While supplies last! Free 2022 Coding Essentials for Infusion & Injection Therapy Services book with every RACmonitor webcast order. No code required. Order now >

On Friday, the Centers for Medicare & Medicaid Services (CMS) released its highly anticipated 2016 Outpatient Prospective Payment System (OPPS) Final Rule, in which the agency finalized most of their new proposals. Of most interest was its proposed change to the so-called “two-midnight rule.”

Despite my vigorous objections, CMS finalized its proposal to “modify the existing 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. This exception was supported by the American Hospital Association (AHA) and by many hospitals throughout the country. But the celebrations at those organizations should not start too soon, because the devil is in the details, and CMS provided absolutely no details whatsoever.

Throughout the narrative discussion, CMS reiterated the crucial role of the physician in the medical care of the patient, noting that they “have been clear that the two-midnight benchmark does not override the clinical judgment of the physician regarding the need to keep the beneficiary at the hospital, to order specific services, or to determine appropriate levels of nursing care or physical locations within the hospital.” CMS also noted that “some stakeholders have argued that the two-midnight benchmark removes physician judgment from the decision to admit a patient for inpatient hospital services.”

Amazingly, though, CMS responds to this with “we disagree.” But they then go on to adopt a proposal that supports that very argument. Simply, CMS is telling us that under the two-midnight rule, there is no difference between and an outpatient and an inpatient, and both can receive any intensity of hospital care (excluding inpatient-only surgery) regardless of length of stay unless the physician now says there is a difference.

But despite the pleas of the supporters of the exception, such as the AHA, and opponents, such as this author, CMS provided no additional guidance as to when it is appropriate for a physician to declare that a patient “requires” inpatient admission despite an expectation of a hospital stay of less two midnights. In the comments discussion, CMS even states that “the details pertinent to the final policy on two midnights are sufficiently set forth in this final rule, with comment period and its supporting documents and guidance and … all tools necessary for the effective implementation of the final policy (having) been made available to hospitals, physicians, and other stakeholders.” Yet despite a vigorous search of the rule and all other pertinent documents, there is no list of diagnoses or clinical circumstances in which this exception could be applied.

When applying the other exception to the rule, unexpected mechanical ventilation, it would be very clear to any reviewer that the patient has been intubated, but there is no such delineation for this new exception. As we have learned over 800,000 times in the past from Recovery Auditor (RAC) denials, there is no presumptive weight given to a physician’s decision that a patient should be admitted as inpatient; it must be clinically rational. So how are physicians supposed to make that decision with only the nebulous guidance of evaluating the severity of the signs and symptoms exhibited by the patient and the medical predictability of something adverse happening to the patient? What does CMS consider a high enough predictability to warrant inpatient admission? How “severe” must the signs and symptoms be to warrant inpatient admission? Does a chest pain patient with a 12-percent chance of an acute cardiac event warrant inpatient admission, or is it 20 percent, or 50 percent? If a patient rates his or her abdominal pain at 9 out of 10, is that severe enough to warrant inpatient admission even though all test results came back normal?

We have access to evidence-based tools such as InterQual and MCG Care Guidelines that incorporate these factors and can recommend inpatient admission or outpatient evaluation, but CMS has repeatedly rejected their formal adoption. Despite CMS not endorsing these tools, the auditors did not hesitate to use those guidelines when it allowed them to deny cases based on intensity of service or severity of illness and then turn around and ignore those same guidelines when they supported the admission decision.

CMS also refers to “rare and unusual” as a requirement for the exception. But how does it define rare? Many hospitals now treat strokes and heart attacks in under two midnights, so perhaps those patients are “sick enough”(and expensive enough) to warrant inpatient admission, but neither stroke nor heart attack is rare or unusual. In fact, many hospitals are dependent on their high-volume interventional cardiac programs to maintain profitability.

Where does that leave us? In my opinion, the AHA has won the battle but lost the war. Their pleas were heard and the exception adopted, but without explicit examples or direction, using the exception will just be handing the auditors a gift-wrapped denial on a silver platter. No amount of documentation by a physician can justify inpatient admission if the expected length of stay is under two midnights and the services planned for the patient can be offered to both inpatients and outpatients. I would recommend never using this exception. What the AHA should have done is fought the battle for what was really at issue: the inadequate reimbursement for outpatient hospital stays compared to similar care provided to an inpatient.

Hospitals soon will begin having their short inpatient admissions audited by the quality improvement organizations. Poor performance on those audits will mean that a referral to the RACs will be in the near future. Hospitals need to ask themselves if it is worth taking a chance for the payment difference between observation and inpatient. But if there is any consolation for the AHA, CMS did adopt the new comprehensive APC for observation services and set the rate at $2,275.

So maybe observation is not that bad after all.

Read the final rule in its entirety online: Outpatient Prospective Payment System Final Rule


About the Author

Ronald Hirsch, MD, FACP, CHCQM is vice president of the Regulations and Education Group at Accretive Physician Advisory Services at Accretive Health. Dr. Hirsch’s career in medicine includes many clinical leadership roles at healthcare organizations ranging from acute-care hospitals and home health agencies to long-term care facilities and group medical practices. In addition to serving as a medical director of case management and medical necessity reviewer throughout his career, Dr. Hirsch has delivered numerous peer lectures on case management best practices and is a published author on the topic. He is a member of the American Case Management Association and a Fellow of the American College of Physicians.

Contact the Author


Comment on this Article



You May Also Like

Leave a Reply

Your Name(Required)
Your Email(Required)