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Under the 2014 fiscal year Inpatient Prospective Payment System (IPPS) Final Rule released last month, the Centers for Medicare & Medicaid Services (CMS) is seeking to clarify its medical review criteria for medical necessity and payment issues relating to hospital inpatient services rendered under Part A.

The agency is looking to do this by giving greater weight to the beneficiary’s expected length of stay, the presence of an inpatient order, and the presence of strong documentation supporting the order.

The Two-Midnight Rule: Benchmark Versus Presumption

In the past, CMS has provided guidance indicating that the expectation of a hospital stay of 24 hours or greater was one of the elements to consider when evaluating a potential admission. CMS now has replaced the 24-hour benchmark with a two-midnight benchmark, under which “a physician or other qualified practitioner … should order admission if he or she expects that the beneficiary’s length of stay will exceed a two-midnight benchmark, or if the beneficiary requires a procedure specified as inpatient-only under 42 CFR 419.22.”

However, CMS emphasizes that “this instruction does not override the clinical judgment of the physician” and that the appropriateness of the inpatient admission hinges on “a reasonable and supportable expectation (of a two-midnight stay), not the actual length of care.”

Additionally, CMS clarifies that “(for) those hospital stays in which the physician cannot reliably predict the beneficiary to require a hospital stay greater than two midnights, the physician should continue to treat the beneficiary as an outpatient and then admit as an inpatient if and when additional information suggests a longer stay, or the passing of the second midnight is anticipated.” 

For the purposes of contractor medical review, the rule establishes a new “presumption” that “inpatient hospital claims with lengths of stay greater than two midnights after formal admission following the order will be presumed generally appropriate for Part A payment.” If the stay does not span at least two midnights, the presumption will not apply and Medicare reviewers are directed to review the admission by applying the two-midnight benchmark. In doing so, the reviewers will focus on the totality of the record, utilizing the time spent receiving services as a hospital outpatient prior to the actual inpatient admission in determining whether the benchmark has been met.

Medicare contractors likely will change their focus to those inpatient claims that fail to meet this benchmark (i.e., hospital stays that span less than two midnights). Claim review will address whether care was provided efficiently and also whether the care was provided in a manner intended to extend the length of the inpatient stay solely to meet the two-midnight benchmark. 

Physician Orders

CMS now has mandated that a physician order for inpatient admission must be present in the medical record in order for the hospital to be reimbursed for inpatient services under Part A. Furthermore, in contrast to previous CMS policy, the admission order “must specify admission ‘to or as an inpatient.’”

CMS reiterates its position that while a patient is considered an inpatient upon issuance of an admission order by the treating physician, the order is to be given no presumptiveweight. Rather, it is to be considered “in the context of the evidence in the medical record.”

The order does not have to be signed by the physician responsible for the patient’s care; rather, the practitioner signing the order must be knowledgeable about the patient’s condition, the plan of care, and the current condition of the patient (in addition to having admitting privileges).

In the final rule, CMS also confirms its existing position that an inpatient admission starts at the time of an inpatient order. However, CMS also has set forth that “(the) starting point for the two-midnight benchmark will be when the beneficiary begins receiving hospital care, on either an inpatient or outpatient basis.” 

Physician Documentation

Although a patient stay meeting the two-midnight benchmark would create a presumption that inpatient care is medically necessary, CMS stresses that physician documentation must “clearly and completely” justify the decision to admit.

The admitting physician still must weigh the totality of the patient’s circumstances as set forth in the CMS Benefit Policy Manual (Chapter 1, Section 10), because “a reasonable expectation of a stay crossing two midnights, which is based on complex medical factors (including evidence-based clinical medicine) and is documented in the medical record, will provide the justification needed to support medical necessity of the inpatient admission, regardless of the actual duration of the hospital stay and whether it ultimately crosses two midnights.”

CMS made it abundantly clear that complete documentation, including the physician’s order and application of evidence-based clinical medicine, will be paramount in the review of medical necessity. Without a clear order and sufficient documentation justifying the inpatient admission – specifically noting that the physician requires this particular patient to be admitted for inpatient services, that the physician reasonably expects a two-midnight stay, and that the patient is medically appropriate for an admission – CMS will deny your claim. 

CMS has indicated that it will produce additional sub-regulatory guidance to address the documentation requirements more thoroughly.

Next Steps for Hospitals

The two-midnight benchmark and presumption can be used to guide providers in making admission decisions. That said, CMS reemphasizes that admission is a complex medical decision and that a physician order supported by strong documentation is required to justify the admission decision. As such, it is important for providers to continue to run an effective utilization review process, as required by the Medicare conditions of participation for hospitals, to assist physicians in ensuring that admission decisions are timely and well-documented. 

The final rule does not alter the existing requirements for utilization review under the conditions of participation for hospitals (found at 42 CFR 482.30). Therefore, it remains incumbent upon hospitals to take the necessary steps to ensure that they get it right in real time while making patient status determinations.

While there is now a mechanism for post-discharge rebilling, frequent use of this mechanism is likely to bring significant scrutiny from CMS and its contractors. In addition, the administrative burden to the hospital is significant, and the potential impact to the beneficiary can be financially substantial. Obtaining the appropriate admission status as early as possible in the hospital stay, and ensuring that the documentation in the record clearly and completely supports the admission, is crucial to compliance with these new regulations.

The new rule will not become effective until Oct. 1. In the meantime, again, CMS will be developing sub-regulatory guidance to assist the provider community and the contractors performing medical reviews. This guidance (i.e., CMS’s interpretation of the rule) has the potential to significantly impact the rule as it stands today. In the interim, it is important to continue to follow existing CMS guidance regarding inpatient admission decision-making and billing. 

About the Author

Dr. Ralph Wuebker serves as Chief Medical Officer of Executive Health Resources (EHR). In this role, Dr. Wuebker provides clinical leadership within EHR and works closely with hospital leaders to ensure strong utilization review and compliance programs. Additionally, Dr. Wuebker oversees EHR’s Audit, Compliance and Education (ACE) physician team, which is focused on providing on-site education for physicians, case managers, and hospital administrative personnel and on helping hospitals identify potential compliance vulnerabilities through ongoing internal audit.

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Ralph Wuebker, MD, MBA

Dr. Ralph Wuebker serves as Chief Medical Officer of Executive Health Resources. In this role, Dr. Wuebker provides clinical leadership within the company and works closely with hospital leaders to ensure strong utilization review and compliance programs. Additionally, Dr. Wuebker oversees Executive Health Resources’ Client Services teams, who provide onsite education for physicians, case managers, and hospital administrative personnel and help hospitals identify potential compliance vulnerabilities through ongoing internal audit. An expert in CMS regulations, medical necessity compliance, utilization review, denials management, and program integrity efforts, Dr. Wuebker also serves as an industry thought leader and editorial advisor to the media, as well as a highly respected and distinguished industry speaker.

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