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Between October and December 2011, the top overpayment issue for one of the four recovery audit contractors (RACs)-Region D: HealthDataInsights-was that hospitals billed minor surgery and other treatment as an inpatient stay, instead of the appropriate outpatient stay.


This is one of the findings reported by the Centers for Medicare & Medicaid Services (CMS) in its recently issued quarterly newsletter (October to December 2011) about the recent findings from the Medicare Fee-for-Service Recovery Audit Program.


In its January 2012 Medicare Quarterly Provider Compliance Newsletter, CMS gave the following examples of recent RAC findings related to patterns of minor surgeries and other treatments erroneously billed as inpatient stays:


  • An admission for a peripherally inserted central catheter (PICC) line for intravenous (IV) antibiotic therapy without complications
  • A corneal transplant eye surgery without complications but requiring supine positioning after surgery with a planned 23-hour observation following outpatient surgery.

The top overpayment issues of the other three RACs also relate to lack of medical necessity but focus on procedures performed in specific areas of the body, as listed below.


  • Region A: Diversified Collection Services-neurological disorders
  • Region B: CGI, Inc.-cardiovascular procedures
  • Region C: Connolly, Inc.-neurological disorders

None of the hospitals in these regions is alone in their errors, particularly Region D because, on a nationwide basis, one-day inpatient stays for minor procedure continue to contribute to significant Medicare overpayments.


In addition to CMS’s recently released report, this also has been a finding in the Comprehensive Error Rate Testing (CERT) Program, the American Hospital Association’s RACTrac survey, and Medicare administrative contractors (MACs).


Know the Rules



Medicare beneficiaries with known diagnoses who enter a hospital for a minor surgical procedure or other treatment that is expected to keep them in the hospital for less than 24 hours are considered outpatients. This is true regardless of the hour the patient presents to the hospital, whether a bed was used, and whether he or she remained in the hospital after midnight.


If the patient is subsequently admitted to the hospital as an inpatient, the medical record must indicate that the care was medically necessary, reasonable, and appropriate for the diagnosis and condition. It also must prove that the beneficiary’s medical condition, safety, or health was significantly and directly threatened if care was provided in the inpatient setting.


It’s up to the physician or other practitioner responsible for the hospital care to decide whether to admit the patient as an inpatient. Physicians are expected to use 24 hours as a benchmark. That is, they should order admission for patients who are expected to need hospital care for 24 hours or more, and treat other patients on an outpatient basis.


In its instructions, CMS acknowledges that the decision to admit a patient is a complex medical judgment that can be made only after the physician has considered a number of factors, including the:


  • Patient‘s medical history and current medical needs
  • Types of facilities available to inpatients and to outpatients
  • Hospital‘s by-laws and admissions policies
  • Relative appropriateness of treatment in each setting.


Reasons for Denials


Medicare pays for inpatient hospital services that are medically necessary for the setting billed. RACs review the documentation for the situations in which overpayments are made. The following are the most common reasons for denials:


  • Incomplete admission orders (such as no date and time)
  • Unsigned admission order
  • No clinical evidence for the inpatient service
  • Prior conservative treatment was not documented, causing denial of subsequent procedures
  • Care provided in the wrong setting (inpatient instead of outpatient, observation instead of inpatient, etc.)
  • Written documentation that is not legible
  • Documentation (written and electronic medical records [EMRs]) that does not address the uniqueness of the patient’s care and the intensity of service needed
  • Incomplete or blank fields on documentation tools (such as assessments, flow sheets, checklists, etc.) (Tip: If a field is not applicable, use an entry like “N/A” to show that the questions were reviewed and answered.)
  • Medical record entries that were not consistent with other parts of the medical record, including assessments, treatment plans, physician orders, nursing notes, medication and treatment records, and other facility documents (such as admission and discharge data, pharmacy records, etc.)
  • Entries made that contradict previous documentation (Tip: CMS recommends that providers include documentation that explains the contradiction.)


Insights into RAC Review



When conducting a retrospective audit, RACs consider only the medical evidence available to the physician at the time of an admission decision. Factors that may result in an inconvenience to a beneficiary or family do not, by themselves, justify inpatient admission.


RACs will not consider information that became available after admission (e.g., test results). However, information that affects billed services and is acquired after physician documentation must be complete. It should be added to the existing medical record in accordance with accepted standards for amendments.


According to RAC reports, providers do not adequately document pre-existing medical problems or extenuating circumstances that make admission of the beneficiary medically necessary. Providers also fail to adequately document significant changes in the patient’s condition or care issues that sometimes impact the review determination.


The documentation must show that the decision to admit involved the medical predictability that something adverse would happen to the patient if he or she had not been admitted. It also must:


  • Include the diagnostic work-up needed and the availability of diagnostic procedures at the time when, and at the location where, the patient presents
  • Support signs, symptoms or services severe or intense enough to warrant the need for inpatient medical care.


Proactive Steps



To avoid problems such as the above, hospital providers should analyze their inpatient paid claims data to identify accounts with outpatient procedures incorrectly paid as an inpatient. If discovered, refund the overpayment.


To prevent the problem, perform a root-cause analysis to understand where the gaps in the process allow patients (typically an outpatient) having these procedures performed are admitted as inpatients. Also review inpatient accounts with procedures, typically outpatient, which include documentation too weak to support the inpatient admission.

About the Author


Kim Charland is vice president of consulting and a health-information management (HIM) thought-leader at Medical Learning, Inc. (MedLearn), a Panacea Healthcare Solutions Company, St. Paul, MN. Her professional experience includes extensive project management as well as 20 plus years in HIM and reimbursement management for hospitals and physician offices.


Contact the Author




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


AWV’s – CMS Redefining Traditional Preventative Care



Kim T. Charland, BA, RHIT, CCS

Kim Charland has over 30 years of experience in health information and revenue cycle management for hospitals and physicians. Kim has spent most of her career in product development related to healthcare consulting services, education, publishing, and software. She was responsible for the operations of a healthcare audit consulting division for many years and launched an Internet news and information platform, VBPmonitor, that focused on the transition to value-based payments. She was also the co-host of ICD10monitor’s weekly Internet news program, Talk-Ten-Tuesdays, for many years. Kim speaks nationally on topics such as quality and value-based payment initiatives, clinical documentation improvement (CDI), and documentation, coding, revenue cycle, and compliance-related issues. Kim is also the president of the New York Health Information Management Association.

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