Inpatient vs Outpatient: The Debate Continues

Observation volumes continue to stress hospitals.                             

The utilization process is very difficult and complicated. We must continue to advocate for our elders and utilize their Medicare benefits correctly. We should be using all our patients’ benefits correctly, so let’s talk about something that concerns us about our insurance companies’ behaviors over the past few years. 

Observation Services.

In order to discuss this, I just want to remind you what the Centers for Medicare & Medicaid Services (CMS) says about observation:

Remember that time frame: 48 hours.

The CMS two-midnight rule, implemented in October 2013, should have taken care of the swirl of debate regarding inpatient versus observation status, but it seems that it really only added to the confusion of who to put in observation. And the fact that CMS uses the definition of hospital services as “services that are performed in the hospital” did not help either, did it? I get that there are people who come to the hospital to seek help despite having no valid clinical reasons to be there, but those are few and far between. And isn’t it sad that those become the stories we hear? How many other patients do we not even hear about, for whom we actually chose wrong, due to fear of an audit?

What about the way that some insurance carriers have taken the concept of observation and completely ignored the definition and the time frame? Most of the examples I have cannot be confirmed, because insurance companies do not provide their policies to us, but here are some examples of where we are challenged on any given day, in any hospital: 

  1. We have heard that there are certain insurances that have internal policies requiring their utilization management (UM) nurses approve only observation for more than 100 Diagnosis-Related Groups (DRGs.) That’s interesting considering that the DRG is not even confirmed until after discharge and all documents are coded. Even with concurrent coding, the DRG is not finalized. So really, these nurses are making a medical decision that should be a physician’s responsibility.
  2. We have also heard that there are other insurances that are going on 96 hours of observation before they will even discuss conversion to an inpatient level of care. And then they want the patient to meet inpatient admission criteria on Day 5.
  3. We have examples of patients who have insurance and were denied for inpatient level of care, remaining in observation for days, weeks, or months, with the insurance taking no responsibility for assisting with transition out of the facility. 
  4. We have examples of our behavioral health patients being denied inpatient level of care in the emergency department, and then no ancillary help being offered to them.

All of these insurance companies claim they use a set of screening criteria, be it MCG or Interqual. Yet these examples above would suggest they do not. If and when you are negotiating your contracts with insurance companies, it is highly recommended you call out the UM process independently, and contract to abide by one set of rules. Whatever that set of rules is, there will be some wins and some losses on both sides, but we need to get back to the basics, and we need to utilize patient benefits as they were meant to be used. This way we can spend our resources on things that matter – like patient care!

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Mary Beth Pace, RN, BSN, MBA, ACM, CMAC

Mary Beth Pace is vice president of care management at Trinity Health.

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