Payer Memo Drawing Deserved Scrutiny

Let me start with a few updates today.

I discussed last week the national intravenous fluid shortage. What I had not heard at that point was that there is also a shortage of fluid for peritoneal dialysis. While we can use oral hydration instead of IV fluids, for peritoneal dialysis, the alternative is going back on hemodialysis. Let’s hope that is not necessary. Last week, President Biden invoked the Defense Production Act to speed up the rebuilding of the Baxter plant. Let us all hope this is a short-lived crisis.

Last week, I also mentioned the inappropriate Comprehensive Error Rate Testing (CERT) auditor denial of the inpatient total joint replacement because the patient did not have a complication. Well, two other hospitals contacted me, saying that they had received the same denial on a similar patient and will be contacting the Centers for Medicare & Medicaid Services (CMS). Why is it that the supposed experts cannot interpret the rules properly? I do have to apologize to the CMS staff who now have to deal with this. I am sure they would rather be helping us interpret the new rules for patient appeals after status changes (or maybe not).

And that brings me to the main topic today, a notice from UnitedHealthcare (UHC) about their review process under the Two-Midnight Rule. Thanks to Julie, who forwarded this to me. It seems to have been published in January, but let’s talk about it anyway, since UHC has not updated it, as best as I can tell.

Let me start by crediting UHC for getting some things right. For instance, they state that time alone does not suffice for an inpatient admission to be covered; the two midnights must be reasonable and necessary, without delays or convenience time. As my old colleague Dr. Steve Meyerson famously said, “the Two-Midnight Rule is not a calendar and a crayon, marking off days and admitting after two midnights.” They also acknowledge that they follow the Inpatient-Only (IPO) List, regardless of the length of stay, but they do note that the surgery must be medically necessary. That’s a hidden message saying that “we will still require you go through the time and effort to do prior authorization for most surgery.”

But then they go off the rails. They state, “CMS has explained that hospital stays under 24 hours rarely qualify for payment as an inpatient stay.” And they cite the CMS review guidelines published in November 2015. The problem is that not once in that CMS document is “24 hours” mentioned.

In this document, CMS does, however, discuss one-midnight stays as the rare and unusual exceptions to the two-midnight expectation. At the time, there was only one exception: newly initiated mechanical ventilation. It was not until 2016, after publication of this initial CMS memo, that CMS adopted the case-by-case exception for patients, whereby the physician determines that inpatient admission is warranted despite an expected length of stay of fewer than two midnights.

And in the 2016 Outpatient Prospective Payment System (OPPS) Final Rule, CMS clarified that the addition of this exception “does not define inpatient hospital admissions with expected lengths of stay less than two midnights as rare and unusual. Rather, it modifies our current ‘rare and unusual’ exceptions policy to allow payment on a case-by-case basis.” I will admit this is a brain twister; the policy is called “rare and unusual exceptions,” but not every exception is rare and unusual.

And to top it off, this 2024 document from UHC totally ignores the fact that CMS updated that document at the end of 2015, a month after publishing the first, adding a discussion of the case-by-case exception without mentioning that it should be “rare and unusual.” Why in the world would UHC use the outdated version, if not because it is the one that supports their draconian policies?

They then go on to completely contort CMS’s words in seeming to argue that they can use InterQual criteria to make inpatient admission decisions. They claim they can do that because CMS does not have specific criteria for making medical necessity decisions, and therefore CMS allows them to adopt internal criteria.

The problem is that CMS does have specific criteria for inpatient admission decisions at 42 CFR 412.3, which we all know as the Two-Midnight Rule, with its two-midnight expectation and two-midnight benchmark. If the physician’s judgement is rational, represents the medical standard of care, and is documented, and the care is medically necessary hospital care, then InterQual criteria cannot override that.

And interestingly, as I write this, the content director of InterQual posted on LinkedIn the following: “Commercial medical necessity screening guidelines are developed to screen in that which is clearly appropriate at a particular level of care based on the evidence-base. The Secondary Review process, where clinical judgement comes to bear, has always been a part of the InterQual process.” I do wonder why the payors never got this message…

Now, this UHC memo comes on the heels of the report that UHC is no longer allowing hospitals to bill for observation hours when they deny an inpatient admission, significant anger from the therapy community about UHC’s new onerous rules requiring prior authorization for any outpatient therapy services, and Thursday’s report from the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) that UHC was improperly paid over $3.7 billion in 2023 for diagnoses that were only reported from an in-home risk assessment.  

It is really hard to play a game when the opposing team is permitted to rewrite the rules for each game as they see fit, but also employs not only the on-field referees, but also the replay officials.

These views represent those of Dr. Hirsch and not those of his employer, R1 RCM.