “no,” and/or “no time soon,” your organization will continue to find itself in the “caboose” of the Medicare Baby Boomers’ soon-to-be runaway train. There’s no time like the present, and whatever the explanation, your practice, department, hospital or organization MUST fix your front-end issues. The below was presented in a RACmonitor webinar in mid-2010:


  • CMS requires that the physician order clearly state the level of care the patient requires.
  • June 23, 2009 – CMS CR Transmittal #R1760CP: “Clarification Related to Observation Services”
  • CMS updated the Medicare Claims Processing Manual (Chapter 4, Section 290); Editorial changes to the manuals remove reference to “admission and observation status in relation to outpatient observation services.”


The term “admission” is typically used to denote an inpatient admission and inpatient services. For payment purposes there is no payment status called “observation.” Observation care is an outpatient service
.”  http://www.cms.hhs.gov/MLNMattersArticles/downloads/MM6492.pdf


And the below is now an approved issue for all four of the RACs:



Issue Name: Inpatient Admissions without a Physician’s Inpatient Admit Order

  • Description: Admissions to the inpatient setting require a physician’s order in order to qualify and be paid as an inpatient stay.
  • Provider Type Affected:Inpatient Hospital
  • Date of Service: 10/01/2007 – Open

How your front-end functions work determines your success going forward – and all the many challenges of getting it right must be managed so you have a VERY low error rate, or you will have a VERY high loss rate on the back end. Secondly, the middle: the next place to correct any defects and manage the back-end “oops” before “oops” ever happens.

  • Middle ambassadors include case managers, clinical documentation specialists, UR, nurse practitioners, physician assistants, physicians and concurrent coding specialists.
    • Where is the patient? Why is the patient here? What are we doing for the patient? How long is the patient expected to be here? Where else could the patient be managed safely?
    • Who communicates the above to the attending physician? Is the physician receptive to input, or rather determine that “I know best?”  Does the hospital have the real will to manage a major admitter to the hospital?


The above issues challenge so many providers for all of the many reasons we all know and dislike, but reality is reality, right? Reality has been described for hospitals for a long time:

  • The utilization review committee is the one committee that is required by federal law. See 42 CFR 482.30
  • Maintaining a utilization review plan is a Medicare condition of participation.
  • The purpose of the utilization review plan is to promote a program providing appropriate allocation of the hospital’s resources in striving to provide high-quality care to each patient in a cost-effective, timely manner.
  • The utilization management plan is intended to establish methods for addressing the appropriateness and medical necessity of admissions and continued stays, whether or not the level of care or service needed by the patient should be provided by the organization, and the appropriateness, medical necessity and timeliness of support services provided.

A bit more reality:


Condition Code 44


“… is for use on outpatient claims only when the physician ordered inpatient services, but upon internal utilization review performed before the claim was initially submitted, the hospital determined the services did not meet its inpatient criteria prior to discharge.


  • The National Uniform Billing Committee (NUBC) issued Condition Code 44, effective April 1, 2004, to identify cases when this occurs.

Question to CMS
: Can a case manager or utilization management staff member change a patient’s status from inpatient to outpatient after determining that the hospital’s admission criteria were not met?


  • CMS Answer: CMS has received many questions regarding who may make the status change, and requests for clarification as to whether utilization management staff or a case manager may implement the change. The CoP in §482.30 of the regulations requires that the utilization review committee be comprised of at least two doctors of medicine or doctors of osteopathy, although it may include other specified practitioners.
  • If a Medicare patient is admitted … the patient must be under the care of a doctor of medicine or osteopathy. Therefore, a case manager or other utilization management staff person who is not a licensed practitioner permitted by the state to admit patients to a hospital or a doctor of medicine or osteopathy would not have the authority to change a patient’s status from inpatient to outpatient.
  • However, we encourage and expect hospitals to employ case management staff to facilitate the application of hospital admission protocols and criteria, to facilitate communication between practitioners and the UR committee or QIO, and to assist the UR committee in the decision-making process.


Well, the above may appear easier said than done, but the reality is that your organization and physicians have had multiple opportunities to discuss, debate, ignore, resist or embrace a process that must work for your unique setting. However, they must work with the “middle” ambassadors, and become ones themselves, or the Medicare Baby Boomers (which may include some of them) will crush opposition to change, period.



Lastly, the back end: where so much time, effort, staff, systems, data, departments, consultants have toiled.


  • Back-end warriors include patient financial services, HIM, coders, business office, billing office and outsourced experts (did you notice there usually are no physicians at this end?)
    • Why was the patient here? Where was he or she treated? Are there orders? Who ordered the services? From where was the patient admitted? IIs the documentation complete, specific, dated, timed and signed? Can we, and should we query?
    • Is the claim correct, what edits, can we re-bill some or any services; who will manage appeal, who coordinates responses, what were we paid, is it correct, can we keep it?


March 2010: Affordable Care Act (ACA)


  • As a result of the ACA, claims with dates of service on or after Jan. 1, 2010, received later than one calendar year beyond the date of service, will be denied by Medicare.
  • The act defines an “overpayment” as “any funds that a person receives or retains [from a federal payor] to which the person, after applicable reconciliation is not entitled.”
  • The act provides that all overpayments must be refunded within 60 days after “identification” of the overpayment.


I could continue to quote from our prevailing federal regulations, but then we have our state requirements. However, do we really know them?  It is our real ability to affirm and effect change – from where we are to where we work, how we work, and with whom we work – that will cause us and our physicians, hospitals and organizations to succeed as the Medicare Baby Boomers (and, oh yes, all the other equally important patient types of any age) enter our system. Blocking and tackling, excelling at the above basics and doing the everyday job of ensuring accuracy is the bottom line of our bottom line. Happy New Yar, and may you and your organization prosper!


About the Author


Patricia Dear, RN, has more than 30 years of experience in the healthcare industry, working within corporate healthcare entities, for-profit and non-profit hospital systems, legal defense and plaintiff counsel. She is a recognized national speaker on reimbursement and compliance. She is the president and CEO of eduTrax®.


Contact the Author



To comment on this article, please go to editor@racmonitor.com


To read article entitled, “Compliant Coding, Take the Cheater Test,” please click here


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